10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2012           OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____ to ____

Commission file number 001-35009

Fortegra Financial Corporation

(Exact name of Registrant as specified in its charter)

Delaware	58-1461399
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10151 Deerwood Park Boulevard, Building 100, Suite 330 Jacksonville, FL	32256
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code:	(866)-961-9529

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o     Accelerated filer o Non-accelerated filer x Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The number of outstanding shares of the registrant's Common Stock, $0.01 par value, outstanding as of October 31, 2012 was 19,657,152.

FORTEGRA FINANCIAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED

September 30, 2012

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		Page Number
Item 1.	Financial Statements	3
	Consolidated Balance Sheets (unaudited)
	Consolidated Statements of Income (unaudited)
	Consolidated Statements of Comprehensive Income (unaudited)
	Consolidated Statement of Stockholders' Equity (unaudited)
	Consolidated Statements of Cash Flows (unaudited)
	Notes to Consolidated Financial Statements (unaudited)
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6	Exhibits	65
Signatures		66
Exhibit Index		67

1

PART I. FINANCIAL INFORMATION

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q ("Form 10-Q") to "Fortegra Financial," "Fortegra," "we," "us," "the Company" or similar terms refer to Fortegra Financial Corporation and its subsidiaries.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are made in reliance upon the protection provided by such act for forward-looking statements. Such statements are subject to risks and uncertainties. All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project,'' "plan," "intend," "believe," "may," "should," "can have," "will," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating results or financial performance or other events.

The forward-looking statements contained in this Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read this Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under Part I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and Part II, ITEM 1A. RISK FACTORS. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual results may vary materially from those projected in these forward-looking statements.

Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011 ("Annual Report") along with the Company's other filings with the Securities and Exchange Commission ("SEC").

2

ITEM 1. FINANCIAL STATEMENTS

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

(All Amounts in Thousands Except Share and Per Share Amounts)

	September 30, 2012			December 31, 2011
Assets:
Investments:
Fixed maturity securities available-for-sale at fair value (amortized cost of $107,150 at September 30, 2012 and $92,311 at December 31, 2011)	$	110,833		$	93,509
Equity securities available-for-sale at fair value (cost of $5,882 at September 30, 2012 and $1,203 at December 31, 2011)	6,085			1,219
Short-term investments	970			1,070
Total investments	117,888			95,798
Cash and cash equivalents	11,284			31,339
Restricted cash	21,232			14,180
Accrued investment income	1,115			929
Notes receivable, net	4,281			3,603
Accounts and premiums receivable, net	25,056			20,172
Other receivables	15,708			9,103
Reinsurance receivables	197,184			194,740
Deferred acquisition costs	56,903			55,467
Property and equipment, net	17,227			14,666
Goodwill	104,668			104,500
Other intangibles, net	50,803			54,410
Other assets	6,452			6,070
Total assets	$	629,801		$	604,977
Liabilities:
Unpaid claims	$	32,041		$	32,583
Unearned premiums	231,114			227,929
Policyholder account balances	26,223			28,040
Accrued expenses, accounts payable, income taxes and other liabilities	51,785			35,446
Deferred revenue	19,164			20,781
Note payable	71,168			73,000
Preferred trust securities	35,000			35,000
Deferred income taxes, net	26,023			24,614
Total liabilities	492,518			477,393
Commitments and Contingencies (Note 16)
Stockholders' Equity:
Preferred stock, par value $0.01; 10,000,000 shares authorized; none issued	—			—
Common stock, par value $0.01;150,000,000 shares authorized; 20,681,252 and 20,561,328 shares issued at September 30, 2012 and December 31, 2011, respectively, including shares in treasury	207			206
Treasury stock, at cost;1,024,212 shares and 516,132 shares at September 30, 2012 and December 31, 2011, respectively	(6,651		)	(2,728		)
Additional paid-in capital	97,095			96,199
Accumulated other comprehensive loss, net of tax	(673		)	(1,754		)
Retained earnings	46,725			35,150
Stockholders' equity before non-controlling interest	136,703			127,073
Non-controlling interest	580			511
Total stockholders' equity	137,283			127,584
Total liabilities and stockholders' equity	$	629,801		$	604,977

See accompanying notes to these consolidated financial statements.

3

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(All Amounts in Thousands Except Share and Per Share Amounts)

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2012			September 30, 2011		September 30, 2012			September 30, 2011
Revenues:
Service and administrative fees	$	10,056		$	10,125	$	28,790		$	28,041
Brokerage commissions and fees	8,411			8,611		27,295			25,686
Ceding commission	11,122			7,027		25,396			21,428
Net investment income	744			801		2,219			2,636
Net realized (losses) gains on the sale of investments	(16		)	1,196		(6		)	2,423
Net earned premium	33,893			28,673		97,770			84,646
Other income	52			18		172			138
Total revenues	64,262			56,451		181,636			164,998
Expenses:
Net losses and loss adjustment expenses	11,430			9,714		32,272			28,338
Commissions	21,548			17,926		61,479			53,766
Personnel costs	12,708			10,945		36,467			33,365
Other operating expenses	7,959			7,267		21,635			23,779
Depreciation	871			886		2,584			2,283
Amortization of intangibles	1,127			998		3,775			3,428
Interest expense	2,025			1,906		5,267			5,862
Loss on sale of subsidiary	—			477		—			477
Total expenses	57,668			50,119		163,479			151,298
Income before income taxes and non-controlling interest	6,594			6,332		18,157			13,700
Income taxes	2,455			2,259		6,520			4,847
Income before non-controlling interest	4,139			4,073		11,637			8,853
Less: net income (loss) attributable to non-controlling interest	29			1		62			(171		)
Net income	$	4,110		$	4,072	$	11,575		$	9,024
Earnings per share:
Basic	$	0.21		$	0.20	$	0.59		$	0.44
Diluted	$	0.20		$	0.19	$	0.56		$	0.42
Weighted average common shares outstanding:
Basic	19,531,694			20,404,441		19,705,105			20,355,057
Diluted	20,463,238			21,214,365		20,620,084			21,375,184

See accompanying notes to these consolidated financial statements.

4

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(All Amounts in Thousands)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Net income	$	4,110		$	4,072		$	11,575		$	9,024
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities
Unrealized holding gains arising during the period	1,432			720			2,666			1,165
Related tax (expense) benefit	(501		)	(252		)	(933		)	(454		)
Less: reclassification of losses (gains) included in net income	16			(1,196		)	6			(2,423		)
Related tax (expense) benefit	(6		)	419			(2		)	848
Unrealized gains (losses) on available-for-sale securities, net of tax	941			(309		)	1,737			(864		)
Interest rate swap
Unrealized loss on interest rate swap	(159		)	(2,030		)	(915		)	(3,300		)
Related tax benefit	55			710			320			1,155
Add: reclassification of losses included in net income	(39		)	—			(83		)	—
Related tax expense	15			—			29			—
Unrealized loss on interest rate swap, net of tax	(128		)	(1,320		)	(649		)	(2,145		)
Other comprehensive income (loss) income before non-controlling interest, net of tax	813			(1,629		)	1,088			(3,009		)
Less: comprehensive income attributable to non-controlling interest	6			—			7			4
Other comprehensive income (loss)	807			(1,629		)	1,081			(3,013		)
Comprehensive income	$	4,917		$	2,443		$	12,656		$	6,011

See accompanying notes to these consolidated financial statements.

5

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)

(All Amounts in Thousands Except Share Amounts)

	Common Stock			Treasury Stock
	Shares	Amount		Shares		Amount			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-controlling Interest			Total Stockholders' Equity
Balance, December 31, 2011, as previously reported	20,561,328	$	206	(516,132	)	$	(2,728	)	$	96,199	$	(1,754	)	$	39,822		$	532		$	132,277
Cumulative effect of adjustment resulting from new accounting guidance	—	—		—		—			—		—			(4,672		)	(21		)	(4,693		)
Balance, December 31, 2011, restated	20,561,328	206		(516,132	)	(2,728		)	96,199		(1,754		)	35,150			511			127,584
Net income	—	—		—		—			—		—			11,575			62			11,637
Other comprehensive income	—	—		—		—			—		1,081			—			7			1,088
Stock-based compensation	90,519	1		—		—			710		—			—			—			711
Shares issued for the Employee Stock Purchase Plan	29,405	—		—		—			167											167
Treasury stock purchased	—	—		(508,080	)	(3,923		)	—		—			—			—			(3,923		)
Options exercised, net of forfeitures	—	—		—		—			19		—			—			—			19
Balance, September 30, 2012	20,681,252	$	207	(1,024,212	)	$	(6,651	)	$	97,095	$	(673	)	$	46,725		$	580		$	137,283

See accompanying notes to these consolidated financial statements.

6

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(All Amounts in Thousands)

	For the Nine Months Ended
	September 30, 2012			September 30, 2011
Operating Activities
Net income	$	11,575		$	9,024
Adjustments to reconcile net income to net cash flows provided by operating activities:
Change in deferred policy acquisition costs	(1,437		)	3,369
Depreciation and amortization	6,359			5,711
Deferred income tax expense	822			2,704
Net realized loss (gains) on the sale of investments	6			(2,423		)
Loss on sale of subsidiary	—			477
Stock-based compensation expense	711			615
Amortization of premiums and accretion of discounts on investments	932			408
Non-controlling interest	62			(171		)
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions:
Accrued investment income	(186		)	39
Accounts and premiums receivable, net	(4,884		)	(5,300		)
Other receivables	(6,605		)	8,152
Reinsurance receivables	(2,444		)	(527		)
Other assets	(382		)	559
Unpaid claims	(542		)	(2,296		)
Unearned premiums	3,185			6,558
Policyholder account balances	(1,817		)	—
Accrued expenses, accounts payable, income taxes and other liabilities	15,340			(20,964		)
Deferred revenue	(1,617		)	(5,595		)
Net cash flows provided by operating activities	19,078			340
Investing activities
Proceeds from maturities, calls and prepayments of available-for-sale investments	8,052			7,418
Proceeds from sales of available-for-sale investments	4,980			33,663
Proceeds from maturities of short term investments	100			100
Purchases of available-for-sale investments	(33,484		)	(37,859		)
Purchases of property and equipment	(5,174		)	(5,411		)
Net paid for acquisitions of subsidiaries, net of cash received	(308		)	(40,611		)
Sale of subsidiary, net of cash paid	—			(153		)
Net (issuance) proceeds from notes receivable	(678		)	24
Change in restricted cash	(7,052		)	6,043
Net cash flows used in investing activities	(33,564		)	(36,786		)
Financing activities
Payments on notes payable	(126,200		)	(64,263		)
Proceeds from notes payable	124,368			91,550
Payments for initial public offering costs	—			(827		)
Payments on redeemable preferred stock	—			(10,940		)
Net proceeds from exercise of stock options	19			651
Purchase of treasury stock	(3,923		)	—
Net proceeds received from stock issued in the Employee Stock Purchase Plan	167			—
Net cash flows (used in) provided by financing activities	(5,569		)	16,171
Net decrease in cash and cash equivalents	(20,055		)	(20,275		)
Cash and cash equivalents, beginning of period	31,339			43,389
Cash and cash equivalents, end of period	$	11,284		$	23,114

See accompanying notes to these consolidated financial statements.

7

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Nature of Operations

Fortegra Financial Corporation (Traded on the New York Stock Exchange under the symbol: FRF), including its subsidiaries ("Fortegra" or the "Company"), is a diversified insurance services company headquartered in Jacksonville, Florida that provides distribution and administration services on a wholesale basis to insurance companies, insurance brokers and agents and other financial services companies primarily in the United States. In 2008, the Company changed its name from Life of the South Corporation to Fortegra Financial Corporation. The Company was incorporated in 1981 in the State of Georgia and re-incorporated in the State of Delaware in 2010. Most of the Company's business is generated through networks of small to mid-sized community and regional banks, small loan companies and automobile dealerships. The Consolidated Financial Statements include the Company and its majority-owned and controlled subsidiaries, including:

• LOTS Intermediate Co. ("LOTS IM")

• Bliss and Glennon, Inc. ("B&G")

• CRC Reassurance Company, Ltd. ("CRC")

• Insurance Company of the South ("ICOTS")

• Life of the South Insurance Company ("LOTS") and its subsidiary, Bankers Life of Louisiana ("Bankers Life")

• LOTS Reassurance Company ("LOTS RE")

• LOTSolutions, Inc.

• Lyndon Southern Insurance Company ("Lyndon Southern")

• Southern Financial Life Insurance Company ("SFLAC")

• South Bay Acceptance Corporation ("South Bay")

• Continental Car Club, Inc. ("Continental")

• United Motor Club of America, Inc. ("United")

• Auto Knight Motor Club, Inc. ("Auto Knight")

• eReinsure.com, Inc. ("eReinsure")

• Pacific Benefits Group Northwest, LLC ("PBG")

• Magna Insurance Company ("Magna")

The Company operates in three business segments: (i) Payment Protection, (ii) Business Process Outsourcing ("BPO") and (iii) Brokerage. Payment Protection specializes in protecting lenders and their consumers from death, disability or other events that could otherwise impair their ability to repay a debt and also offers warranty and service contracts and motor club solutions. BPO provides an assortment of administrative services tailored to insurance and other financial services companies through a virtual insurance company platform. Brokerage uses a pure wholesale sell-through model to sell specialty casualty and surplus lines insurance and also provides web-hosted applications used by insurers, reinsurers and reinsurance brokers for the global reinsurance market.

1. Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements of Fortegra have been prepared in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP") promulgated by the Financial Accounting Standards Board ("FASB"), Accounting Standards Codification ("ASC" or "the guidance") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company's Annual Report.

The interim financial statements in this Form 10-Q have not been audited. In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, including normal recurring adjustments and the adjustments for the retrospective adoption of the new accounting guidance for Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts as described in Note 3, necessary to present fairly Fortegra's financial position, results of operations and other comprehensive income for each of the interim periods presented. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2012.

2. Summary of Significant Accounting Policies

Fortegra's interim Consolidated Financial Statements as of September 30, 2012 and 2011 are unaudited and have been prepared following the significant accounting policies disclosed in Note 2 of the Notes to the Consolidated Financial Statements of the Company's Annual Report, except as discussed in Note 3 of this Form 10-Q for the adoption of the new guidance on Accounting

8

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

for Costs Associated with Acquiring or Renewing Insurance Contracts effective January 1, 2012.

Principles of Consolidation

The unaudited Consolidated Financial Statements include the accounts of Fortegra Financial Corporation and its majority-owned and controlled subsidiaries. All material intercompany account balances and transactions have been eliminated. The third-party ownership of 15% of the common stock of SFLAC has been reflected as non-controlling interest on the Consolidated Balance Sheets. Income (loss) attributable to SFLAC's minority shareholders has been reflected on the Consolidated Statements of Income as income (loss) attributable to non-controlling interest and on the Consolidated Statements of Comprehensive Income as comprehensive income (loss) attributable to non-controlling interest.

Comprehensive Income (Loss)

Comprehensive income (loss) includes both net income and other items of comprehensive income comprised of unrealized gains and losses on investment securities classified as available-for-sale and unrealized gains and losses on the interest rate swap.

Use of Estimates

Preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation, which had no material impact on net income, comprehensive income or loss, net cash provided by operating activities or stockholders' equity, except as disclosed in Note 3.

Change in Accounting Estimate - Unearned Premium Reserves for the Payment Protection Segment

Prior to the three months ended September 30, 2012, the Company's method of estimating unearned premium reserves in relation to the loss patterns and the related recognition of income for certain types of credit property and vendor single interest payment protection products was based on the pro-rata method.  The use of the pro-rata method was based on the best information available at the time the Company's financial statements were prepared.

During the past two years the Company has increased the volume of business related to these product types, thereby increasing the volume of policy and claims data specific to the Company's product types. During the three months ended September 30, 2012, the Company determined it had accumulated a sufficient volume of policy and claims data to be able to perform an actuarial analysis in order to determine the preferable estimation approach. As a result of the analysis of the recently collected additional data, the Company has gained better insight into its product loss patterns and can provide improved judgment and estimation to more accurately calculate the unearned premium reserves and the associated recognition of income. Upon completion of the analysis, Management determined that the Rule of 78s applied on a daily basis provides a more accurate representation of historical loss patterns and the recognition of the related income; as such, the estimation method was changed. The change in approach has been accounted for as a change in accounting estimate that is effected by a change in accounting principle and is justifiable in that it is the preferable approach for income recognition based on the Company's actuarial study.  This change in accounting estimate was applied prospectively in accordance with ASC 250-10-45-18. Summarized below is the effect of the change in accounting estimate on the Consolidated Statement of Income for the following periods:

9

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	For the Three and Nine Months Ended
	September 30, 2012
Revenues:
Net earned premium	$	1,845
Ceding commission	2,135
Net increase to total revenues from the change in accounting estimate	3,980
Expenses:
Commissions	2,739
Other operating expenses	(268		)
Net increase to total expenses from the change in accounting estimate	2,471
Net increase to income before income taxes from the change in accounting estimate	1,509
Income taxes	533
Net increase to net income from the change in accounting estimate	$	976
Increase to earnings per share from the change in accounting estimate:
Basic	$	0.05
Diluted	$	0.05

Immaterial Correction of Prior Period Errors

Prior to the filing of the Company’s Form 10-Q for the three months ended September 30, 2012, the Company identified errors related to the purchase accounting adjustments for the April 2009 acquisition of B&G and the 2011 acquisition of Auto Knight. As a result, the Company’s historical balances for goodwill, property and equipment and deferred taxes were incorrectly reported in prior period filings for the years ending December 31, 2009, 2010 and 2011, respectively. Management evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that the errors were immaterial to each of the prior periods noted above.

As a result, in this Form 10-Q, the Consolidated Balance Sheet data as of December 31, 2011 has been revised to reflect the correction of the error associated with the Auto Knight acquisition. This correction increased goodwill by $0.6 million and increased deferred income tax liabilities by $0.6 million.

In addition, the Consolidated Balance Sheet data as of December 31, 2009 has been revised to reflect the correction of the error associated with the B&G acquisition. This correction increased goodwill by $0.4 million, decreased deferred income tax liabilities by $0.3 million and decreased property and equipment by $0.7 million. The revised financial data will be reflected in future filings containing Consolidated Balance Sheet information for the year ending December 31, 2009.

Subsequent Events

The Company reviewed all material subsequent events that occurred up to the date the Company's Consolidated Financial Statements were issued to determine whether any event required recognition or disclosure in the financial statements and/or disclosure in the notes thereto. For more information, please see the note, "Subsequent Events."

3. Recent Accounting Standards

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-05, Comprehensive Income (Topic 820), which changes the presentation of comprehensive income. These changes give an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. This guidance became effective for the Company on January 1, 2012 and only requires a change in the format of the presentation of comprehensive income. The adoption of this guidance did not impact the Company’s consolidated financial position, results of operations or cash flows.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS"), which provides a consistent definition of

10

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

fair value and ensures that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. The guidance changes certain fair value measurement principles and expands the disclosure requirements particularly for Level 3 fair value measurements. The guidance became effective for the Company beginning January 1, 2012 and is to be applied prospectively. The adoption of this guidance, which primarily relates to disclosure, did not impact the Company’s consolidated financial position, results of operations or cash flows.

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

	December 31, 2011
Consolidated Balance Sheets	As Previously Reported (1)		Effect of the Change			As Restated
Assets
Deferred acquisition costs	$	62,687	$	(7,220	)	$	55,467
Total assets	$	612,197	$	(7,220	)	$	604,977
Liabilities
Deferred income taxes	$	27,141	$	(2,527	)	$	24,614
Total Liabilities	479,920		(2,527		)	477,393
Stockholders' Equity
Retained earnings	39,822		(4,672		)	35,150
Non-controlling interest	532		(21		)	511
Total Stockholders' Equity	132,277		(4,693		)	127,584
Total Liabilities and Stockholders' Equity	$	612,197	(7,220		)	$	604,977

(1) - Includes the business acquisition valuation measurement period adjustments described in Notes 6, 7 and 8.

11

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	For the Three Months Ended							For the Nine Months Ended
	September 30, 2011							September 30, 2011
Consolidated Statements of Income	As Previously Reported		Effect of the Change			As Restated		As Previously Reported			Effect of the Change			As Restated
Revenues:
Total Revenues	$	56,451	$	—		$	56,451	$	164,998		$	—		$	164,998
Expenses:
Net losses and loss adjustment expenses	9,714		—			9,714		28,338			—			28,338
Commissions	17,926		—			17,926		53,766			—			53,766
Personnel costs	10,945		—			10,945		33,365			—			33,365
Other operating expenses	7,171		96			7,267		23,331			448			23,779
Depreciation	886		—			886		2,283			—			2,283
Amortization of intangibles	998		—			998		3,428			—			3,428
Interest expense	1,906		—			1,906		5,862			—			5,862
Loss on sale of subsidiary	477					477		477						477
Total expenses	50,023		96			50,119		150,850			448			151,298
Income before income taxes and non-controlling interest	6,428		(96		)	6,332		14,148			(448		)	13,700
Income taxes	2,292		(33		)	2,259		5,003			(156		)	4,847
Income before non-controlling interest	4,136		(63		)	4,073		9,145			(292		)	8,853
Less: net (loss) income attributable to non-controlling interest	1		—			1		(171		)	—			(171		)
Net income	$	4,135	$	(63	)	$	4,072	$	9,316		$	(292	)	$	9,024
Earnings per share:
Basic	$	0.20	$	—		$	0.20	$	0.46		$	(0.02	)	$	0.44
Diluted	$	0.19	$	—		$	0.19	$	0.44		$	(0.02	)	$	0.42

Recently Issued Accounting Pronouncements

In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The ASU permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company is evaluating the impact of the ASU; however, it is not expected to have a significant impact on the Company's consolidated financial position, results of operations or cash flows.

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

4. Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding adjusted to include the effect of potentially dilutive common shares, which includes outstanding stock options and non-vested restricted stock awards, using the treasury stock method. Potentially dilutive common shares for which the exercise price was greater than the average market price of common shares are excluded from the computation of diluted earnings per share, as the effect would be anti-dilutive.

12

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Earnings per share is calculated as follows:	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Numerator for both basic and diluted earnings per share:
Net income	$	4,110	$	4,072	$	11,575	$	9,024
Denominator:
Total average basic common shares outstanding	19,531,694		20,404,441		19,705,105		20,355,057
Effect of dilutive stock options and restricted stock awards	931,544		809,924		914,979		1,020,127
Total average diluted common shares outstanding	20,463,238		21,214,365		20,620,084		21,375,184
Earnings per share-basic	$	0.21	$	0.20	$	0.59	$	0.44
Earnings per share-diluted	$	0.20	$	0.19	$	0.56	$	0.42
Weighted average anti-dilutive common shares	567,995		512,298		431,446		283,762

5. Variable Interest Entities

The Company's investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as Variable Interest Entities ("VIEs") and the Company is the primary beneficiary, in which case the investments are consolidated in accordance with ASC 810, "Consolidation." Investments that do not meet the above criteria are accounted for under the cost method.

In July 2011, the Company sold its 100% interest in Creative Investigations Recovery Group, LLC ("CIRG"). The consideration included a note receivable, included on the Consolidated Balance Sheets, with a first priority lien security interest in the assets of CIRG and other property of the buyers. The Company performed a detailed analysis of the CIRG sale transaction and determined that CIRG is considered a VIE, as defined in ASC 810, because the Company has an interest due to the note financing. The Company further determined that it is not the primary beneficiary because the Company does not have the power to direct the activities of the VIE and has no right to receive the residual returns of CIRG. Therefore, CIRG is not consolidated in the Company's results of operations. The Company's maximum exposure to loss in the VIE is limited to the outstanding balance of the note receivable, which is presented in the table below:

	At
	September 30, 2012		December 31, 2011
The Company's maximum exposure to loss in the VIE	$	1,139	$	1,142

6. Business Acquisitions

The values of certain assets and liabilities acquired in acquisitions are preliminary in nature, and are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and loss reserves. The valuations will be finalized within one year of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill. A change to the acquisition date value of the identifiable net assets during the measurement period (up to one year from the acquisition date) affects the amount of the purchase price allocated to goodwill. Changes to the purchase price allocation are adjusted retrospectively in the consolidated financial statements.

During the three months ended March 31, 2012, the Company received the final valuation studies for identifiable intangible assets to determine the final valuation for the 2011 acquisition of eReinsure. In addition, during the three months ended September 30, 2012, the Company received the final valuation studies for identifiable intangible assets to determine the final valuation for the 2011 acquisition of PBG. Accordingly, the Consolidated Balance Sheet at December 31, 2011 has been retrospectively adjusted to include the effect of the measurement period adjustments as required under ASC 805, Business Combinations, ("ASC 805"). Please see the notes, "Goodwill," and "Other Intangible Assets," for more information on the retrospective measurement period adjustments made in 2012.

13

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents assets acquired, liabilities assumed and goodwill recorded for the 2011 acquisitions of eReinsure and PBG based on their fair values as of the respective acquisition date and the effects of the measurement period adjustments recorded in 2012, as discussed above:

	eReinsure			PBG
ASSETS:
Cash	$	3,694		$	38
Investments	1,212			—
Other receivables	1,828			—
Property and equipment, net	142			65
Other intangible assets, net	13,908			3,650
Other assets	54			22
Net deferred tax asset	—			127
LIABILITIES:
Accrued expenses and accounts payable	(2,801		)	(304		)
Commissions payable	—			(60		)
Deferred revenue	(835		)	—
Net deferred tax liability	(1,783		)	—
Net assets acquired	15,419			3,538
Purchase consideration (1)	38,931			7,607
Goodwill	$	23,512		$	4,069

(1) - Reflects a purchase price reduction of $0.3 million for the final eReinsure working capital adjustments.

7. Goodwill

During the three months ended March 31, 2012, the Company determined the final valuation for the 2011 acquisition of eReinsure, included in the Brokerage Segment. During the three months ended September 30, 2012, the Company determined the final valuation for the 2011 acquisition of PBG, included in the BPO segment. The following table shows the retrospective adjustments made to the balance of goodwill at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with accounting requirements under ASC 805 and the adjustments made to goodwill for the immaterial error corrections under ASC 250 that are discussed in Note 2 to the Consolidated Financial Statements.

Goodwill balances by segment are as follows:	Payment Protection		BPO			Brokerage			Total
Balance as originally reported at December 31, 2011	$	36,632	$	15,632		$	56,533		$	108,797
Prior period adjustments for the B&G acquisition for the year ending December 31, 2009 increasing goodwill (1)	—		—			383			383
Goodwill adjustment under ASC 250 for the Auto Knight acquisition for the year ending December 31, 2011	608		—			—			608
Final valuation adjustments as required under ASC 805 for eReinsure	—		—			(2,626		)	(2,626		)
Final valuation adjustments as required under ASC 805 for PBG	—		(2,662		)	—			(2,662		)
Adjusted balance at December 31, 2011	37,240		12,970			54,290			104,500
Goodwill acquired during 2012	—		—			168			168
Balance at September 30, 2012	$	37,240	$	12,970		$	54,458		$	104,668

⁽¹⁾- Immaterial correction of an error adjustment from the year ending December 31, 2009 is shown as an adjustment to the December 31, 2011 balance since the goodwill balances from December 31, 2009 and December 31, 2010 are not being presented in this Form 10-Q.

8. Other Intangible Assets

Other intangible assets consist of finite- and indefinite-lived intangible assets. The following table shows finite-lived other intangible assets and their respective amortization periods:

14

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

				September 30, 2012							December 31, 2011
	Amortization Period (Years)			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets with finite lives:
Customer and agent relationships	5	to	15	$	34,720	$	(11,458	)	$	23,262	$	34,552	$	(8,724	)	$	25,828
Software	7	to	10	8,773		(3,114		)	5,659		8,773		(2,345		)	6,428
Present value of future profits	0.3	to	0.75	548		(548		)	—		548		(548		)	—
Non-compete agreements	1.5	to	6	2,958		(2,691		)	267		2,958		(2,419		)	539
Total finite-lived intangible assets				$	46,999	$	(17,811	)	$	29,188	$	46,831	$	(14,036	)	$	32,795

The following table shows the carrying amount of indefinite-lived intangible assets at :	September 30, 2012		December 31, 2011
Tradenames	$	21,615	$	21,615

During the three months ended March 31, 2012, the Company determined the final valuation for the 2011 acquisition of eReinsure. During the three months ended September 30, 2012, the Company determined the final valuation for the 2011 acquisition of PBG. The intangible assets acquired in 2012 relate to the purchase of a book of business. The following table includes the retrospective adjustments made to the balance of other intangible assets at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with the accounting requirements under ASC 805 and the current period activity.

Balance as originally reported at December 31, 2011	$	47,022
Final valuation adjustments as required under ASC 805 for eReinsure	4,508
Final valuation adjustments as required under ASC 805 for PBG	2,880
Adjusted balance at December 31, 2011	54,410
Intangible assets acquired in 2012	168
Less:Amortization expense	3,775
September 30, 2012	$	50,803

Estimated amortization of other intangible assets for the next five years and thereafter ending December 31 is presented below:

2012 (remaining three months)	$	1,128
2013	4,490
2014	4,478
2015	4,471
2016	3,904
Thereafter	10,717
Total	$	29,188

9. Investments

The following table summarizes the Company's available-for-sale fixed maturity and equity securities:

	September 30, 2012
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	20,853	$	923	$	(1	)	$	21,775
Municipal securities	15,770		473		—			16,243
Corporate securities	69,835		2,336		(63		)	72,108
Mortgage-backed securities	501		11		—			512
Asset-backed securities	191		4		—			195
Total fixed maturity securities	$	107,150	$	3,747	$	(64	)	$	110,833
Common stock	$	99	$	18	$	(5	)	$	112
Preferred stock	5,783		190		—			5,973
Total equity securities	$	5,882	$	208	$	(5	)	$	6,085

15

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	December 31, 2011
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	25,751	$	611	$	(2	)	$	26,360
Municipal securities	17,609		388		(5		)	17,992
Corporate securities	47,304		594		(426		)	47,472
Mortgage-backed securities	1,272		26		—			1,298
Asset-backed securities	375		12		—			387
Total fixed maturity securities	$	92,311	$	1,631	$	(433	)	$	93,509
Common stock	$	144	$	26	$	(17	)	$	153
Preferred stock	1,059		7		—			1,066
Total equity securities	$	1,203	$	33	$	(17	)	$	1,219

Pursuant to certain reinsurance agreements and statutory licensing requirements, the Company has deposited invested assets in custody accounts or insurance department safekeeping accounts. The Company is not permitted to remove invested assets from these accounts without prior approval of the contractual party or regulatory authority. The following table details the Company's restricted investments:

	At
	September 30, 2012		December 31, 2011
Fair value of restricted investments	$	19,080	$	18,319
Fair value of restricted investments for special deposits required by state insurance departments	$	12,375	$	11,618

The amortized cost and fair value of fixed maturity securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	At
	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,706	$	5,751	$	3,890	$	3,923
Due after one year through five years	57,739		59,580		51,210		51,839
Due after five years through ten years	26,392		27,423		23,623		23,973
Due after ten years	16,621		17,372		11,941		12,089
Mortgage-backed securities	501		512		1,272		1,298
Asset-backed securities	191		195		375		387
Total fixed maturity securities	$	107,150	$	110,833	$	92,311	$	93,509

The following table provides information on unrealized losses on investment securities that have been in an unrealized loss position for less than twelve months, and twelve months or greater, as of:

16

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	September 30, 2012
	Less than Twelve Months						Twelve Months or Greater						Total
Description of Security	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	345	$	(1	)	6	$	—	$	—		—	$	345	$	(1	)	6
Municipal securities	—		—			—	—		—			—	—		—			—
Corporate securities	10,189		(29		)	11	167		(34		)	1	10,356		(63		)	12
Mortgage-backed securities	—		—			—	—		—			—	—		—			—
Asset-backed securities	—		—			—	—		—			—	—		—			—
Total fixed maturity securities	$	10,534	$	(30	)	17	$	167	$	(34	)	1	$	10,701	$	(64	)	18
Common stock	$	39	$	(5	)	2	$	—	$	—		—	$	39	$	(5	)	2
Preferred stock	—		—			—	—		—			—	—		—			—
Total equity securities	$	39	$	(5	)	2	$	—	$	—		—	$	39	$	(5	)	2

	December 31, 2011
	Less than Twelve Months						Twelve Months or Greater						Total
Description of Security	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	1,902	$	(2	)	7	$	—	$	—		—	$	1,902	$	(2	)	7
Municipal securities	486		(1		)	1	478		(4		)	1	964		(5		)	2
Corporate securities	16,861		(426		)	26	—		—			—	16,861		(426		)	26
Mortgage-backed securities	—		—			—	—		—			—	—		—			—
Asset-backed securities	—		—			—	—		—			—	—		—			—
Total fixed maturity securities	$	19,249	$	(429	)	34	$	478	$	(4	)	1	$	19,727	$	(433	)	35
Common stock	$	83	$	(17	)	5	$	—	$	—		—	$	83	$	(17	)	5
Preferred stock	—		—			—	—		—			—	—		—			—
Total equity securities	$	83	$	(17	)	5	$	—	$	—		—	$	83	$	(17	)	5

The Company does not intend to sell the investments that are in an unrealized loss position at September 30, 2012 and it is more likely than not that the Company will be able to hold these securities until full recovery of their amortized cost basis for fixed maturity securities or cost for equity securities. At September 30, 2012, based on management's quarterly review, the Company deemed that 1 individual equity security was other than temporarily impaired and recorded an impairment charge of $16 thousand for the three months ended September 30, 2012. For the three months and nine months ended September 30, 2011, the Company deemed that 8 individual equity securities were other than temporarily impaired and recorded an impairment charge of $0.2 million.

The following table summarizes the gross proceeds from the sale of available-for-sale investment securities:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Gross proceeds from sales	$	503	$	11,143	$	4,980	$	33,663

The following table summarizes the gross realized gains and gross realized losses for both fixed maturity and equity securities and realized losses for other-than-temporary impairments for available-for-sale investment securities:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Gross realized gains	$	—		$	1,414		$	22		$	2,663
Gross realized losses	—			(68		)	(12		)	(90		)
Total net gains from sales	$	—		$	1,346		$	10		$	2,573
Impairment write-downs (other-than-temporary impairments)	$	(16	)	$	(150	)	$	(16	)	$	(150	)
Total net realized investment (losses) gains	$	(16	)	$	1,196		$	(6	)	$	2,423

17

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following schedule details the components of net investment income:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Fixed income securities	$	628		$	782		$	1,954		$	2,544
Cash on hand and on deposit	47			63			143			180
Common and preferred stock dividends	77			24			191			56
Notes receivable	75			34			201			123
Other income	34			23			104			107
Investment expenses	(117		)	(125		)	(374		)	(374		)
Net investment income	$	744		$	801		$	2,219		$	2,636

10. Reinsurance Receivables

The Company has various reinsurance agreements in place whereby the amount of risk in excess of the Company's retention is reinsured by unrelated domestic and foreign insurance companies. The Company remains liable to policyholders in the event that the assuming companies are unable to meet their obligations. The effects of reinsurance on premiums written and earned and losses and loss adjustment expenses ("LAE") incurred are presented in the tables below:

Premiums	For the Three Months Ended												For the Nine Months Ended
	September 30, 2012						September 30, 2011						September 30, 2012						September 30, 2011
	Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct and assumed	$	100,409		$	98,287		$	94,432		$	80,982		$	272,317		$	269,132		$	241,979		$	235,420
Ceded	(65,935		)	(64,394		)	(61,361		)	(52,309		)	(169,971		)	(171,362		)	(154,227		)	(150,774		)
Net	$	34,474		$	33,893		$	33,071		$	28,673		$	102,346		$	97,770		$	87,752		$	84,646

Losses and LAE incurred	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Direct and assumed	$	23,069		$	21,589		$	66,198		$	60,752
Ceded	(11,639		)	(11,875		)	(33,926		)	(32,414		)
Net losses and LAE incurred	$	11,430		$	9,714		$	32,272		$	28,338

The following table reflects the components of the reinsurance receivables:	At
	September 30, 2012		December 31, 2011
Prepaid reinsurance premiums (1):
Life	$	53,451	$	59,545
Accident and health	33,257		30,759
Property	81,427		80,758
Total	168,135		171,062
Ceded claim reserves:
Life	1,508		1,794
Accident and health	8,966		9,896
Property	8,493		7,743
Total ceded claim reserves recoverable	18,967		19,433
Other reinsurance settlements recoverable	10,082		4,245
Reinsurance receivables	$	197,184	$	194,740
(1)  Including policyholder account balances ceded.

Reinsurance receivables include amounts related to paid benefits, unpaid benefits and prepaid reinsurance premiums. Reinsurance receivables are based upon estimates and are reported on the Consolidated Balance Sheets separately as assets, as reinsurance does not relieve the Company of its legal liability to policyholders. The Company is required to pay losses even if a reinsurer fails to meet its obligations under the applicable reinsurance agreement. Management continually monitors the financial condition and agency ratings of the Company's reinsurers and believes that the reinsurance receivables accrued are collectible. The following table shows the amount included in reinsurance receivable that is recoverable from three unrelated insurers:

18

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At
	September 30, 2012		December 31, 2011
Total recoverable from three unrelated reinsurers	$	124,311	$	124,160

The three unrelated reinsurers are: Munich American Reassurance Company (A. M. Best Rating-A+); London Life Reinsurance Company (A. M. Best Rating-A); and London Life International Reinsurance Corporation (A. M. Best Rating-NR-3). Because London Life International Reinsurance Corporation does not maintain an A.M. Best rating, the related receivables are collateralized by assets held in trust and letters of credit. At September 30, 2012, the Company does not believe there is a risk of loss as a result of the concentration of credit risk in the reinsurance program.

11. Note Payable

As disclosed on August 7, 2012 in a Form 8-K, effective August 2, 2012, Fortegra terminated its existing line of credit with SunTrust Bank, N.A. and entered into a five-year $125.0 million secured credit agreement (the "Credit Agreement") with a syndicate of lenders, among them Wells Fargo Bank, N.A., who also serves as administrative agent ("Wells Fargo" or the "Administrative Agent").  The Credit Agreement provides for a $50.0 million term loan facility (the "Term Loan Facility"), as well as a $75.0 million revolving credit facility (the "Revolving Facility" and collectively with the Term Loan Facility, the "Facilities"). Subject to earlier termination, the Credit Agreement terminates on August 2, 2017. The Credit Agreement includes a provision pursuant to which, from time to time, the Borrowers may request that the lenders in their discretion increase the maximum amount of commitments under the Facilities by an amount not to exceed $50.0 million.  In connection with the termination of the SunTrust Bank, N.A. revolving line of credit, the Company recorded a charge of $0.7 million to interest expense in the three months ended September 30, 2012 for previously capitalized transaction costs associated with this line of credit.

The Company's Note Payable consisted of the following at:	September 30, 2012			December 31, 2011
Wells Fargo Bank, N.A.- credit facility, maturing August 2017	$	71,168		$	—
Maximum balance allowed on Wells Fargo Bank, N.A credit facility	$	125,000		$	—
SunTrust Bank, N.A. - revolving credit facility, maturing June 2013	$	—		$	73,000
Maximum balance allowed on SunTrust Bank, N.A revolving credit facility	$	—		$	85,000
Interest rate on the respective note payable at the end of the respective periods:	3.59		%	4.59		%

Aggregate maturities for the Company's note payable at September 30, 2012 are as follows:

2012 (remaining three months)	$	1,250
2013	5,000
2014	5,000
2015	5,000
2016	5,000
Thereafter	49,918
Total	$	71,168

The Company must comply with various covenant requirements set forth by Wells Fargo Bank, N.A in the Credit Agreement. The following summarizes the definitions of the more significant financial covenants in effect at September 30, 2012 and the calculations used to arrive at each ratio:

Total Leverage Ratio - the ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated Adjusted EBITDA for the Measurement Period ending on or immediately prior to such date.

Fixed Charge Coverage Ratio - the ratio of (a) Consolidated Adjusted EBITDA less the actual amount paid by the Borrowers and their Subsidiaries in cash on account of Capital Expenditures less cash taxes paid by the Borrowers and their Subsidiaries

to (b) Consolidated Fixed Charges, in each case for the Measurement Period ending on or immediately prior to such date.

Reinsurance Ratio - the ratio (expressed as a percentage) of (a) the aggregate amounts recoverable by the Borrowers and its Subsidiaries from reinsurers divided by (b) the sum of (i) policy and claim liabilities plus (ii) unearned premiums, in each case of the Borrowers and their Subsidiaries determined in accordance with GAAP.

RBC Ratio - the ratio (expressed as a percentage) of National Association of Insurance Commissioners ("NAIC") Risk Based Capital (as defined in the NAIC standards) for any Regulated Insurance Company on an individual basis, calculated at the end of any Fiscal Year, to the authorized control level" (as defined in the NAIC standards).

The following is a summary of the Company's more significant financial covenants related to the Wells Fargo Bank, N.A. facility calculated at September 30, 2012, except for RBC Ratios, which under the Credit Agreement are to reflect the ratios calculated as of the most recent fiscal year end, in this case December 31, 2011.

		Actual At
Covenant	Covenant Requirement	September 30, 2012
Total leverage ratio	not more than 3.50	2.40
Fixed charge coverage ratio	not less than 2.00	3.86
Reinsurance ratio	not less than 50%	75.0%
RBC Ratio's		Actual at December 31, 2011
RBC Ratio - Bankers Life of Louisiana	not less than 250%	507.0%
RBC Ratio - Southern Financial Life Insurance Company	not less than 250%	2,039.0%
RBC Ratio - Insurance Company of the South	not less than 250%	495.0%
RBC Ratio - Lyndon Southern Insurance Company	not less than 250%	339.0%
RBC Ratio - Life of the South Insurance Company	not less than 250%	352.0%

12. Derivative Financial Instruments - Interest Rate Swap

Cash Flow Hedge

The Company uses interest rate swaps as part of its risk management strategy to manage interest rate risk and cash flow risk that may arise in connection with the variable interest rate provision of the Company's preferred trust securities. The Company accounts for its derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, which requires all derivative instruments to be carried at fair value on the balance sheet.

Changes in fair value associated with the effective portion of a derivative instrument designated as a qualifying cash flow hedge are recognized initially in other comprehensive income (loss). When the cash flows for which the derivative is hedging materialize and are recorded in income or expense, the associated gain or (loss) from the hedging derivative previously recorded in accumulated other comprehensive income (loss) is recognized in earnings. If a cash flow hedge is de-designated because it is no longer highly effective, or if the hedge relationship is terminated, the cumulative gain or loss on the hedging derivative to that date will continue to be reported in accumulated other comprehensive income (loss) unless the hedged forecasted transaction is no longer expected to occur, at which time the cumulative gain or loss is recorded into earnings.

The Company records the fair value of the derivative instrument in other assets or other liabilities. To the extent a derivative is an effective hedge of the cash flow risk of the hedged debt obligation, any change in the derivative's fair value is recorded in accumulated other comprehensive income ("AOCI"), net of income tax. To the extent the derivative is an ineffective hedge, that portion of the change in fair value is recorded in other operating expenses or interest expense as appropriate. The Company is not a party to leveraged derivatives and does not enter into derivative financial instruments for trading or speculative purposes.

The Company has a single interest rate swap (the "Swap"), designated as a cash flow hedge, with Wells Fargo Bank, N.A., pursuant to which the Company swapped the floating rate portion of its outstanding preferred trust securities to a fixed rate. The Swap commenced in June 2012 and expires in June 2017. The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of derivative instruments and indicates where within the Consolidated Balance Sheets each is reported:

19

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

		At
	Balance Sheet Location	September 30, 2012			December 31, 2011
Derivatives designated as cash flow hedging instruments:
Interest rate swap - notional value		$	35,000		$	35,000
Fair value of the Swap	Other Liabilities	$	(4,599	)	$	(3,601	)
Unrealized loss, net of tax, on the fair value of the Swap	AOCI	$	(2,989	)	$	(2,340	)
Variable rate of the interest rate swap (1)		0.39		%	—		%
Fixed rate of the interest rate swap (1)		3.47		%	—		%

^{(1) -} The swap took effect in June 2012.

The following table summarizes the pretax impact of the interest rate swap designated as a cash flow hedge on the Consolidated Financial Statements for the following periods:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
(Loss) recognized in AOCI on the derivative-effective portion	$	(159	)	$	(2,030	)	$	(915	)	$	(3,300	)
(Loss) reclassified from AOCI into income-effective portion	$	39		$	—		$	83		$	—
Gain (loss) recognized in income on the derivative-ineffective portion	$	—		$	—		$	—		$	—

The table below shows the estimated amount to be reclassified to earnings from AOCI during the next 12 months. These net losses reclassified into earnings are expected to primarily increase net interest expense related to the respective hedged item.

	At
	September 30, 2012
Estimated loss to be reclassified to earnings from AOCI during the next 12 months	$	1,105

13. Income Taxes

Income taxes for interim periods have been computed using an estimated annual effective tax rate. This rate is revised, if necessary, at the end of each successive interim period to reflect the current estimate of the annual effective tax rate.

As part of the final valuation determinations for the 2011 acquisition of eReinsure, the Company recorded a $0.2 million liability against a $0.7 million research and experimentation credit carryforward deferred tax asset. The Company has reviewed its uncertain tax positions and management has concluded that there are no other amounts required to be recorded in accordance with ASC 740-10.

The Company is currently undergoing an examination of its federal income tax returns by the Internal Revenue Service for the tax years ending December 31, 2009 and 2010. The results of this audit, including any potential increases or decreases to the Company's tax liability for those years, are unknown at the present time.

14. Fair Value of Financial Instruments 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents: The estimated fair value of cash and cash equivalents approximates their carrying value.

Fixed maturity securities: Fair values were obtained from market value quotations provided by an independent pricing service.

Equity securities: The fair values of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service. The fair values of non-publicly traded common stocks were based on prices obtained from an independent pricing service.

Notes receivable: The carrying amounts approximate fair value because the interest rates charged approximate current market rates for similar credit risks. These values are net of allowance for doubtful accounts.

Accounts and premiums receivable, net, and other receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets.

Short-term investments:The carrying amounts approximate fair value because of the short maturities of these instruments.

Notes payable and preferred trust securities: The carrying amounts approximate fair value because the applicable interest rates approximate current rates offered to the Company for similar instruments.

Interest rate swap: The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The carrying and fair values of financial instruments are as follows:	At
	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	11,284	$	11,284	$	31,339	$	31,339
Fixed maturity securities	110,833		110,833		93,509		93,509
Equity securities	6,085		6,085		1,219		1,219
Notes receivable	4,281		4,281		3,603		3,603
Accounts and premiums receivable, net	25,056		25,056		20,172		20,172
Other receivables	15,708		15,708		9,103		9,103
Short-term investments	970		970		1,070		1,070
Total financial assets	$	174,217	$	174,217	$	160,015	$	160,015
Financial liabilities:
Notes payable	$	71,168	$	71,168	$	73,000	$	73,000
Preferred trust securities	35,000		35,000		35,000		35,000
Interest rate swap	4,599		4,599		3,601		3,601
Total financial liabilities	$	110,767	$	110,767	$	111,601	$	111,601

The FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active

markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted

prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable

for the asset or liability and market-corroborated inputs.

Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value

measurement. These unobservable inputs are derived from the Company's internal calculations, estimates and assumptions and

require significant management judgment or estimation.

The Company's policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer.

The following tables set forth the Company's financial assets and liabilities accounted for at fair value by level within the fair value hierarchy at:

20

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

September 30, 2012			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	110,833	$	—	$	110,781	$	52
Equity securities	6,085		4,960		46		1,079
Short-term investments	970		970		—		—
Total assets	$	117,888	$	5,930	$	110,827	$	1,131
Liabilities
Interest rate swap	$	4,599	$	—	$	4,599	$	—

December 31, 2011			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	93,509	$	—	$	93,433	$	76
Equity securities	1,219		91		—		1,128
Short-term investments	1,070		1,070		—		—
Total Assets	$	95,798	$	1,161	$	93,433	$	1,204
Liabilities
Interest rate swap	$	3,601	$	—	$	3,601	$	—

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2012. For the nine months ended September 30, 2012, a single equity security was transferred from Level 3 to Level 2. This transfer occurred due to the availability of Level 2 pricing for the equity security, which was unavailable in prior periods. The Company's use of Level 3 unobservable inputs included 7 individual securities that accounted for 1.0% of total investments at September 30, 2012. The Company utilized an independent third party pricing service to value 6 individual fixed maturity securities for Level 3.The value of the single equity security in Level 3, which is a non-publicly traded preferred stock, was calculated by the Company taking into account the strength of the issuer's parent company guaranteeing the dividend of the issuer. At December 31, 2011, the Company had 12 individual securities valued under Level 3 that accounted for 1.3% of total investments.

The following table summarizes the changes in Level 3 assets measured at fair value:

	For the Nine Months Ended
	September 30, 2012			September 30, 2011
Beginning balance, January 1,	$	1,204		$	1,425
Total investment gains or losses (realized/unrealized):
Included in net income	—			372
Included in other comprehensive (loss) income	(19		)	(148		)
Sales	(47		)	(607		)
Transfers (out of) into Level 3	(7		)	45
Ending balance, September 30,	$	1,131		$	1,087

15. Statutory Reporting and Dividend Restrictions

The Company's insurance subsidiaries may pay dividends to the Company, subject to statutory restrictions. Payments in excess of statutory restrictions (extraordinary dividends) to the Company are permitted only with prior approval of the insurance departments of the applicable state of domicile. All dividends from subsidiaries were eliminated in the Consolidated Financial

21

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Statements. The following table sets forth the dividends paid to the Company by its insurance company subsidiaries for the following periods:

	Nine months ended		Twelve months ended
	September 30, 2012		December 31, 2011
Ordinary dividends	$	285	$	7,558
Extraordinary dividends	—		830
Total dividends	$	285	$	8,388

The following table details the combined statutory capital and surplus of the Company's insurance subsidiaries, the required minimum statutory capital and surplus and the combined amount available for ordinary dividends of the Company's insurance subsidiaries at:

	September 30, 2012		December 31, 2011
Combined statutory capital and surplus of the Company's insurance subsidiaries	$	54,157	$	50,230
Required minimum statutory capital and surplus	$	15,300	$	15,300
Amount available for ordinary dividends of the Company's insurance subsidiaries	$	2,060	$	2,344

Under the NAIC's Risk-Based Capital Act of 1995, a company's risk-based capital ("RBC") is calculated by applying certain risk factors to various asset, claim and reserve items. If a company's adjusted surplus falls below calculated RBC thresholds, regulatory intervention or oversight is required. The insurance subsidiaries' RBC levels as calculated in accordance with the NAIC's RBC instructions exceeded all RBC thresholds as of September 30, 2012 and December 31, 2011.

16. Commitments and Contingencies

The Company is a party to claims and litigation in the normal course of its operations. Management believes that the ultimate outcome of these matters will not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.

In the Payment Protection segment, the Company is currently a defendant in lawsuits that relate to marketing and/or pricing issues that involve claims for punitive, exemplary or extra-contractual damages in amounts substantially in excess of the covered claim.  Such litigation includes Lawson v. Life of the South Insurance Co., which was filed on March 13, 2006, in the Superior Court of Muscogee County, Georgia, and later moved to the United States District Court for the Middle District of Georgia, Columbus Division.  The action is brought by the plaintiff, individually and on behalf of a class of all persons similarly situated.   The allegations involve the Company's alleged duty to refund unearned premiums on credit insurance policies, even when the Company has not been informed of the payoff of the underlying finance contract. The action seeks an injunction requiring remedial action, as well as a variety of damages, including punitive damages and attorney fees and costs.

The Company filed a Motion to Strike or Dismiss Plaintiffs' Class Action Allegations, or in the Alternative, to Deny Class Certification on May 11, 2012. On September 28, 2012, the United States District Court for the Middle District of Georgia granted such motion.  Plaintiffs have filed a petition for permission to appeal this ruling with the United States Eleventh Circuit Court of Appeals.

Also in the Payment Protection segment, the Company is currently a defendant in Mullins v. Southern Financial Life Insurance Co., which was filed on February 2, 2006, in the Pike County Circuit Court, in the Commonwealth of Kentucky.  A class was certified on June 25, 2010.  At issue is the duration or term of coverage under certain policies.  The action alleges violations of the Consumer Protection Act and certain insurance statutes, as well as common law fraud.  The action seeks compensatory and punitive damages, attorney fees and interest.  The parties are currently involved in the merits discovery phase and discovery disputes have arisen.  Plaintiffs filed a Motion for Sanctions on April 5, 2012 in connection with the Company's efforts to locate and gather certificates and other documents from the Company's agents.  While the Pike County Circuit Court did not award sanctions, it did order the Company to subpoena certain records from its agents.  The Company is currently appealing this order. To date, no trial date has been set.

22

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The Company considers all of the above-described litigation customary in the Company's lines of business.  In management's opinion, based on information available at this time, the ultimate resolution of such litigation, which it is vigorously defending, should not be materially adverse to the financial position, results of operations or cash flows of the Company. It should be noted that large punitive damage awards, bearing little relation to actual damages sustained by plaintiffs, have been awarded in certain states against other companies in the credit insurance business. Loss contingencies may be taken as developments warrant, although such amounts are not reasonably estimable at this time.

17. Segment Results

The Company conducts business through three business segments: (i) Payment Protection; (ii) BPO; and (iii) Brokerage. The revenue for each segment is presented to reflect the operating characteristics of the segment. The Company allocates certain revenues and expenses to the segments. These items consist primarily of corporate-related income, transaction related costs, executive stock compensation and other overhead expenses. Segment assets are not presented to the Company's chief operating decision maker for operational decision-making and therefore are not disclosed in the accompanying table.

The Company measures the profitability of its business segments with the allocation of Corporate revenues and expenses and without taking into account amortization, depreciation, interest expense and income taxes. The Company refers to this financial performance measure as segment EBITDA (earnings before interest, taxes, depreciation and amortization). The Company's financial measure of segment EBITDA meets the definition of a Non-GAAP financial measure and is not a recognized term under U.S. GAAP, nor is it an alternative to the U.S. GAAP financial measures presented in this Form 10-Q. The Non-GAAP financial measure in this Form 10-Q should be used in addition to, but not as a substitute for, the U.S. GAAP financial measures presented elsewhere in this Form 10-Q. The Company believes that this Non-GAAP financial measure provides useful information to management, analysts and investors regarding financial and business trends relating to the Company's results of operations and financial condition. The variability of the Company's segment EBITDA is significantly affected by segment net revenues because a large portion of the Company's operating expenses are fixed. The Company's industry peers may also provide similar supplemental Non-GAAP financial measures, although they may not use the same or comparable terminology and may not make identical adjustments. 

The following table presents the Company's business segment results:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Segment Net Revenue
Payment Protection
Service and administrative fees	$	4,677		$	5,695		$	13,876		$	14,704
Ceding commission	11,122			7,027			25,396			21,428
Net investment income	744			801			2,219			2,636
Net realized (losses) gains on the sale of investments	(16		)	1,196			(6		)	2,423
Other income	52			18			172			138
Net earned premium	33,893			28,673			97,770			84,646
Net losses and loss adjustment expenses	(11,430		)	(9,714		)	(32,272		)	(28,338		)
Commissions	(21,548		)	(17,926		)	(61,479		)	(53,766		)
Total Payment Protection Net Revenue	17,494			15,770			45,676			43,871
BPO	4,951			3,833			13,565			11,088
Brokerage
Brokerage commissions and fees	8,411			8,611			27,295			25,686
Service and administrative fees	428			597			1,349			2,249
Total Brokerage	8,839			9,208			28,644			27,935
Total segment net revenue	31,284			28,811			87,885			82,894
Operating Expenses

23

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
Payment Protection	9,563		8,445			26,205		25,857
BPO	3,836		2,717			10,320		8,164
Brokerage	7,268		7,491			21,577		21,837
Corporate	—		36			—		1,763
Total operating expenses	20,667		18,689			58,102		57,621
EBITDA
Payment Protection	7,931		7,325			19,471		18,014
BPO	1,115		1,116			3,245		2,924
Brokerage	1,571		1,717			7,067		6,098
Corporate	—		(36		)	—		(1,763		)
Total EBITDA	10,617		10,122			29,783		25,273
Depreciation and Amortization
Payment Protection	863		927			2,577		3,204
BPO	494		307			1,495		824
Brokerage	641		650			2,287		1,683
Total depreciation and amortization	1,998		1,884			6,359		5,711
Interest Expense
Payment Protection	1,359		1,053			3,342		3,622
BPO	294		96			820		258
Brokerage	372		757			1,105		1,982
Total interest expense	2,025		1,906			5,267		5,862
Income before income taxes and non-controlling interest
Payment Protection	5,709		5,345			13,552		11,188
BPO	327		713			930		1,842
Brokerage	558		310			3,675		2,433
Corporate	—		(36		)	—		(1,763		)
Total income before income taxes and non-controlling interest	6,594		6,332			18,157		13,700
Income taxes	2,455		2,259			6,520		4,847
Less: net income (loss) attributable to non-controlling interest	29		1			62		(171		)
Net income	$	4,110	$	4,072		$	11,575	$	9,024

The following table reconciles segment information to the Company's Consolidated Statements of Income and provides a summary of other key financial information for each segment:

	For the Three Months Ended				For the Nine Months Ended
Reconciliation of Segment Net Revenue to Total Revenue and EBITDA to Net Income	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Segment Net Revenue
Payment Protection	$	17,494	$	15,770	$	45,676	$	43,871
BPO	4,951		3,833		13,565		11,088
Brokerage	8,839		9,208		28,644		27,935
Segment net revenues	31,284		28,811		87,885		82,894
Net losses and loss adjustment expenses	11,430		9,714		32,272		28,338
Commissions	21,548		17,926		61,479		53,766

	For the Three Months Ended					For the Nine Months Ended
Reconciliation of Segment Net Revenue to Total Revenue and EBITDA to Net Income	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
Total segment revenue	64,262		56,451			181,636		164,998
Operating Expenses
Payment Protection	9,563		8,445			26,205		25,857
BPO	3,836		2,717			10,320		8,164
Brokerage	7,268		7,491			21,577		21,837
Corporate	—		36			—		1,763
Total operating expenses	20,667		18,689			58,102		57,621
Net losses and loss adjustment expenses	11,430		9,714			32,272		28,338
Commissions	21,548		17,926			61,479		53,766
Total operating expenses before depreciation, amortization and interest expense	53,645		46,329			151,853		139,725
EBITDA
Payment Protection	7,931		7,325			19,471		18,014
BPO	1,115		1,116			3,245		2,924
Brokerage	1,571		1,717			7,067		6,098
Corporate	—		(36		)	—		(1,763		)
Total EBITDA	10,617		10,122			29,783		25,273
Depreciation and amortization
Payment Protection	863		927			2,577		3,204
BPO	494		307			1,495		824
Brokerage	641		650			2,287		1,683
Total depreciation and amortization	1,998		1,884			6,359		5,711
Interest Expense
Payment Protection	1,359		1,053			3,342		3,622
BPO	294		96			820		258
Brokerage	372		757			1,105		1,982
Total interest expense	2,025		1,906			5,267		5,862
Income before income taxes and non-controlling interest
Payment Protection	5,709		5,345			13,552		11,188
BPO	327		713			930		1,842
Brokerage	558		310			3,675		2,433
Corporate	—		(36		)	—		(1,763		)
Total income before income taxes and non-controlling interest	6,594		6,332			18,157		13,700
Income taxes	2,455		2,259			6,520		4,847
Less: net income (loss) attributable to non-controlling interest	29		1			62		(171		)
Net income	$	4,110	$	4,072		$	11,575	$	9,024

18. Related Party Transactions

The following table details the amounts recorded on the Company's Consolidated Balance Sheets and Consolidated Income

24

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Statement resulting from related party transactions:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Income recorded by the Company from related parties	$	—	$	—	$	218	$	—
					At
					September 30, 2012		December 31, 2011
Accounts receivable from related parties					$	134	$	125

19. Subsequent Event

In late October 2012, the named storm, Sandy made landfall in the United States.  Given its recent occurrence and the limited information available at this time, we cannot estimate the amount of any possible losses associated with this event. The impact, which we do not believe will be material, will be reflected in the Company's results for the three months ending December 31, 2012.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") represents an overview of our results of operations and financial condition and should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Part I, Item 1 of this Form 10-Q. Except for the historical information contained herein, the discussions in MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Item 1A. Risk Factors" of this Form 10-Q.

Executive Summary

Our net income for the three months ended September 30, 2012 and 2011 was $4.1 million, respectively, with the 2012 results including $1.0 million attributable to the change is accounting estimate and three months of results from our October 2011 acquisition of PBG, while 2011 included the loss on CIRG and a higher level of realized gains on the sale of investments. Earnings per diluted share increased 5.3% to $0.20 for the three months ended September 30, 2012 from $0.19 for the same period in 2011, and included a $0.05 per diluted share increase from the change in accounting estimate.

For the three months ended September 30, 2012, our overall revenues increased $7.8 million, or 13.8%, to $64.3 million from $56.5 million for the same period in 2011, and included a $4.0 million increase in revenues attributable to the change in accounting estimate. This increase was also due to higher net earned premiums, ceding commissions, and service and administrative fees, which was partially offset by lower realized investments (losses) gains and brokerage commission.

Total expenses increased $7.5 million, or 15.1%, to $57.7 million for the three months ended September 30, 2012 from $50.1 million for the same period in 2011, and include a $2.5 million increase in expenses attributable to the change in accounting estimate. The majority of the increase, which includes the results of the PBG acquisition, was due to increases in commissions of $3.6 million, of which $2.7 million was from the change in accounting estimate, personnel costs of $1.8 million and net losses and loss adjustment expenses of $1.7 million. As a result of our entry into the new $125.0 million credit facility with Wells Fargo Bank, N.A. in August 2012, we wrote off $0.7 million of previously capitalized transaction costs, which are included in interest expense, associated with the termination of the SunTrust Bank, N.A. revolving credit facility during the three months ended September 30, 2012. This new credit facility will give us additional liquidity to further expand our existing businesses and explore future avenues of growth.

Our net income for the nine months ended September 30, 2012 increased $2.6 million, or 28.3%, to $11.6 million from $9.0 million for the same period in 2011, with the 2012 results including $1.0 million attributable to the change is accounting estimate, and nine months of results from our October 2011 acquisition of PBG, while 2011 includes six months of results from our July 1, 2011 divestiture of CIRG and the related loss on the sale of that subsidiary as well as a higher level of realized gains on the sale of investments. Earnings per diluted share increased 33.3% to $0.56 for the nine months ended September 30, 2012 from $0.42 for the same period in 2011 and included a $0.05 per diluted share increase from the change in accounting estimate.

25

For the nine months ended September 30, 2012, our overall revenues increased $16.6 million, or 10.1%, to $181.6 million from $165.0 million for the same period in 2011, and include a $4.0 million increase in revenues attributable to the change in accounting estimate. This increase was also due to increased net earned premiums, ceding commissions and brokerage commissions, which was partially offset by lower net realized investment (losses) gains and net investment income.

Total expenses increased $12.2 million, or 8.1%, to $163.5 million for the nine months ended September 30, 2012 from $151.3 million for the same period in 2011. The majority of the increase was due to increases in commissions of $7.7 million, of which $2.7 million was from the change in accounting estimate, net losses and loss adjustment expenses of $3.9 million, and personnel costs of $3.1 million. Partially offsetting this increase was a reduction of $2.1 million in other operating expenses due to higher acquisition related charges and the loss on the sale of CIRG impacting 2011. Additionally, interest expense decreased $0.6 million due to lower borrowing costs and the effect of the swap, which was partially offset by the $0.7 million charge for previously capitalized transaction costs on the SunTrust Bank, N.A. revolving credit facility.

Critical Accounting Policies

Fortegra's critical accounting policies involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2012 are unchanged from the disclosures presented in the MD&A of Fortegra's 2011 Annual Report except as discussed below:

Change in Accounting Estimate - Unearned Premium Reserves for the Payment Protection Segment

During the period ended September 30, 2012, we reviewed our unearned premium reserves in relation to the loss patterns and the related recognition of income and based on our analysis determined that a change to the Rule of 78s method results in a more accurate estimate of net earned premium reserves. The change is being accounted for as a change in accounting estimate and was applied prospectively. See the Note, "Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements of this Form 10-Q for the effect of this change in accounting estimate.

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

On January 1, 2012, we adopted the new guidance for Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts. This guidance was adopted on a retrospective basis and has been applied to all prior period financial information contained in our Consolidated Financial Statements. See the Note, "Recent Accounting Standards" of the Notes to the Consolidated Financial Statements of this Form 10-Q for the effect of the retrospective application.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards see the Note "Recent Accounting Standards" of the Notes to the Consolidated Financial Statements of this Form 10-Q.

COMPONENTS OF REVENUES AND EXPENSES

REVENUES

Service and Administrative Fees. We earn service and administrative fees from our Payment Protection and BPO business segments. Such fees are typically positively correlated with transaction volume and are recognized as revenue as they become both realized and earned. We earn service and administrative fees from a variety of activities, including the administration of credit insurance, the administration of debt cancellation programs, the administration of motor club programs, the administration of warranty programs and the administration of collateral tracking and asset recovery programs.

Payment Protection.  Our Payment Protection products are sold as complementary products to consumer retail and credit transactions and are thus subject to the volatility of volume of consumer purchase and credit activities. We receive service and administrative fees for administering Payment Protection products that are sold by our clients, such as credit insurance, debt protection, motor club and warranty solutions. We earn administrative fees for administering debt cancellation plans, facilitating the distribution and administration of warranty or extended service contracts, providing motor club membership benefits and providing related services for our clients. For credit insurance products, our clients typically retain the risk associated with credit insurance products that they sell to their customers through economic arrangements with us. Our Payment Protection revenue includes revenue earned from reinsurance arrangements with producer owned reinsurance companies owned by our clients. Our clients own producer owned reinsurance companies ("PORCs") that assume the credit insurance premiums and associated risk that they originate in exchange for fees paid to us for ceding the premiums. In addition, our Payment Protection revenue includes administrative fees charged by us under retrospective commission arrangements with producers, where the commissions paid are adjusted based on actual losses incurred compared to premium earned after a specified net allowance retained by us. Under these arrangements, our insurance companies receive the insurance premiums and administer the policies that are distributed by our clients. The producer of the credit insurance policies receives a retrospective commission if the premium generated by that producer in the accounting period exceeds the costs associated

26

with those polices, which includes our administrative fees, incurred claims, reserves and premium taxes. If the net result is negative, we either offset that negative amount against future retrospective commission payments, reduce the producer's up-front commission on a prospective basis to increase the likelihood that it will return to a positive position or request payment of the negative amount from the producer. Revenues in our Payment Protection business may fluctuate seasonally based on consumer spending trends, where consumer spending has historically been higher in September and December, corresponding to back-to-school and the holiday season. Accordingly, our Payment Protection revenues may reflect higher third and fourth quarters than in the first half of the year.

BPO. Our BPO revenues consist primarily of service and administrative fees for providing a broad set of administrative services tailored to insurance and other financial services companies including ongoing sales and marketing support, premium billing and collections, policy administration, claims adjudication, call center management services and the development of web-hosted applications for the reinsurance market. In addition, our BPO segment markets and sells health, accident, critical illness and life insurance policies to customers in the U.S. Our BPO revenues are based on the volume of business that we manage on behalf of our clients. Our BPO segment typically charges fees on a per-unit of service basis as a percentage of our client's insurance premiums.

Brokerage Commissions and Fees.  Brokerage commissions and fees consist of commissions paid to us by insurance companies, net of the portion of the commissions we share with retail insurance brokers and agents. The commissions we receive from insurance carriers are typically calculated as a percentage of the premiums paid for the specialized and complex insurance products (commonly known as "surplus lines") we distribute. We typically earn our commissions on the later of the effective date of the policy or the date coverage is bound. We pay our retail insurance agent and broker clients a portion of the gross commissions we receive from insurance carriers for placing insurance. In certain cases, our Brokerage segment also charges fees for policy issuance, inspections and other types of transactions. Our Brokerage segment also derives fees from master license agreements to use the eReinsure system together with fees for the transactions completed through its platform.

Brokerage commissions and fees are generally affected by fluctuations in the amount of premium charged by insurance carriers. The premiums charged fluctuate based on, among other factors, the amount of capital available in the insurance marketplace, the type of risk being insured, the nature of the insured party and the terms of the insurance purchased. If premiums increase or decrease, our revenues are typically affected in a corresponding fashion. In a declining premium rate environment, the resulting decline in our revenue may be offset, in whole or in part, by an increase in commission rates from insurance carriers and by an increased likelihood that insured parties may use the savings generated by the reduction in premium rates to purchase greater coverage. In an increasing pricing environment, the resulting increase in our revenue may be offset, in whole or in part, by a decrease in commission rates by insurance carriers and by an increased likelihood that insured parties may determine to reduce the amount of coverage they purchase. The market for Property and Casualty ("P&C") insurance products is cyclical from a capacity and pricing perspective. We refer to a period of reduced capacity and rising premium rates as a "hard" market and a period of increased capacity and declining premium rates as a "soft" market.

Gross commission rates for the products that we distribute in our Brokerage segment, whether acting as a wholesale broker or as a Managing General Agent ("MGA"), generally range from 15% to 25% of the annual premium for the policy. Brokerage commissions and fees net of commissions paid to our retail insurance agent and broker clients typically approximate 10%.

Demand for surplus lines insurance products also affects our premium volume and net commissions. State regulations generally require a buyer of insurance to have been turned down by three or more traditional carriers before being eligible to purchase the surplus lines distributed by us. As standard insurance carriers eliminate non-core lines of business and implement more conservative risk selection techniques, demand for excess and surplus lines insurance improves.

We also receive profit commissions for certain arrangements with certain insurance carriers on binding authority business. These profit commissions are based on the profitability of the business that we underwrite or broker on the insurance carrier's behalf. Profit commissions typically range from 0.6% to 1.7% of the annual premium and are paid periodically based on the terms of the individual carrier contract.

Our surplus lines brokerage commission and fee revenues fluctuate seasonally based on policy renewal dates and timing of profit commissions, and have historically been higher in the first two calendar quarters compared to the last two calendar quarters. In addition, our fee revenues at eReinsure are subject to seasonal fluctuations and are generally higher in the second and fourth quarters.

Ceding Commissions. Ceding commission earned under coinsurance agreements are based on contractual formulas that take into account, in part, underwriting performance and investment returns experienced by assuming companies. As experience changes, adjustments to the ceding commissions are reflected in the period incurred. Ceding commissions are only generated by our Payment

27

Protection segment on credit insurance products.

We elect to cede to reinsurers under coinsurance arrangements a significant portion of the credit insurance that we distribute on behalf of our clients. We continue to provide all policy administration for credit insurance that we cede to reinsurers. Ceding commissions consist of commissions paid to us by our reinsurers to reimburse us for costs related to the acquisition, administration and servicing of policies and premium that we cede to reinsurers. In addition, a portion of the ceding commission is determined based on the underwriting profits of the ceded credit insurance. The credit insurance that we distribute has historically generated attractive underwriting profits. Furthermore, some reinsurers pay to us a portion or all of the investment income earned on reserves that are maintained in trust accounts.

Ceding commissions are generally positively correlated with our credit insurance transaction and premium volumes. The portion of our ceding commissions that is related to the underwriting profits of the ceded credit insurance also fluctuates based on the claims made on such policies. The portion of our ceding commissions that is related to investment income can be impacted by the amount of reserves that are maintained in trust accounts and changes in interest rates. Ceding commissions are earned over the life of the policy.

Net Earned Premium.  Net earned premium consists of revenue generated from the direct sale of Payment Protection insurance policies by our distributors or premiums written for Payment Protection insurance policies by another carrier and assumed by us. Whether direct or assumed, the premium is earned over the term of the respective policy. Premiums earned are offset by earned premiums ceded to our reinsurers, including PORCs. The amount ceded is proportional to the amount of risk assumed by the reinsurer.

The principal factors affecting net earned premiums are: (i) the proportion of the risk assumed by our reinsurers as defined in the applicable reinsurance treaty; (ii) increases and decreases in written premium; (iii) increases and decreases in policy cancellation rates; (iv) the average duration of the policies written; and (v) changes in regulation that would modify the earning patterns for the policies underwritten and administered.

We limit the underwriting risk we take in our Payment Protection insurance policies. When we do assume risk in our Payment Protection insurance policies, we utilize both reinsurance (e.g., quota share and excess of loss) and retrospective commission agreements to manage and mitigate our risk.

Net Realized Gains (Losses) on the Sale of Investments. We realize gains when invested assets are sold for an amount greater than the amortized cost in the case of fixed maturity securities and cost basis for equity securities. We recognize realized losses for invested assets sold for an amount less than their carrying cost or when fixed maturity securities or equity securities are written down as a result of an other-than-temporary impairment ("OTTI").

Net Investment Income. We earn net investment income from interest payments and dividends received from our investment portfolio, and interest earned on our cash accounts and notes receivable, less portfolio management expenses. Our investment portfolio is invested primarily in fixed maturity securities which tend to produce consistent levels of investment income. The fair value of the fixed maturity securities in our portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. The fair value generally increases or decreases in an inverse relationship with fluctuations in interest rates. Investment income can be significantly impacted by changes in interest rates. Interest rate volatility can increase or reduce unrealized gains or unrealized losses in our portfolios. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. Fluctuations in interest rates affect our returns on, and the fair value of, fixed maturity and short-term investments.

We also have investments that carry prepayment risk, such as mortgage-backed and asset-backed securities. Actual net investment income and/or cash flows from investments that carry prepayment risk may differ from estimates at the time of investment as a result of interest rate fluctuations. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Therefore, we may be required to reinvest those funds in lower interest-bearing investments. Conversely, in times of rising interest rates, prepayments slow as borrowers tend to be less likely to refinance borrowings at higher interest rates, which tends to increase the duration of our investment holdings. With the increase in investment duration, we will have less cash flows from prepayments to invest at higher prevailing market rates.

Other Income. Other income consists primarily of miscellaneous fees generated by our Brokerage and Payment Protection segments.

EXPENSES

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Net Losses and Loss Adjustment Expenses. Net losses and loss adjustment expenses include actual paid claims and the change in unpaid claim reserves and consist of direct and assumed losses less ceded losses. Our profitability depends in part on accurately predicting net loss and loss adjustment expenses. Incurred claims are impacted by loss frequency, which is the measure of the number of claims per unit of insured exposure, and loss severity, which is based on the average size of claims. Factors affecting loss frequency and loss severity include changes in claims reporting patterns, claims settlement patterns, judicial decisions, legislation, economic conditions, morbidity patterns and the attitudes of claimants towards settlements.

Actual claims paid are claims payments made to the policyholder or beneficiary during the accounting period. The change in unpaid claim reserve is an increase or reduction to the unpaid claim reserve in the accounting period to maintain the unpaid claim reserve at the levels evaluated by our actuaries.

Unpaid claims are reserve estimates that are established in accordance with U.S. GAAP using generally accepted actuarial methods. Credit life and AD&D unpaid claims reserves include claims in the course of settlement and incurred but not reported ("IBNR"). Credit disability unpaid claims reserves also include continuing claim reserves for open disability claims. For all other product lines, unpaid claims reserves are bulk reserves and are entirely IBNR. We use a number of algorithms in establishing our unpaid claims reserves. These algorithms are used to calculate unpaid claims as a function of paid losses, earned premium, target loss ratios, in-force amounts, unearned premium reserves, industry recognized morbidity tables or a combination of these factors.

In arriving at our unpaid claims reserves, we conduct an actuarial analysis on a basis gross of reinsurance. The same estimates used as a basis in calculating the gross unpaid claims reserves are then used as the basis for calculating the net unpaid claims reserves, which take into account the impact of reinsurance. Anticipated future loss development patterns form a key assumption underlying these analyses. Our claims are generally reported and settled quickly, resulting in a consistent historical loss development pattern. From the anticipated loss development patterns, a variety of actuarial loss projection techniques are employed, such as the chain ladder method, the Bornhuetter-Ferguson method and expected loss ratio method.

Our unpaid claims reserves do not represent an exact calculation of exposure, but instead represent our best estimates, generally involving actuarial projections at a given time. The process used in determining our unpaid claims reserves cannot be exact since actual claim costs are dependent upon a number of complex factors such as changes in doctrines of legal liabilities and damage awards. These factors are not directly quantifiable, particularly on a prospective basis. We periodically review and update our methods of making such unpaid claims reserve estimates and establishing the related liabilities based on our actual experience. We have not made any changes to our methodologies for determining unpaid claims reserves in the periods presented.

Commissions. Commissions include the commissions paid to distributors selling credit insurance policies offered by our Payment Protection segment. Commission rates, in many instances, are set by state regulators and are also impacted by market conditions. In certain instances, our commissions are subject to retrospective adjustment based on the profitability of the related policies. These retrospective commission adjustments are payments made or adjustments to future commission expense based on claims experience. Under these retrospective commission arrangements, the producer of the credit insurance policies, which is typically our client, receives a retrospective commission if the premium generated by that producer in the accounting period exceeds the costs associated with those policies, which includes our administrative fees, claims, reserves and premium taxes. If the net result is negative, we either offset that negative amount against future retrospective commission payments, reduce the producer's up-front commission on a prospective basis to increase the likelihood that it will return to a positive position or request payment of the negative amount from the producer.

Personnel Costs. Personnel costs represent the amounts attributable to wages, salaries, bonuses and benefits for our full and part-time employees, as well as expense related to our stock-based compensation. In addition to our general personnel costs, some of the employees in our Brokerage and Payment Protections segments are paid a percentage of revenues they generate. Accordingly, compensation for brokers in our Brokerage segment is predominantly variable. Bonuses for the remaining employees are discretionary and are based on an evaluation of their individual performance and the performance of their particular business segment, as well as our entire company.

Other Operating Expenses. Other operating expenses consist primarily of rent, insurance, investigation fees, transaction expenses, professional fees, technology costs, travel and entertainment and advertising, and may include variable costs based on the volume of business we process. Other operating expenses are a significant portion of our expenses.

Depreciation. Depreciation expense is the allocation of the capitalized cost of property and equipment over the periods benefited by the use of the asset.

Amortization of Intangibles. Amortization of intangibles is an expense recorded to allocate the cost of intangible assets, such as purchased customer accounts and non-compete agreements acquired as part of our business acquisitions, over their estimated

29

useful lives.

Interest Expense. Interest expense includes interest payable on our credit facilities, mainly our notes payable and preferred trust securities and is directly correlated to the balances outstanding and the prevailing interest rates on these debt instruments.

Income Taxes.Income taxes are comprised of federal and state taxes based on income in multiple jurisdictions and changes in uncertain tax positions, if any.

RESULTS OF OPERATIONS

The following tables set forth our Consolidated Statements of Income:

(in thousands, except shares, per share amounts and percentages)	For the Three Months Ended
	September 30, 2012			September 30, 2011		Change from 2011			% Change from 2011
Revenues:
Service and administrative fees	$	10,056		$	10,125	$	(69	)	(0.7	)%
Brokerage commissions and fees	8,411			8,611		(200		)	(2.3	)
Ceding commission	11,122			7,027		4,095			58.3
Net investment income	744			801		(57		)	(7.1	)
Net realized (losses) gains on the sale of investments	(16		)	1,196		(1,212		)	(101.3	)
Net earned premium	33,893			28,673		5,220			18.2
Other income	52			18		34			188.9
Total revenues	64,262			56,451		7,811			13.8
Expenses:
Net losses and loss adjustment expenses	11,430			9,714		1,716			17.7
Commissions	21,548			17,926		3,622			20.2
Personnel costs	12,708			10,945		1,763			16.1
Other operating expenses	7,959			7,267		692			9.5
Depreciation	871			886		(15		)	(1.7	)
Amortization of intangibles	1,127			998		129			12.9
Interest expense	2,025			1,906		119			6.2
Loss on sale of subsidiary	—			477		(477		)	100.0
Total expenses	57,668			50,119		7,549			15.1
Income before income taxes and non-controlling interest	6,594			6,332		262			4.1
Income taxes	2,455			2,259		196			8.7
Income before non-controlling interest	4,139			4,073		66			1.6
Less: net income attributable to non-controlling interest	29			1		28			2,800.0
Net income	$	4,110		$	4,072	$	38		0.9	%
Earnings per share:
Basic	$	0.21		$	0.20
Diluted	$	0.20		$	0.19
Weighted average common shares outstanding:
Basic	19,531,694			20,404,441
Diluted	20,463,238			21,214,365

30

(in thousands, except shares, per share amounts and percentages)	For the Nine Months Ended
	September 30, 2012			September 30, 2011			Change from 2011			% Change from 2011
Revenues:
Service and administrative fees	$	28,790		$	28,041		$	749		2.7	%
Brokerage commissions and fees	27,295			25,686			1,609			6.3
Ceding commission	25,396			21,428			3,968			18.5
Net investment income	2,219			2,636			(417		)	(15.8	)
Net realized (losses) gains on the sale of investments	(6		)	2,423			(2,429		)	(100.2	)
Net earned premium	97,770			84,646			13,124			15.5
Other income	172			138			34			24.6
Total revenues	181,636			164,998			16,638			10.1
Expenses:
Net losses and loss adjustment expenses	32,272			28,338			3,934			13.9
Commissions	61,479			53,766			7,713			14.3
Personnel costs	36,467			33,365			3,102			9.3
Other operating expenses	21,635			23,779			(2,144		)	(9.0	)
Depreciation	2,584			2,283			301			13.2
Amortization of intangibles	3,775			3,428			347			10.1
Interest expense	5,267			5,862			(595		)	(10.2	)
Loss on sale of subsidiary	—			477			(477		)	100.0
Total expenses	163,479			151,298			12,181			8.1
Income before income taxes and non-controlling interest	18,157			13,700			4,457			32.5
Income taxes	6,520			4,847			1,673			34.5
Income before non-controlling interest	11,637			8,853			2,784			31.4
Less: net income (loss) attributable to non-controlling interest	62			(171		)	233			(136.3	)
Net income	$	11,575		$	9,024		$	2,551		28.3	%
Earnings per share:
Basic	$	0.59		$	0.44
Diluted	$	0.56		$	0.42
Weighted average common shares outstanding:
Basic	19,705,105			20,355,057
Diluted	20,620,084			21,375,184

REVENUES

Service and Administrative Fees

Service and administrative fees for the three months ended September 30, 2012 and 2011 totaled $10.1 million, respectively. The increase resulted primarily from a $1.1 million increase in our BPO segment revenues, including the benefit of a $1.0 million increase in administrative fees from our acquisition of PBG in October 2011 and an increase in Consecta of $0.1 million. This increase was nearly offset by reduced administrative fees of $1.0 million in our Payment Protection segment.

Service and administrative fees for the nine months ended September 30, 2012 increased $0.7 million, or 2.7%, to $28.8 million from $28.0 million for the same period in 2011. The increase resulted primarily from a $2.5 million increase in our BPO segment revenues, including the benefit of a $2.7 million increase in administrative fees from our acquisition of PBG in October 2011 offset by decreased revenue in Consecta of $0.2 million. This increase was partially offset by reduced administrative fees of $0.8 million in our Payment Protection segment and a decrease of $1.0 million in debt collection and collateral recovery fees, with $0.7 million of this amount related to the sale of CIRG in July 2011.

Brokerage Commissions and Fees

Brokerage commissions and fees for the three months ended September 30, 2012 decreased $0.2 million, or 2.3%, to $8.4 million from $8.6 million for the same period in 2011. For the 2012 period, eReinsure revenues decreased $0.4 million which was partially offset by a $0.2 million increase attributable to B&G.

Brokerage commissions and fees for the nine months ended September 30, 2012 increased $1.6 million, or 6.3%, to $27.3 million from $25.7 million for the same period in 2011. The 2012 period includes nine full months of results for eReinsure, while the

31

same period in 2011 includes eReinsure's results from the acquisition on March 3, 2011 to September 30, 2011. For the 2012 period, B&G contributed $1.0 million to the increase while eReinsure contributed an increase of $0.6 million.

Ceding Commissions

Ceding commissions for the three months ended September 30, 2012 increased $4.1 million, or 58.3%, to $11.1 million from $7.0 million for the same period in 2011. This increase resulted primarily from improved underwriting results due to growth in earned premiums and favorable loss experience along with additional administrative fees earned from increased insurance production in 2012, and the change in accounting estimate which accounted for $2.1 million of the increase. For the three months ended September 30, 2012, ceding commissions included $7.4 million in service and administrative fees, $3.5 million in underwriting profits from positive underwriting performance and $0.2 million in net investment income.

Ceding commissions for the nine months ended September 30, 2012 increased $4.0 million, or 18.5%, to $25.4 million from $21.4 million for the same period in 2011. This increase primarily resulted from improved underwriting results due to growth in earned premiums and favorable loss experience along with additional administrative fees earned from increased insurance production in 2012, and the change in accounting estimate which accounted for $2.1 million of the increase. For the nine months ended September 30, 2012, ceding commissions included $18.1 million in service and administrative fees, $6.8 million in underwriting profits from positive underwriting performance and $0.5 million in net investment income.

Net Investment Income

Net investment income for the three months ended September 30, 2012 and 2011 was $0.7 million and $0.8 million, respectively. and $2.2 million and $2.6 million, for the nine months ended September 30, 2012 and 2011 respectively. For both 2012 periods presented, the decreases were principally due to lower income earned on fixed income securities and to a lesser extent a lower amount of income earned on cash.

Net Realized (Losses) Gains on the Sale of Investments

Net realized losses on the sale of investments totaled $16 thousand and $6 thousandfor the three and nine months ended September 30, 2012, respectively, compared to net realized gains of $1.2 million and $2.4 million for the same periods in 2011, respectively. The decrease for both periods in 2012 was due to higher levels of investment sales occurring in 2011 that were not repeated in the 2012 periods. In addition, the $16 thousand net realized loss recorded for the three months ended September 30, 2012 was attributable to an OTTI charge for the write-down of a single equity security.

Net Earned Premium

Net earned premium for the three months ended September 30, 2012 increased $5.2 million, or 18.2%, to $33.9 million from $28.7 million for the same period in 2011, with the change in accounting estimate increasing net earned premium by $1.8 million for the 2012 period. For the 2012 period, direct and assumed earned premium increased $17.3 million resulting from an increase in direct and assumed written premium due to increased production from existing clients and new clients distributing our credit insurance and warranty products and geographic expansion. Because of this increase, ceded earned premiums increased $12.1 million, or 23.1%, for the three months ended September 30, 2012. On average, we maintained a 65.5% overall cession rate of direct and assumed earned premium for the three months ended September 30, 2012 compared with 64.6% for the three months ended September 30, 2011.

Net earned premium for the nine months ended September 30, 2012 increased $13.1 million, or 15.5%, to $97.8 million from $84.6 million for the same period in 2011, with the change in accounting estimate increasing net earned premium by $1.8 million for the 2012 period. For the 2012 period, direct and assumed earned premium increased $33.7 million resulting from an increase in direct and assumed written premium due to increased production from existing clients and new clients distributing our credit insurance and warranty products and geographic expansion. Because of this increase, ceded earned premiums increased $20.6 million, or 13.7%, the nine months ended September 30, 2012. On average, we maintained a 63.7% overall cession rate of direct and assumed earned premium for the nine months ended September 30, 2012 compared with 64.0% in 2011.

Other Income

Other income was relatively consistent for all periods presented and totaled $0.1 million and $18.0 thousand for the three months ended September 30, 2012 and 2011, respectively and $0.2 million and $0.1 million for the nine months ended September 30, 2012 and 2011, respectively.

EXPENSES

Net Losses and Loss Adjustment Expenses

Net losses and loss adjustment expenses for the three months ended September 30, 2012 increased $1.7 million, or 17.7%, to $11.4 million, from $9.7 million for the same period in 2011.  Our net losses and loss adjustment expense ratio improved from 33.9% in 2011 to 33.7% in 2012, with the change in accounting estimate improving the net losses and loss adjustment expense ratio by

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200 basis points. The increase in net losses and loss adjustment expenses was driven by increased earned premiums and warranty claims. For the 2012 period, our direct and assumed losses increased by $1.5 million, or 6.9%, as compared with the same period in 2011. For the 2012 period, our ceded losses were lower by $0.2 million, or 2.0%, compared with the same period in 2011, and increased our overall net losses and loss adjustment expense by the corresponding amount. . On average, we maintained a 50.5% and 55.0% overall cession rate of direct and assumed losses and loss adjustment expenses for the three months ended September 30, 2012 and 2011, respectively.

Net losses and loss adjustment expenses for the nine months ended September 30, 2012 increased $3.9 million, or 13.9% to $32.3 million, from $28.3 million for the same period in 2011.  Our net losses and loss adjustment expense ratio improved from 33.5% in 2011 to 33.0% in 2012, with the change in accounting estimate improving the net losses and loss adjustment expense ratio by 60 basis points. The increase in net losses and loss adjustment expenses was driven by increased earned premiums and warranty claims. For the 2012 period, our direct and assumed losses increased by $5.4 million, or 9.0%, as compared with the same period in 2011. For the 2012 period, our ceded losses were higher by $1.5 million, or 4.7%, compared with the same period in 2011, partially offsetting the increase in direct and assumed losses. On average, we maintained a 51.2% and 53.4% overall cession rate of direct and assumed losses and loss adjustment expenses for the nine months ended September 30, 2012 and 2011, respectively.

Commissions

Commissions for the three months ended September 30, 2012 increased $3.6 million, or 20.2%, to $21.5 million, from $17.9 million for the same period in 2011. Commissions for the nine months ended September 30, 2012 increased $7.7 million, or 14.3%, to $61.5 million, from $53.8 million for the same period in 2011. The increase for both periods in 2012, compared to 2011, resulted from growth in net earned premiums and from the change in accounting estimate, which increased commissions for both periods in 2012 by $2.7 million.

Personnel Costs

Personnel costs for the three months ended September 30, 2012 increased $1.8 million, or 16.1%, to $12.7 million from $10.9 million for the same period in 2011. The 2012 results include $0.7 million for the 2011 PBG acquisition, with the remaining $1.1 million of the increase related to increased headcount across the business. In addition, the sale of CIRG in 2011 reduced 2012 personnel costs by $0.2 million. Stock-based compensation expense totaled $0.2 million for the three months ended September 30, 2012 and 2011, respectively.

Personnel costs for the nine months ended September 30, 2012 increased $3.1 million, or 9.3%, to $36.5 million from $33.4 million for the same period in 2011. The increase resulted primarily from $1.9 million for the 2011 PBG acquisition and the increased headcount across the business. In addition, the sale of CIRG in 2011 reduced personnel costs in 2012 by $0.3 million in the current year period. Stock-based compensation expense totaled $0.4 million for both the nine months ended September 30, 2012 and 2011.

Other Operating Expenses

Other operating expenses for the three months ended September 30, 2012 increased $0.7 million, or 9.5%, to $8.0 million from $7.3 million for the same period in 2011. The 2012 results include the full impact of the October 2011 acquisition of PBG and also reflect a $0.2 million decrease in other operating expense from the sale of CIRG and a $0.3 million reduction in expense due to the change in accounting estimate.

Other operating expenses for the nine months ended September 30, 2012 decreased $2.1 million, or 9%, to $21.6 million from $23.8 million for the same period in 2011. The 2012 results include the full impact of the 2011 acquisitions of eReinsure and PBG and a $0.3 million reduction in expense due to the change in accounting estimate, while 2011 only contained the results of eReinsure from March 3, 2011. The eReinsure and PBG acquisitions increased other operating expenses for the 2012 period by $1.7 million compared to the same period in 2011. Other operating expenses decreased $1.5 million for transaction and other non-operating, non-recurring charges and $1.3 million for one-time operating charges that did not reoccur in 2012. In addition, the BPO segment other operating expenses decreased $0.9 million due to variable cost reductions in our business due to revenue declines and $0.4 million decrease in other operating expense from the sale of CIRG.

Depreciation

Depreciation expense was $0.9 million for both the three months ended September 30, 2012 and 2011, respectively. Depreciation expense for the nine months ended September 30, 2012 increased 13.2% to $2.6 million from $2.3 million for the same period in 2011, with the increase attributable to higher levels of depreciable assets in service during 2012 compared to the same period in 2011.

Amortization of Intangibles

Amortization expense increased $0.1 million, or 12.9%, to $1.1 million for the three months ended September 30, 2012 from $1.0 million for the same period in 2011 and increased $0.3 million, or 10.1%, to $3.8 million for the nine months ended September

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30, 2012 from $3.4 million for the same period in 2011.The increase for both periods in 2012, compared to 2011, was primarily due to prior year acquisitions which increased the level of other intangible assets subject to amortization.

Interest Expense

Interest expense for the three months ended September 30, 2012 increased $0.1 million, or 6.2%, to $2.0 million from $1.9 million for the same period in 2011. This increase was attributable to a $0.7 million charge to interest expense for previously capitalized transaction costs associated with the termination of the SunTrust Bank, N.A. revolving credit facility and higher outstanding borrowings in 2012 compared with 2011. Nearly offsetting this increase was a lower interest rate on outstanding borrowings from our new lower rate credit facility with Wells Fargo Bank, N.A., which took effect on August 2, 2012 and the impact of the interest rate swap, which took effect in mid-June 2012.

Interest expense for the nine months ended September 30, 2012 decreased $0.6 million, or 10.2%, to $5.3 million from $5.9 million for the same period in 2011 and was positively impacted by a lower interest rate on outstanding borrowings and our new credit facility, which was partially offset by a $0.7 million charge to interest expense for previously capitalized transaction costs associated with the termination of the SunTrust Bank, N.A. revolving credit facility as well as slightly higher outstanding borrowings in 2012 compared with 2011.

Loss on sale of subsidiary

On July 1, 2011, we sold our wholly-owned subsidiary, CIRG, for a sales price of $1.2 million, for cash and a $1.1 million secured note receivable. For the three months ended September 30, 2011 we recorded a $0.5 million loss on the sale of this subsidiary.

Income Taxes

Income taxes for the three months ended September 30, 2012 was $2.5 million, which is comparable to the $2.3 million for the same period in 2011. Our effective tax rate was 37.2% for the three months ended September 30, 2012 compared to 35.7% for the same period in 2011.

Income taxes for the nine months ended September 30, 2012 and 2011 was $6.5 million and $4.8 million, respectively, with the increase primarily attributable to a higher level of pretax income. Our effective tax rate was 35.9% for the nine months ended September 30, 2012 compared to 35.4% for the same period in 2011. For 2012, we expect our annual effective tax rate to approximate 35.2%.

Income taxes for the for the three and nine months ended September 30, 2012 included $0.1 million in additional income tax expense to reflect the true-up of the recorded income taxes for the differences between the December 31, 2011 recorded income tax provision and the final federal and state income tax returns. This true-up amount is primarily the increase in net deferred tax liabilities for the change in combined federal and state tax rates used to compute the deferred tax balances.

We are currently undergoing an examination of our federal income tax returns by the Internal Revenue Service ("IRS") for the tax years ending December 31, 2009 and 2010. We do not know when the examination by the IRS will be concluded.

RESULTS OF OPERATIONS - SEGMENTS

We conduct our business through three business segments: (i) Payment Protection; (ii) BPO; and (iii) Brokerage. The revenue for each segment is presented to reflect the operating characteristics of the segment. We allocate certain revenues and costs to our segments. These items consist primarily of corporate-related income, transaction related costs, executive stock compensation and other overhead expenses. For additional information regarding segment net revenues and operating expenses, see the note, "Segment Results" in the Notes to the Consolidated Financial Statements included in this Form 10-Q.

In this Form 10-Q, we present EBITDA, segment EBITDA margin and Adjusted EBITDA. These financial measures as presented in this Form 10-Q are considered Non-GAAP financial measures and are not recognized terms under U.S. GAAP and should not be used as an indicator of, and are not an alternative to, net income as a measure of operating performance. EBITDA as used in this Form 10-Q is net income before interest expense, income taxes, non-controlling interest, depreciation and amortization. Adjusted EBITDA, as used in this Form 10-Q means "Consolidated Adjusted EBITDA" which is defined under our credit facility with Well Fargo Bank, N.A., is generally consolidated net income before consolidated interest expense, consolidated amortization expense, consolidated depreciation expense and consolidated income tax expense. The other items excluded in this calculation may include if applicable, but are not limited to, specified acquisition costs, impairment of goodwill and other non-cash charges, stock-based compensation expense and unusual or non-recurring charges. The calculation below does not give effect to certain additional adjustments permitted under our credit facility, which if included, would increase the amount of Adjusted EBITDA reflected in this table. We believe presenting EBITDA and Adjusted EBITDA provides investors with a supplemental financial measure of our operating performance.

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In addition to the financial covenant requirements under our credit facility, management uses EBITDA and Adjusted EBITDA as financial measures of operating performance for planning purposes, which may include, but are not limited to, the preparation of budgets and projections, the determination of bonus compensation for executive officers, the analysis of the allocation of resources and the evaluation of the effectiveness of business strategies. Although we use EBITDA and Adjusted EBITDA as financial measures to assess the operating performance of our business, both measures have significant limitations as analytical tools because they exclude certain material expenses. For example, they do not include interest expense and the payment of income taxes, which are both a necessary element of our costs and operations. Since we use property and equipment to generate service revenues, depreciation expense is a necessary element of our costs. In addition, the omission of amortization expense associated with our intangible assets further limits the usefulness of this financial measure. Management believes the inclusion of the adjustments to EBITDA and Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. Because EBITDA and Adjusted EBITDA do not account for these expenses, its utility as a financial measure of our operating performance has material limitations. Due to these limitations, management does not view EBITDA and Adjusted EBITDA in isolation or as a primary financial performance measure.

We believe EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of similar companies in similar industries and to measure the company's ability to service its debt and other cash needs. Because the definitions of EBITDA and Adjusted EBITDA (or similar financial measures) may vary among companies and industries, they may not be comparable to other similarly titled financial measures used by other companies.

The following tables present segment revenue and expense information, segment EBITDA and EBITDA margin information and a reconciliation to net income:

(in thousands)	For the Three Months Ended
	September 30, 2012			September 30, 2011			Change from 2011			% Change from 2011
Payment Protection:
Service and administrative fees	$	4,677		$	5,695		$	(1,018	)	(17.9	)%
Ceding commission	11,122			7,027			4,095			58.3
Net investment income	744			801			(57		)	(7.1	)
Net realized (losses) gains on the sale of investments	(16		)	1,196			(1,212		)	(101.3	)
Other income	52			18			34			188.9
Net earned premium	33,893			28,673			5,220			18.2
Net losses and loss adjustment expenses	(11,430		)	(9,714		)	(1,716		)	17.7
Commissions	(21,548		)	(17,926		)	(3,622		)	20.2
Payment Protection revenue, net	17,494			15,770			1,724			10.9
Operating expenses - Payment Protection	9,563			8,445			1,118			13.2
EBITDA	7,931			7,325			606			8.3
EBITDA margin	45.3		%	46.4		%
Depreciation and amortization	863			927			(64		)	(6.9	)
Interest Expense	1,359			1,053			306			29.1
Income before income taxes and non-controlling interest	5,709			5,345			364			6.8
BPO:
BPO revenue	4,951			3,833			1,118			29.2
Operating expenses	3,836			2,717			1,119			41.2
EBITDA	1,115			1,116			(1		)	(0.1	)
EBITDA margin	22.5		%	29.1		%
Depreciation and amortization	494			307			187			60.9
Interest Expense	294			96			198			206.3
Income before income taxes and non-controlling interest	327			713			(386		)	(54.1	)
Brokerage:

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(in thousands)	For the Three Months Ended
	September 30, 2012			September 30, 2011			Change from 2011			% Change from 2011
Brokerage revenue	8,839			9,208			(369		)	(4.0	)
Operating expenses	7,268			7,491			(223		)	(3.0	)
EBITDA	1,571			1,717			(146		)	(8.5	)
EBITDA margin	17.8		%	18.6		%
Depreciation and amortization	641			650			(9		)	(1.4	)
Interest Expense	372			757			(385		)	(50.9	)
Income before income taxes and non-controlling interest	558			310			248			80.0
Corporate:
Corporate revenue	—			—			—			—
Operating expenses	—			36			(36		)	(100.0	)
EBITDA	—			(36		)	36			(100.0	)
EBITDA margin	—			—
Depreciation and amortization	—			—			—			—
Interest Expense	—			—			—			—
Income before income taxes and non-controlling interest	—			(36		)	36			(100.0	)
Segment net revenue	31,284			28,811			2,473			8.6
Net losses and loss adjustment expenses	11,430			9,714			1,716			17.7
Commissions	21,548			17,926			3,622			20.2
Total revenue	64,262			56,451			7,811			13.8
Segment operating expenses	20,667			18,689			1,978			10.6
Net losses and loss adjustment expenses	11,430			9,714			1,716			17.7
Commissions	21,548			17,926			3,622			20.2
Total expenses before depreciation, amortization and interest expense	53,645			46,329			7,316			15.8
Total EBITDA	10,617			10,122			495			4.9
Depreciation and amortization	1,998			1,884			114			6.1
Interest Expense	2,025			1,906			119			6.2
Total income before income taxes and non-controlling interest	6,594			6,332			262			4.1
Income taxes	2,455			2,259			196			8.7
Less: net income attributable to non-controlling interest	29			1			28			2,800.0
Net income	$	4,110		$	4,072		$	38		0.9	%

(in thousands)	For the Nine Months Ended
	September 30, 2012			September 30, 2011		Change from 2011			% Change from 2011
Payment Protection:
Service and administrative fees	$	13,876		$	14,704	$	(828	)	(5.6	)%
Ceding commission	25,396			21,428		3,968			18.5
Net investment income	2,219			2,636		(417		)	(15.8	)
Net realized (losses) gains on the sale of investments	(6		)	2,423		(2,429		)	(100.2	)
Other income	172			138		34			24.6

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(in thousands)	For the Nine Months Ended
	September 30, 2012		September 30, 2011		Change from 2011		% Change from 2011
Net earned premium	97,770		84,646		13,124		15.5
Net losses and loss adjustment expenses	(32,272	)	(28,338	)	(3,934	)	13.9
Commissions	(61,479	)	(53,766	)	(7,713	)	14.3
Payment Protection revenue, net	45,676		43,871		1,805		4.1
Operating expenses - Payment Protection	26,205		25,857		348		1.3
EBITDA	19,471		18,014		1,457		8.1
EBITDA margin	42.6	%	41.1	%
Depreciation and amortization	2,577		3,204		(627	)	(19.6	)
Interest Expense	3,342		3,622		(280	)	(7.7	)
Income before income taxes and non-controlling interest	13,552		11,188		2,364		21.1
BPO:
BPO revenue	13,565		11,088		2,477		22.3
Operating expenses	10,320		8,164		2,156		26.4
EBITDA	3,245		2,924		321		11.0
EBITDA margin	23.9	%	26.4	%
Depreciation and amortization	1,495		824		671		81.4
Interest Expense	820		258		562		217.8
Income before income taxes and non-controlling interest	930		1,842		(912	)	(49.5	)
Brokerage:
Brokerage revenue	28,644		27,935		709		2.5
Operating expenses	21,577		21,837		(260	)	(1.2	)
EBITDA	7,067		6,098		969		15.9
EBITDA margin	24.7	%	21.8	%
Depreciation and amortization	2,287		1,683		604		35.9
Interest expense	1,105		1,982		(877	)	(44.2	)
Income before income taxes and non-controlling interest	3,675		2,433		1,242		51.0
Corporate:
Corporate revenue	—		—		—		—
Operating expenses	—		1,763		(1,763	)	(100.0	)
EBITDA	—		(1,763	)	1,763		(100.0	)
EBITDA margin	—		—
Depreciation and amortization	—		—		—		—
Interest Expense	—		—		—		—
Income before income taxes and non-controlling interest	—		(1,763	)	1,763		(100.0	)
Segment net revenue	87,885		82,894		4,991		6.0
Net losses and loss adjustment expenses	32,272		28,338		3,934		13.9
Commissions	61,479		53,766		7,713		14.3
Total revenue	181,636		164,998		16,638		10.1
Segment operating expenses	58,102		57,621		481		0.8
Net losses and loss adjustment expenses	32,272		28,338		3,934		13.9

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(in thousands)	For the Nine Months Ended
	September 30, 2012		September 30, 2011			Change from 2011			% Change from 2011
Commissions	61,479		53,766			7,713			14.3
Total expenses before depreciation, amortization and interest expense	151,853		139,725			12,128			8.7
Total EBITDA	29,783		25,273			4,510			17.8
Depreciation and amortization	6,359		5,711			648			11.3
Interest Expense	5,267		5,862			(595		)	(10.2	)
Total income before income taxes and non-controlling interest	18,157		13,700			4,457			32.5
Income taxes	6,520		4,847			1,673			34.5
Less: net income (loss) attributable to non-controlling interest	62		(171		)	233			(136.3	)
Net income	$	11,575	$	9,024		$	2,551		28.3	%

The table below presents a reconciliation of net income to EBITDA and Adjusted EBITDA for the following periods:

	For the Three Months Ended				For the Nine Months Ended
(in thousands)	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Net income	$	4,110	$	4,072	$	11,575	$	9,024
Depreciation	871		886		2,584		2,283
Amortization of intangibles	1,127		998		3,775		3,428
Interest expense	2,025		1,906		5,267		5,862
Income taxes	2,455		2,259		6,520		4,847
Net income (loss) attributable to non-controlling interest	29		1		62		(171		)
EBITDA	10,617		10,122		29,783		25,273
Transaction costs (a)	5		36		139		829
Corporate governance study	—		—		—		248
Relocation expenses	—		—		—		207
Statutory audits	—		—		—		98
Loss on sale of subsidiary	—		477		—		477
Stock-based compensation expense	288		214		657		615
Adjusted EBITDA	$	10,910	$	10,849	$	30,579	$	27,747
(a) Represents transaction costs associated with acquisitions.

Payment Protection Segment

Net revenues for the three months ended September 30, 2012 increased $1.7 million, or 10.9%, to $17.5 million from $15.8 million for the same period in 2011. The change in accounting estimate increased net revenues by $1.2 million for the 2012 period. Ceding commission increased $2.0 million, after deducting the impact from the change in accounting estimate, primarily from improved underwriting results due to growth in earned premiums and favorable loss experience along with additional administrative fees earned from increased insurance production in 2012. In addition, after deducting the impact from the change in accounting estimate, underwriting revenue was $0.8 million above the 2011 period and resulted from increased earned premiums offset by growth in commissions due to an increase in direct and assumed earned premium and a decrease in loss ratio in our risk retained business. Net investment income on our portfolio decreased by $0.1 million due to lower investment yields. Net realized (losses) gains on the sale of investments decreased by $1.2 million due to the sale of investment securities in the third quarter of 2011 not repeated in the third quarter of 2012. Service fee income decreased by $1.0 million due to reduced motor club revenue.

Net revenues for the nine months ended September 30, 2012 increased $1.8 million, or 4.1%, to $45.7 million from $43.9 million for the same period in 2011. The change in accounting estimate increased net revenues by $1.2 million for the 2012 period. Ceding commission increased $1.8 million, after deducting the impact from the change in accounting estimate, primarily from improved underwriting results due to growth in earned premiums and favorable loss experience in reinsured blocks along with additional

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administrative fees earned from increased insurance production in 2012. In addition, after deducting the impact from the change in accounting estimate, underwriting revenue was $2.4 million above the 2011 period and resulted from increased earned premiums offset by growth in commissions due to an increase in direct and assumed earned premium and a decrease in loss ratio in our risk retained business. Net investment income on our portfolio decreased by $0.4 million due to lower investment yields. Net realized (losses) gains on the sale of investments decreased by $2.4 million due to the sale of investment securities in 2011 not repeated in the 2012 period. Service fee income decreased by $0.8 million primarily due to reduced motor club revenue.

Operating expenses for the three months ended September 30, 2012 increased $1.1 million, or 13.2%, to $9.6 million from $8.4 million for the same period in 2011 and for the nine months ended September 30, 2012 increased $0.3 million, or 1.3%, to $26.2 million from $25.9 million for the same period in 2011. The increase for both periods in 2012 resulted primarily from growth in variable expenses to expand our payment protection business while the change in accounting estimate decreased both periods in 2012 by $0.3 million.

EBITDA for the three months ended September 30, 2012 increased $0.6 million, or 8.3%, to $7.9 million from $7.3 million for the same period in 2011. EBITDA margin was 45.3% and 46.4% for the three months ended June 30, 2012 and 2011, respectively.

EBITDA for the nine months ended September 30, 2012 increased $1.5 million, or 8.1%, to $19.5 million from $18.0 million for the same period in 2011. EBITDA margin was 42.6% and 41.1% for the nine months ended September 30, 2012 and 2011, respectively.

BPO Segment

The BPO segment for 2012 includes a full three and nine months of results for PBG, which was acquired in October 2011.

Revenues for the three months ended September 30, 2012 increased $1.1 million, or 29.2%, to $5.0 million from $3.8 million for the same period in 2011. The increase in 2012 was primarily due to the additional revenues of $1.0 million from our PBG acquisition and an increase in service and administrative fees of $0.1 million on debt cancellation programs of credit card companies and $33 thousand in revenue for the new term life program for a new life insurance carrier client.

Revenues for the nine months ended September 30, 2012 increased $2.5 million, or 22.3%, to $13.6 million from $11.1 million for the same period in 2011. The increase in 2012 was primarily due to the additional revenues of $2.7 million from our PBG acquisition and by an increase in service and administrative fees of $0.8 million on debt cancellation programs of credit card companies and $0.3 million fee for the implementation of a new term life program for a new life insurance carrier client. These increases were partially offset by lower service and administrative fees for our insurance company clients, which decreased $1.3 million due to regulatory changes that slowed the production for one of our main customers in 2012.

Operating expenses for the three months ended September 30, 2012 increased $1.1 million, or 41.2%, to $3.8 million from $2.7 million for the same period in 2011. The increase in 2012 resulted primarily from additional expenses of $1.4 million from our PBG acquisition, offset by a $0.3 million reduction in operating expenses resulting from lower variable costs for processing and fulfillment associated with the decline in Consecta revenue.

Operating expenses for the nine months ended September 30, 2012 increased $2.2 million, or 26.4%, to $10.3 million from $8.2 million for the same period in 2011. The increase in 2012 resulted primarily from additional expenses of $3.3 million from our PBG acquisition, offset by a $1.1 million reduction in operating expenses resulting from lower variable costs for processing and fulfillment associated with the decline in Consecta revenue.

EBITDA for the three months ended September 30, 2012 was $1.1 million compared to $1.1 million for the same period in 2011. EBITDA margin was 22.5% and 29.1% for the three months ended September 30, 2012 and 2011, respectively.

EBITDA for the nine months ended September 30, 2012 was $3.2 million compared to $2.9 million for the same period in 2011. EBITDA margin was 23.9% and 26.4% for the nine months ended September 30, 2012 and 2011, respectively.

Brokerage Segment

The Brokerage segment for 2012 includes a full three and nine months of results for eReinsure. For the 2011 periods, the three months ended September 30, 2011 includes a full three months of results, while the 2011 year to date period includes eReinsure's results from the date of acquisition on March 3, 2011. The 2011 results also include six months of CIRG results, which was sold in July 2011.

Revenues of $8.8 million for the three months ended September 30, 2012 were comprised primarily of $6.0 million in standard commissions and fees, $0.3 million in profit commissions, $0.5 million of premium financing and collateral recovery fees, and

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$2.1 million in fees from eReinsure. Revenues of $9.2 million for the three months ended September 30, 2011 were comprised primarily of $5.8 million in standard commissions and fees, $0.3 million in profit commissions, $2.5 million in fees from eReinsure, and $0.6 million of debt collection, premium financing and collateral recovery fees.

Revenues increased $0.7 million, or 2.5%, to $28.6 million for the nine months ended September 30, 2012 from $27.9 million and were comprised primarily of $18.5 million in standard commissions and fees, $2.4 million in profit commissions, $1.0 million of premium financing and collateral recovery fees and $6.4 million in fees from eReinsure. Revenues of $27.9 million for the nine months ended September 30, 2011 were comprised primarily of $18.0 million in standard commissions and fees, $1.9 million in profit commissions, $5.8 million in fees from eReinsure, and $2.2 million of debt collection, premium financing and collateral recovery fees.

Operating expenses for the three months ended September 30, 2012 decreased $0.2 million, or 3.0%, to $7.3 million, from $7.5 million for the same period in 2011. For the three months ended September 30, 2012 and 2011, the majority of our expenses were personnel costs, which totaled $5.1 million and $4.8 million, respectively. For the three months ended September 30, 2012 and 2011, eReinsure accounted for $1.0 million of the personnel costs and $0.3 million of the operating expenses compared to $1.0 million and $0.4 million, respectively for the same period in 2011.

Operating expenses for the nine months ended September 30, 2012 were $21.6 million, compared to $21.8 million for the same period in 2011. For the nine months ended September 30, 2012 and 2011, the majority of our expenses were personnel costs, which totaled $15.6 million and $14.9 million, respectively. For the nine months ended September 30, 2012 and 2011, eReinsure accounted for $3.1 million of the personnel costs and $0.9 million of the operating expenses compared to $2.3 million and $0.9 million, respectively for the same period in 2011.

EBITDA, for the three months ended September 30, 2012 was $1.6 million compared to $1.7 million for the same period in 2011. EBITDA margin was 17.8% and 18.6% for the three months ended September 30, 2012 and 2011, respectively.

EBITDA, for the nine months ended September 30, 2012 was $7.1 million compared to $6.1 million for the same period in 2011. EBITDA margin was 24.7% and 21.8% for the nine months ended September 30, 2012 and 2011, respectively.

Corporate Segment

No income or expenses were allocated to the Corporate segment for the three and nine months ended September 30, 2012.

Operating expenses for the three and nine months ended September 30, 2011 were $36.0 thousand and $1.8 million, respectively, and were attributable to a combination of professional fees, transaction costs and costs associated with the moving of our corporate headquarters.

Goodwill by Business Segment

During the three months ended March 31, 2012, we determined the final valuation for eReinsure and reduced the amount of goodwill associated with this acquisition by $2.6 million to reflect the final valuation of intangibles acquired. In addition, we reduced goodwill by $2.7 million to reflect final valuation to intangibles for the 2011 acquisition of PBG.

The following table shows goodwill assigned to each business segment at: (in thousands)	September 30, 2012
Payment Protection:
Summit Partners Transactions	$	22,763
Darby & Associates	642
Continental	5,427
United	4,581
Auto Knight	3,827
Total Payment Protection	37,240
BPO:
Summit Partners Transactions	8,902
PBG	4,068
Total BPO	12,970
Brokerage:
B&G	30,468
South Bay	478
eReinsure	23,512
Total Brokerage	54,458
Total Goodwill	$	104,668

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, capital expenditures, debt service, acquisitions and other commitments and contractual obligations. We historically have derived our liquidity from our invested assets, cash flow from operations, ordinary and extraordinary dividend capacity from our subsidiary insurance companies, our credit facility and investments. When considering our liquidity, it is important to note that we hold cash in a fiduciary capacity as a result of premiums received from insured parties that have not yet been paid to insurance carriers. The fiduciary cash is recorded as an asset on our Consolidated Balance Sheets with a corresponding liability, net of our commissions, to insurance carriers.

Our primary cash requirements include the payment of our operating expenses, interest and principal payments on our debt, capital expenditures and acquisitions. We may also incur unexpected costs and operating expenses related to any unforeseen disruptions to our facilities and equipment, the loss of key personnel or changes in the credit markets and interest rates, which could increase our immediate cash requirements or otherwise impact our liquidity.

Our primary sources of liquidity are our total investments, cash and cash equivalent balances, availability under our revolving credit facility and dividends and other distributions from our subsidiaries. At September 30, 2012, we had total available-for-sale and short-term investments of $117.9 million, which includes restricted investments of $19.1 million, cash and cash equivalents of $11.3 million and $53.8 million of available capacity on our credit facility. At December 31, 2011, we had total investments of $95.8 million. which includes restricted investments of $18.3 million, cash and cash equivalents of $31.3 million and $12.0 million of available capacity on our revolving credit facility. Our total indebtedness was $106.2 million at September 30, 2012 compared to $108.0 million at December 31, 2011.

On August 2, 2012, we entered into a new credit facility with Wells Fargo Bank, N.A., which is described in the section below, "$125.0 million Credit Facility."

We believe that our cash flow from operations and our availability under our revolving credit facility, combined with our low capital expenditure requirements will provide us with sufficient capital to continue to grow our business over the next several years. We intend to use a portion of our available cash flow to pay interest on our outstanding debt, thus limiting the amount available for working capital, capital expenditures and other general corporate purposes. As we continue to expand our business and make acquisitions, we may in the future require additional working capital to meet our future business needs. This additional working capital may be in the form of additional debt or equity. Although we believe we have sufficient liquidity under our revolving credit facility, as discussed above, under adverse market conditions or in the event of a default under our revolving credit facility, there can be no assurance that such funds would be available or sufficient, and in such a case, we may not be able to successfully obtain additional financing on favorable terms, or at all, or replace our existing credit facility upon maturity in August 2017.

Common Stock Repurchase Program

During the fourth quarter of 2011, our Board of Directors approved a share repurchase plan. The share repurchase plan allows us to purchase up to $10.0 million of our common stock to be purchased from time to time through open market or private transactions. The plan provides for shares to be repurchased for general corporate purposes, which may include serving as a subsequent resource for funding potential acquisitions and employee benefit plans. The timing, price and quantity of purchases are at our discretion, and the plan may be discontinued or suspended at any time. For the three months ended September 30, 2012, we repurchased a total of 147,503 shares with an average price of $8.02 per share and a total cost of $1.2 million. For the nine months ended September 30, 2012, we repurchased a total of 508,080 shares with an average price of $7.72 per share and a total cost of $3.9 million. See Part II, Item 2, for more information on the share repurchase plan.

Regulatory Requirements

We are a holding company and have limited direct operations. Our holding company assets consist primarily of the capital stock of our subsidiaries. Accordingly, our future cash flows depend upon the availability of dividends and other payments from our subsidiaries, including statutorily permissible payments from our insurance company subsidiaries, as well as payments under our tax allocation agreement and management agreements with our subsidiaries. The ability of our insurance company subsidiaries to pay such dividends and to make such other payments are limited by applicable laws and regulations of the states in which our subsidiaries are domiciled, which vary from state to state and by type of insurance provided by the applicable subsidiary. These laws and regulations require, among other things, our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay to the holding company. Along with solvency regulations, the primary factor in determining the amount of capital available for potential dividends is the level of capital needed to maintain desired financial strength ratings from A.M. Best for our insurance company subsidiaries. Given recent economic events that have affected

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the insurance industry, both regulators and rating agencies could become more conservative in their methodology and criteria, including increasing capital requirements for our insurance subsidiaries which, in turn, could negatively affect our capital resources. The following table sets forth the dividends paid to us by our insurance company subsidiaries during the following periods:

	Nine months ended		Twelve months ended
(in thousands)	September 30, 2012		December 31, 2011
Ordinary dividends	$	285	$	7,558
Extraordinary dividends	—		830
Total dividends	$	285	$	8,388

$85.0 Million Revolving Credit Facility

In June 2010, we entered into a $35.0 million revolving credit facility with SunTrust Bank, N.A., which was set to mature in June 2013 (the "Facility"). Subsequent to June 2010, the Facility was increased to $85.0 million.

On August 2, 2012, we terminated the $85.0 million revolving credit facility with SunTrust Bank, N.A. and entered into a new $125.0 million credit facility, which is discussed below. In connection with the termination of the SunTrust Bank, N.A. revolving credit facility, we recorded a charge of $0.7 million to interest expense during the three months ended September 30, 2012 for previously capitalized transaction costs associated with this revolving credit facility.

$125.0 Million Credit Facility

On August 2, 2012, we entered into a five-year $125.0 million secured credit agreement (the "Credit Agreement") with a syndicate of lenders, including Wells Fargo Bank, N.A., who also serves as administrative agent ("Wells Fargo" or the "Administrative Agent"). The Credit Agreement provides for a $50.0 million term loan facility (the "Term Loan Facility"), as well as a $75.0 million revolving credit facility (the "Revolving Facility" and collectively with the Term Loan Facility, the "Facilities") with a sub-limit of $10.0 million for swingline loans and $10.0 million for letters of credit. Subject to earlier termination, the Credit Agreement terminates on August 2, 2017. The Credit Agreement includes a provision pursuant to which, from time to time, we may request that the lenders in their discretion increase the maximum amount of commitments under the Facilities by an amount not to exceed $50.0 million. 

At our election, borrowings under the Revolving Facility will bear interest either at the base rate plus an applicable interest margin or the adjusted LIBO rate plus an applicable interest margin; provided, however, that all swingline loans will be base rate loans. The base rate is a fluctuating interest rate equal to the highest of: (i) Wells Fargo's publicly announced prime lending rate; (ii) the federal funds rate plus0.50%; and (iii) the adjusted LIBO rate, determined on a daily basis for an interest period of one month, plus1.0%. The adjusted LIBO rate is the rate per annum obtained by dividing (i) the London interbank offered rate ("LIBOR") for such interest period by (ii) a percentage equal to 1.00 minusthe Eurodollar Reserve Percentage (as defined in the Credit Agreement). The interest margin over the adjusted LIBO rate, initially set at 2.75%, may increase (to a maximum amount of 3.0%) or decrease (to a minimum amount of 2.0%) based on changes in our leverage ratio. The interest margin over the base rate, initially set at 1.75%, may increase (to a maximum amount of 2.0%) or decrease (to a minimum amount of 1.0%) based on changes in our leverage ratio.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Credit Agreement, we are required to pay a commitment fee, initially equal to 0.40% per annum of the unused amount of the Revolving Facility. The percentage rate of such fee may increase (to a maximum amount of .45%) or decrease (to a minimum amount of .25%) based on changes in the Borrowers' leverage ratio. The amount of outstanding swingline loans is not considered usage of the Revolving Facility for the purpose of calculating the commitment fee. We are also required to pay letter of credit participation fees on the undrawn amount of all outstanding letters of credit. We paid one-time upfront fees of approximately $1.3 million to Wells Fargo in connection with the execution of the Credit Agreement.

We may, at our option, prepay any borrowing, in whole or in part, at any time and from time to time without premium or penalty. However, after the end of our fiscal year (commencing with the fiscal year ending December 31, 2015), we are required to make mandatory principal prepayments of loans under the Facilities in an amount determined under the Credit Agreement based upon a percentage (from a maximum of 50% to a minimum of 0% based on the Borrowers' leverage ratio) of our Excess Cash Flow (as defined in the Credit Agreement) minus certain off set amounts relating to permitted acquisitions of ours.

The Credit Agreement contains certain customary representations, warranties and covenants applicable to us for the benefit of the Administrative Agent and the lenders. We may not assign, sell, transfer or dispose of any collateral or effect certain changes to our capital structure and the capital structure of our subsidiaries without the Administrative Agent's prior consent. Our obligations

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under the Facilities may be accelerated or the commitments terminated upon the occurrence of an event of default under the Credit Agreement, including payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control and other customary events of default. The Credit Agreement also contains the following financial covenants, which require us to maintain, as of the end of each fiscal quarter:

• a maximum Total Leverage Ratio (as defined in the Credit Agreement) of 3.50:1.00, with step-downs to 3.25:1.00 on December 31, 2013 and 3.00:1.00 on December 31, 2014;

• a minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 2.00:1.00;

• a minimum Reinsurance Ratio (as defined in the Credit Agreement) of 50.0%; and

• a minimum NAIC Risk Based Capital Ratio (as defined in the National Association of Insurance Commissioners ("NAIC") standards, calculated as of the end of each fiscal year, to the "authorized control level," as defined by the NAIC in its standards) of 250.0%, applicable to each regulated insurance subsidiary of the Borrowers.

Preferred Trust Securities

In connection with the Summit Partners Transactions, our subsidiary, LOTS Intermediate Co. issued $35.0 million of fixed/floating rate preferred trust securities due in 2037. The preferred trust securities accrued interest at a rate of 9.61% per annum until the June 2012 interest payment date, thereafter, interest accrues at a rate of 3-month LIBOR plus 4.10% for each interest rate period. We were not permitted to redeem the preferred trust securities until after the June 2012 interest payment date, thereafter we may redeem the preferred trust securities, in whole or in part, at a price equal to 100% of the principal amount of such preferred trust securities outstanding plus accrued and unpaid interest. Interest is payable quarterly.

In April 2011, we entered into a forward interest rate swap (the "Swap") with Wells Fargo Bank, N.A., pursuant to which we swapped the floating rate portion of our $35.0 million in outstanding preferred trust securities to a fixed rate of 3.47% per annum payable quarterly resulting in a total rate of 7.57% after adding the applicable margin of 4.10%. The Swap has a five year term, which commenced in June 2012 when the interest rate on the underlying preferred trust securities began to float and will expire in June 2017.

Invested Assets

Our invested assets consist mainly of high quality investments in fixed maturity securities, short-term investments, and a smaller allocation of common and preferred equity securities. We believe that prudent levels of investments in equity securities within our investment portfolio are likely to enhance long-term after-tax total returns without significantly increasing the risk profile of the portfolio. We regularly review our entire portfolio in the context of macroeconomic and capital market conditions. At September 30, 2012, the overall credit quality of the investment portfolio was rated A+ by Standard and Poor's Rating Service.

Regulatory Requirements

Our investments must comply with applicable laws and regulations which prescribe the kind, quality and concentration of investments. In general, these 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, mortgage loans, real estate and other investments.

Investment Strategy

Our investment policy and strategy is reviewed and approved by the board of directors of each of our insurance subsidiaries on a regular basis in order to review and consider investment activities, tactics and new investment opportunities. Our investment strategy seeks long-term returns through disciplined security selection, portfolio diversity and an integrated approach to risk management. We select and monitor investments to balance the goals of safety, stability, liquidity, growth and after-tax total return with the need to comply with regulatory investment requirements. Our investment portfolio is managed by a third-party provider of asset management services, which specializes in the insurance sector. Asset liability management is accomplished by setting an asset target duration range that is influenced by the following factors: (i) the estimated reserve payout pattern, (ii) the inclusion of our tactical capital market views into the investment decision making process and (iii) our overall risk tolerance. We aim to achieve a relatively safe and stable income stream by maintaining a broad-based portfolio of investment grade fixed maturity securities. These holdings are supplemented by investments in additional asset types with the objective of further enhancing the portfolio's diversification and expected returns. These additional asset types include common and redeemable preferred stock. We manage our investment risks through consideration of duration of liabilities, diversification, credit limits, careful analytic review of each investment decision, and comprehensive risk assessments of the overall portfolio.

As of September 30, 2012, we held 18 individual fixed maturity and 2 individual equity securities in unrealized loss positions. We do not intend to sell the investments that are in an unrealized loss position at September 30, 2012 and it is more likely than not that the we will be able to hold these securities until full recovery of their amortized cost basis for fixed maturity securities or

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cost for equity securities, although we can give no assurances. At September 30, 2012, based on management's quarterly review, we deemed that a single equity security was other than temporarily impaired and recorded an impairment charge of $16 thousand for the three and nine month ended September 30, 2012.

As of September 30, 2011, there were 30 individual fixed maturity and 2 individual equity securities in unrealized loss positions. At September 30, 2011, based on management's quarterly review, we deemed that 8 individual equity securities were other than temporarily impaired and for the three and nine months ended September 30, 2011 recorded an impairment charge of $0.2 million. Please see the note, "Investments" in the Notes to the Consolidated Financial Statements for additional information.

Cash Flows

We monitor cash flows at the consolidated, holding company and subsidiary levels. Cash flow forecasts at the consolidated and subsidiary levels are provided on a monthly basis using trend and variance analysis to project future cash needs, with adjustments made as needed. The table below shows our cash flows for the periods presented:

(in thousands)	For the Nine Months Ended
Cash provided by (used in):	September 30, 2012			September 30, 2011
Operating activities	$	19,078		$	340
Investing activities	(33,564		)	(36,786		)
Financing activities	(5,569		)	16,171
Net change in cash and cash equivalents	$	(20,055	)	$	(20,275	)

Operating Activities

Net cash provided by operating activities was $19.1 million for the nine months ended September 30, 2012 compared to net cash used in operating activities of $0.3 million, for the same period in 2011. For the nine months ended September 30, 2012, our net cash provided by operating activities was attributable to net income and an increase in accrued expenses, accounts payable, income taxes and other liabilities, that was partially offset by a increase in accounts and premiums receivable, other receivables and reinsurance receivables. For the nine months ended September 30, 2011, our net cash used in operating activities was attributable to a decrease in unpaid claims, deferred revenues and payments made for accrued expenses, accounts payable and other liabilities partially offset by our net income and decreases in unearned premiums.

Investing Activities

Net cash used in investing activities was $33.6 million for the nine months ended September 30, 2012 and $36.8 million for the same period in 2011. For the nine months ended September 30, 2012, net cash used in investing activities was for the purchase of fixed maturity and equity securities and property and equipment along with an increase in restricted cash, partially offset by the proceeds from maturities and sales of maturity of fixed maturity investments. For the nine months ended September 30, 2011, net cash used in investing activities primarily reflected cash used for the acquisitions of Auto Knight and eReinsure and the purchases of fixed maturity securities, partially offset by the sale and maturity of fixed maturity investments.

Financing Activities

Net cash used in financing activities was $5.6 million for the nine months ended September 30, 2012 compared to $16.2 million of net cash provided by financing activities for the same period in 2011. For the nine months ended September 30, 2012, net cash used in financing activities primarily reflected the use of $3.9 million to repurchase 508,080 shares of our common stock under our stock repurchase plan and $126.2 million used to pay-down our credit facilities, which was partially offset by borrowings under our lines of credit of $124.4 million, Payments and proceeds from our notes payables were also higher for the nine months ended September 30, 2012, compared to the same period in 2011, due to the payoff of our SunTrust Bank, N.A revolving credit facility and the entry into the new Wells Fargo Bank, N.A. credit facility. For the nine months ended September 30, 2011, net cash provided by financing activities reflected additional borrowings under our revolving credit facility credit of $91.6 million, of which approximately $41.8 million was used to complete the acquisitions of Auto Knight and eReinsure, which was partially offset by $64.3 million used to pay-down our revolving credit facility and $10.9 million used for the redemption of our redeemable preferred stock.

Contractual Obligations and Other CommitmentsWe have obligations and commitments to third parties as a result of our operations. These obligations and commitments, as of September 30, 2012, are detailed in the table below by maturity date as of the periods indicated:

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(in thousands)	Payments Due by Period
	Less than						After
	1 Year		1-3 Years		4-5 Years		5 Years		Total
Note payable (1)	$	1,250	$	10,000	$	10,000	$	49,918	$	71,168
Preferred trust securities	—		—		—		35,000		35,000
Policyholder account balances	1,442		7,255		4,349		13,177		26,223
Unpaid claims (2)	28,680		3,129		219		14		32,042
Total	$	31,372	$	20,384	$	14,568	$	98,109	$	164,433

⁽¹⁾ For more information on the credit facility with Wells Fargo Bank, N.A., please see the section above titled "$125.0 Million Credit Facility" in this MD&A and "Note Payable" in the Notes to the Consolidated Financial Statements.

⁽²⁾ Estimated. Net unpaid claims are: total $13,074; less than 1 year $11,702; 1-3 years $1,277; 3-5 years $89; and more than 5 years $6.

As previously disclosed in our Annual Report on Form 10-K, we have certain obligations under operating lease agreements to which we are a party. In accordance with U.S. GAAP, these operating lease obligations and the related leased assets are not reported on our Consolidated Balance Sheets. Other than reductions to the lease obligations resulting from scheduled lease payments, our obligations under these operating lease agreements have not changed materially since December 31, 2011.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Effective risk management is fundamental to our ability to protect both our customers' and stockholders' interests. We are exposed to potential losses from various market risks, in particular interest rate risk and credit risk. Additionally, we are exposed to inflation risk, and concentration risk.

Interest Rate Risk

Interest rate risk is the possibility that the fair value of liabilities will change more or less than the market value of investments in response to changes in interest rates, including changes in the slope or shape of the yield curve and changes in spreads due to credit risks and other factors.

Interest rate risk arises as we invest substantial funds in interest-sensitive fixed maturity securities primarily in the United States. There are two forms of interest rate risk: price risk and reinvestment risk. Price risk occurs when fluctuations in interest rates have a direct impact on the market valuation of these investments. As interest rates rise, the market value of these investments fall, and conversely, as interest rates fall, the market value of these investments rise. Reinvestment risk occurs when fluctuations in interest rates have a direct impact on expected cash flows from mortgage-backed and asset-backed securities. As interest rates fall, an increase in prepayments on these assets results in earlier than expected receipt of cash flows forcing us to reinvest the proceeds in an unfavorable lower interest rate environment. Conversely, as interest rates rise, a decrease in prepayments on these assets

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results in later than expected receipt of cash flows forcing us to forgo reinvesting in a favorable higher interest rate environment.

We manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities. Increases or decreases in interest rates could also impact interest payable under our variable rate indebtedness. As of September 30, 2012, we had $71.2 million outstanding under our credit facility with Wells Fargo Bank, N.A. at an interest rate of 3.59%.

We have the ability to manage interest rate risk by entering into interest rate swap transactions to mitigate the impact of interest rate changes on our debt obligations. In April 2011, we entered into a forward starting interest rate swap transaction to convert the floating rate portion of our preferred trust securities to a fixed rate. The Swap, commenced in June 2012 and expires in June 2017. This transaction swapped the floating rate portion of our $35.0 million in outstanding preferred trust securities to a fixed rate of 3.47% per annum payable quarterly resulting in a total rate of 7.57% after adding the applicable margin of 4.10%.

Credit Risk

Credit risk is the possibility that counterparties may not be able to meet payment obligations when they become due. We assume counterparty credit risk in many forms. A counterparty is any person or entity from which cash or other forms of consideration are expected to extinguish a liability or obligation to us. Primarily, our credit risk exposure is concentrated in our fixed maturity investment portfolio and, to a lesser extent, in our reinsurance receivables.

We have exposure to credit risk primarily from customers, as a holder of fixed maturity securities and by entering into reinsurance cessions. Our risk management strategy and investment strategy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to any one issuer. We attempt to limit our credit exposure by imposing fixed maturity portfolio limits on individual issuers based upon credit quality.

We are also exposed to the credit risk of our reinsurers. When we reinsure, we are still liable to our insureds regardless of whether we get reimbursed by our reinsurer. As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our Payment Protection business segments.

At September 30, 2012, approximately 68.8% of our $197.2 million in reinsurance receivables, compared to 69.4%, or $194.7 million, at December 31, 2011, were protected from credit risk by various types of risk mitigation mechanisms such as collateral trusts, letters of credit or by withholding the assets in a modified coinsurance or co-funds-withheld arrangement. For recoverables that are not protected by these mechanisms, we are dependent solely on the ability of the reinsurer to satisfy claims. Occasionally, the creditworthiness of the reinsurer becomes questionable. The majority of our reinsurance exposure has been ceded to companies rated A- or better by A.M. Best or is supported by letters of credit.

Concentration Risk

Concentration risk is the risk that results from a lack of diversification due to a concentrated exposure on a small number of clients, limited market penetration, or reduced geographic coverage.

A significant portion, approximately 62% at September 30, 2012 compared to 79% at December 31, 2011, of our BPO revenues are attributable to one client, National Union Fire Insurance Company of Pittsburgh, PA. Any loss of business from or change in our relationship with this client could have a material adverse effect on our business. To mitigate this risk, we intend to expand our BPO client base.

We have two additional forms of concentration risk: (i) geographic (almost two-thirds of our Brokerage segment is in California) and (ii) channel distribution risk (almost half of our Payment Protection revenue is in the consumer finance distribution channel). Our risk mitigation strategies are to continue to expand geographically (in our Brokerage segment) and to continue to increase the volume of business through other distribution channels (in our Payment Protection segment).

Inflation Risk

Inflation risk is the possibility that a change in domestic price levels produces an adverse effect on earnings. This typically happens when either invested assets or liabilities, but not both are indexed to inflation. Inflation did not have a material impact on our financial condition, results of operations or cash flows in the periods presented in our Consolidated Financial Statements.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in

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Rule 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that as of September 30, 2012 our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.

Chief Executive Officer and Chief Financial Officer Certifications

Exhibits 31.1 and 31.2 are the Certifications of our Chief Executive Officer and Chief Financial Officer, respectively, required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the "Section 302 Certifications"). The "Evaluation of Disclosure Controls and Procedures" in this Item 4 is the Evaluation referred to in the Section 302 Certifications, and accordingly, the above information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Inherent Limitations of Disclosure Controls and Procedures and Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer,, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to claims and litigation in the normal course of our operations. Management believes that the ultimate outcome of these matters will not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.

In the Payment Protection segment, the Company is currently a defendant in lawsuits that relate to marketing and/or pricing issues that involve claims for punitive, exemplary or extra-contractual damages in amounts substantially in excess of the covered claim.  Such litigation includes Lawson v. Life of the South Insurance Co., which was filed on March 13, 2006, in the Superior Court of Muscogee County, Georgia, and later moved to the United States District Court for the Middle District of Georgia, Columbus Division.  The action is brought by the plaintiff, individually and on behalf of a class of all persons similarly situated.   The allegations involve the Company's alleged duty to refund unearned premiums on credit insurance policies, even when the Company has not been informed of the payoff of the underlying finance contract. The action seeks an injunction requiring remedial action, as well as a variety of damages, including punitive damages and attorney fees and costs.

The Company filed a Motion to Strike or Dismiss Plaintiffs' Class Action Allegations, or in the Alternative, to Deny Class Certification on May 11, 2012. On September 28, 2012, the United States District Court for the Middle District of Georgia granted such motion.  Plaintiffs have filed a petition for permission to appeal this ruling with the United States Eleventh Circuit Court of Appeals.

Also in the Payment Protection segment, the Company is currently a defendant in Mullins v. Southern Financial Life Insurance Co., which was filed on February 2, 2006, in the Pike County Circuit Court, in the Commonwealth of Kentucky.  A class was certified on June 25, 2010.  At issue is the duration or term of coverage under certain policies.  The action alleges violations of

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the Consumer Protection Act and certain insurance statutes, as well as common law fraud.  The action seeks compensatory and punitive damages, attorney fees and interest.  The parties are currently involved in the merits discovery phase and discovery disputes have arisen.  Plaintiffs filed a Motion for Sanctions on April 5, 2012 in connection with the Company's efforts to locate and gather certificates and other documents from the Company's agents.  While the Pike County Circuit Court did not award sanctions, it did order the Company to subpoena certain records from its agents.  The Company is currently appealing this order. To date, no trial date has been set.

The Company considers all of the above-described litigation customary in the Company's lines of business.  In management's opinion, based on information available at this time, the ultimate resolution of such litigation, which it is vigorously defending, should not be materially adverse to the financial position, results of operations or cash flows of the Company. It should be noted that large punitive damage awards, bearing little relation to actual damages sustained by plaintiffs, have been awarded in certain states against other companies in the credit insurance business. Loss contingencies may be taken as developments warrant, although such amounts are not reasonably estimable at this time.

ITEM 1A. RISK FACTORS

The following are certain risks that management believes are specific to our business. This should not be viewed as an all-inclusive list of risks or presenting the risk factors listed in any particular order. You should carefully consider the risks described below, together with the other information contained in this report and in our other filings with the SEC when evaluating our Company. Should any of the events discussed in the risk factors below occur, our business, results of operations or financial condition could be materially affected. Additional risks unknown at this time, or risks we currently deem immaterial, may also impact our financial condition or results of operations.

Risks Related to our Business and Industries

General economic and financial market conditions may have a material adverse effect on the business, results of operations, cash flows and financial condition of all of our business segments.

General economic and financial market conditions, including the availability and cost of credit, the loss of consumer confidence, reduction in consumer or business spending, inflation, unemployment, energy costs and geopolitical issues, have contributed to increased uncertainty and volatility as well as diminished expectations for the U.S. economy and the financial markets. These conditions could materially and adversely affect each of our businesses. Adverse economic and financial market conditions could result in:

• a reduction in the demand for, and availability of, consumer credit, which could result in reduced demand by consumers for our Payment Protection products and our Payment Protection clients opting to no longer make such products available;

• higher than anticipated loss ratios on our Payment Protection products due to rising unemployment or disability claims;

• higher risk of increased fraudulent insurance claims;

• individuals terminating loans or canceling credit insurance policies, thereby reducing our revenues;

• businesses reducing the amount of coverage under surplus lines and specialty admitted insurance policies or allowing such policies to lapse thereby reducing our premium or commission income in our Brokerage business;

• a reduction in demand for new surplus lines and specialty insurance policies from retail insurance brokers and agents or retail insurance brokers and agents and insurance companies ceasing to offer our surplus lines and specialty insurance products and related services from our Brokerage business;

• a contraction in the reinsurance market caused by reduced demand by major insurers, reduced supply by reinsurers or other factors or reduced reinsurance demand by our insurance customers due to market conditions;

• our clients being more likely to experience financial distress or declare bankruptcy or liquidation, which could have an adverse impact on demand for our services and products and the remittance of premiums from such customers, as well as the collection of receivables from such clients for items such as unearned premiums, commissions or BPO-related accounts receivable, which could make the collection of receivables from our clients more difficult;

• increased pricing sensitivity or reduced demand for our services and products;

• increased costs associated with, or the inability to obtain, debt financing to fund acquisitions or the expansion of our businesses; and

• defaults in our fixed income investment portfolio or lower than anticipated rates of return as a result of low interest rate environments.

If we are unable to successfully anticipate changing economic or financial market conditions, we may be unable to effectively plan for or respond to such changes, and our business, results of operations and financial condition could be materially and adversely affected.

We face significant competitive pressures in each of our businesses, which could materially and adversely affect our business, results of operations and financial condition.

We face significant competition in each of our businesses. Competition in our businesses is based on many factors, including price,

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industry knowledge, quality of client service, the effectiveness of our sales force, technology platforms and processes, the security and integrity of our information systems, the financial strength ratings of our insurance subsidiaries, office locations, breadth of services and products and brand recognition and reputation. Some competitors may offer a broader array of services and products, may have a greater diversity of distribution resources, may have better brand recognition, may have lower cost structures or, with respect to insurers, may have higher financial strength or claims paying ratings. Some competitors also have larger client bases than we do. In addition, new competitors could enter our markets in the future, and existing competitors may gain strength by forging new business relationships. The competitive landscape for each of our businesses is described below.

• Payment Protection - In our Payment Protection business, we compete with insurance companies, financial institutions and other insurance service providers. The principal competitors for our Payment Protection business include Aon Corporation, Assurant, Inc., Asurion Corporation and smaller regional companies. As a result of state and federal regulatory developments and changes in prior years, certain financial institutions are able to offer debt cancellation plans and are also able to affiliate with other insurance companies in order to offer services similar to those in our Payment Protection business. This has resulted in new competitors, some of whom have significant financial resources, entering some of our markets. As financial institutions gain experience with payment protection programs, their reliance on our services and products may diminish.

• BPO - Our BPO business competes with a variety of companies, including large multinational firms that provide consulting, technology and/or business process services, off-shore business process service providers in low-cost locations like India, and in-house captive insurance companies of potential clients. Our principal business process outsourcing competitors include Aon Corporation, Computer Sciences Corporation, Direct Response Insurance Administrative Services, Inc., Marsh & McLennan Companies, Inc., Dell Services and Unisys Corporation. The trend toward outsourcing and technological changes may also result in new and different competitors entering our markets. There could also be newer competitors with strong competitive positions as a result of consolidation of smaller competitors or of companies that each provide different services or serve different industries.

• Brokerage - Our Brokerage business competes for retail insurance clients with numerous firms, including AmWINS Group, Inc., Arthur J. Gallagher & Co., Brown & Brown, Inc. and The Swett & Crawford Group, Inc. Many of our Brokerage competitors have relationships with insurance companies or have a significant presence in niche insurance markets that may give them an advantage over us. Because relationships between insurance intermediaries and insurance companies or clients are often local or regional in nature, this potential competitive disadvantage is particularly pronounced outside of California. This could also impact our ability to compete effectively in any new states or regions that we enter. A number of standard market insurance companies are engaged in the sale of products that compete with those products we offer. These carriers sell their products directly through retail agents and brokers without the involvement of a wholesale broker, which may yield higher commissions to retail agents and brokers and may impact our ability to compete. We are also uniquely positioned in the Facultative Reinsurance marketplace with no comparable companies currently providing similar services.  Systems such as Aon's FAConnect, the LexisNexis Insurance Exchange and the Lloyd's Exchange have technology platforms that could provide solutions which could directly compete with us in the future.

We expect competition to intensify in each of our businesses. Increased competition may result in lower prices and volumes, higher personnel and sales and marketing costs, increased technology expenditures and lower profitability. We may not be able to supply clients with services or products that they deem superior and at competitive prices and we may lose business to our competitors. If we are unable to compete effectively in any of our business segments, it would have a material adverse effect on our business, results of operations and financial condition.

Our results of operations may fluctuate significantly, which makes our future results of operations difficult to predict. If our results of operations fall below expectations, the price of our common stock could decline.

Our annual and quarterly results of operations have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, many of which are beyond our control. In addition, our expenses as a percentage of revenues may be significantly different than our historical rates. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. Factors that may cause our results of operations to fluctuate from period-to-period include:

• demand for our services and products;

• the length of our sales cycle;

• the amount of sales to new clients:

• the timing of implementations of our services and products with new clients;

• pricing and availability of surplus lines and other specialty insurance products coverages;

• seasonality;

• the timing of acquisitions;

• competitive factors;

• prevailing interest rates;

• pricing changes by us or our competitors;

• transaction volumes in our clients' businesses;

• the introduction of new services and products by us and our competitors;

• changes in regulatory and accounting standards; and

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• our ability to control costs.

In addition, our Payment Protection revenues can vary depending on the level of consumer activity and the success of our clients in selling payment protection products. In our Brokerage business, our commission and fee income can vary due to the timing of policy renewals, as well as the timing and amount of the receipt of profit commission payments and fees and the net effect of new and lost business production. We do not control the factors that cause these variations. Specifically, customers' demand for insurance products can influence the timing of renewals, new business, lost business (which includes policies that are not renewed) and cancellations. In addition, we rely on retail insurance brokers and agents and insurance companies for the payment of certain commissions. Because these payments are processed internally by these companies, we may not receive a payment that is otherwise expected from a particular firm in one period until after the end of that period, which can adversely affect our ability to budget for such period.

Our results of operations could be materially and adversely affected if we fail to retain our existing clients, cannot sell additional services and products to our existing clients, do not introduce new or enhanced services and products or are not able to attract and retain new clients.

Our revenue and revenue growth are dependent on our ability to retain clients, to sell them additional services and products, to introduce new services and products and to attract new clients in each of our businesses. Our ability to increase revenues will depend on a variety of factors, including:

• the quality and perceived value of our product and service offerings by existing and new clients;

• the effectiveness of our sales and marketing efforts;

• the speed with which our Brokerage business can respond to requests for price quotes from retail insurance agents and brokers, and the availability of competitive services and products from our carriers;

• the successful installation and implementation of our services and products for new and existing Payment Protection and BPO clients;

• availability of capital to complete investments in new or complementary products, services and technologies;

• the availability of adequate reinsurance for us and our clients, including the ability of our clients to form, capitalize and operate captive reinsurance companies;

• our ability to find suitable acquisition candidates, successfully complete such acquisitions and effectively integrate such acquisitions;

• our ability to integrate technology into our services and products to avoid obsolescence and provide scalability;

• the reliability, execution and accuracy of our services, particularly our BPO services; and

• client willingness to accept any price increases for our services and products.

In addition, we are subject to risks of losing clients due to consolidation in each of the markets we serve. Our inability to retain existing clients, sell additional services and products, or successfully develop and implement new and enhanced services and products and attract new clients and, accordingly, increase our revenues could have a material adverse effect on our results of operations.

We typically face a long selling cycle to secure new clients in each of our businesses as well as long implementation periods that require significant resource commitments, which result in a long lead time before we receive revenues from new client relationships.

The industries in which we compete generally consist of mature businesses and markets and the companies that participate in these industries have well-established business operations, systems and relationships. Accordingly, each of our businesses typically faces a long selling cycle to secure a new client. Even if we are successful in obtaining a new client engagement, it is generally followed by a long implementation period in which the services are planned in detail and we demonstrate to the client that we can successfully integrate our processes and resources with their operations. We also typically negotiate and enter into a contractual relationship with the new client during this period. There is then a long implementation period in order to commence providing the services.

We typically incur significant business development expenses during the selling cycle. We may not succeed in winning a new client's business, in which case we receive no revenues and may receive no reimbursement for such expenses. Even if we succeed in developing a relationship with a potential client and begin to plan the services in detail, such potential client may choose a competitor or decide to retain the work in-house prior to the time a final contract is signed. If we enter into a contract with a client, we will typically receive no revenues until implementation actually begins. In addition, a significant portion of our revenue is based upon the success of our clients' marketing programs, which may not generate the transaction volume we anticipate. Our clients may also experience delays in obtaining internal approvals or delays associated with technology or system implementations, thereby further lengthening the implementation cycle. If we are not successful in obtaining contractual commitments after the selling cycle, in maintaining contractual commitments after the implementation cycle or in maintaining or reducing the duration of unprofitable initial periods in our contracts, it may have a material adverse effect on our business, results of operations and financial condition. Furthermore, the time and effort required to complete the implementation phases of new contracts makes it difficult to accurately predict the timing of revenues from new clients as well as our costs.

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Acquisitions are a significant part of our growth strategy and we may not be successful in identifying suitable acquisition candidates, completing such acquisitions or integrating the acquired businesses, which could have a material adverse effect on our business, results of operations, financial condition or growth.

Historically, acquisitions have played a significant role in our expansion into new businesses and in the growth of some of our businesses. Acquiring complementary businesses is a significant component of our growth strategy. Accordingly, we frequently evaluate possible acquisition transactions for our business. However, we may not be able to identify suitable acquisitions, and such transactions may not be financed and completed on acceptable terms. We may incur significant expenses in evaluating such acquisitions. Furthermore, any future acquisitions may not be successful. In addition, we may be competing with larger competitors with substantially greater resources for acquisition targets. Any deficiencies in the process of integrating companies we may acquire could have a material adverse effect on our results of operations and financial condition. Acquisitions entail a number of risks including, among other things:

• failure to achieve anticipated revenues, earnings or cash flow;

• increased expenses;

• diversion of management time and attention;

• failure to retain the acquired business' customers or personnel;

• difficulties in realizing projected efficiencies:

• ability to realize synergies and cost savings;

• difficulties in integrating systems and personnel; and

• inaccurate assessment of liabilities.

Our failure to adequately address these acquisition risks could have a material adverse effect on our business, results of operations, financial condition and growth. Future acquisitions may reduce our cash resources available to fund our operations and capital expenditures and could result in increased amortization expense related to any intangible assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, which could increase our interest expense.

Our business, results of operations, financial condition or liquidity may be materially and adversely affected by errors and omissions and the outcome of certain actual and potential claims, lawsuits and proceedings.

We are subject to various actual and potential claims, lawsuits and other proceedings relating principally to alleged errors and omissions in connection with our conduct in each of our businesses, including the handling and adjudicating of claims and the placement of insurance. Because such placement of insurance and handling claims can involve substantial amounts of money, clients may assert errors and omissions claims against us alleging potential liability for all or part of the amounts in question. Claimants may seek large damage awards, and these claims may involve potentially significant legal costs. Such claims, lawsuits and other proceedings could, for example, include claims for damages based on allegations that our employees or sub-agents improperly failed to procure coverage, report claims on behalf of clients, provide insurance companies with complete and accurate information relating to the risks being insured or appropriately apply funds that we hold for our clients on a fiduciary basis.

While we would expect most of the errors and omissions claims made against us (subject to our self-insured deductibles) to be covered by our professional indemnity insurance, our results of operations, financial condition and liquidity may be materially and adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable, or if there is an increase in liabilities for which we self-insure. Our ability to obtain professional indemnity insurance in the amounts and with the deductibles we desire in the future may be materially and adversely impacted by general developments in the market for such insurance or our own claims experience. In addition, claims, lawsuits and other proceedings may harm our reputation or divert management resources away from operating our business.

We may lose clients or business as a result of consolidation within the financial services industry.

There has been considerable consolidation in the financial services industry, driven primarily by the acquisition of small and mid-size organizations by larger entities. We expect this trend to continue. As a result, we may lose business or suffer decreased revenues from retail insurance brokerage firms that are acquired by other firms. Similarly, we may lose business or suffer decreased revenues if one or more of our Payment Protection clients or distributors consolidate or align themselves with other companies. To date, our business has not been materially affected by consolidation. However, we may be affected by industry consolidation that occurs in the future, particularly if any of our significant clients are acquired by organizations that already possess the operations, services and products that we provide.

Our ability to implement and execute our strategic plans may not be successful and, accordingly, we may not be successful in achieving our strategic goals, which may materially and adversely affect our business.

We may not be successful in developing and implementing our strategic plans for our businesses or the operational plans that have been or need to be developed to implement these strategic plans. If the development or implementation of such plans is not successful, we may not produce the revenue, margins, earnings or synergies that we need to be successful. We may also face delays or difficulties in implementing service, product, process and system improvements, which could adversely affect the timing or

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effectiveness of margin improvement efforts in our businesses and our ability to successfully compete in the markets we serve. The execution of our strategic and operating plans will, to some extent, also be dependent on external factors that we cannot control. In addition, these strategic and operational plans need to continue to be assessed and reassessed to meet the challenges and needs of our businesses in order for us to remain competitive. The failure to implement and execute our strategic and operating plans in a timely manner or at all, realize the cost savings or other benefits or improvements associated with such plans, have financial resources to fund the costs associated with such plans or incur costs in excess of anticipated amounts, or sufficiently assess and reassess these plans could have a material and adverse effect on our business or results of operations.

We may not effectively manage our growth, which could materially harm our business.

The growth of our business has placed and may continue to place significant demands on our management, personnel, systems and resources. To manage our growth, we must continue to improve our operational and financial systems and managerial controls and procedures, and we will need to continue to expand, train and manage our personnel. We must also maintain close coordination among our technology, compliance, legal, risk management, accounting, finance, marketing and sales organizations. We may not manage our growth effectively, and if we fail to do so, our business could be materially and adversely harmed.

If we continue to grow, we may be required to increase our investment in facilities, personnel and financial and management systems and controls. Continued growth, especially in connection with expansion into new business lines, may also require expansion of our procedures for monitoring and assuring our compliance with applicable regulations and that we recruit, integrate, train and manage a growing employee base. The expansion of our existing businesses, our expansion into new businesses and the resulting growth of our employee base increase our need for internal audit and monitoring processes that are more extensive and broader in scope than those we have historically required. We may not be successful in implementing all of the processes that are necessary. Further, unless our growth results in an increase in our revenues that is proportionate to the increase in our costs associated with this growth, our operating margins and profitability will be materially and adversely affected.

As a holding company, we depend on the ability of our subsidiaries to transfer funds to us to pay dividends and to meet our obligations.

We act as a holding company for our subsidiaries and do not have any significant operations of our own. Dividends from our subsidiaries are our principal sources of cash to meet our obligations and pay dividends, if any, on our common stock. These obligations include our operating expenses and interest and principal payments on our current and any future borrowings. The agreements governing our credit facilities restrict our subsidiaries' ability to pay dividends or otherwise transfer cash to us. Under our credit facility, our subsidiaries are permitted to make distributions to us if no default or event of default has occurred and is continuing at the time of such distribution. If the cash we receive from our subsidiaries pursuant to dividends or otherwise is insufficient for us to fund any of these obligations, or if a subsidiary is unable to pay dividends to us, we may be required to raise cash through the incurrence of additional debt, the issuance of additional equity or the sale of assets.

The payment of dividends and other distributions to us by each of the regulated insurance company subsidiaries in our Payment Protection segment is regulated by insurance laws and regulations of the states in which they operate. In general, dividends in excess of prescribed limits are deemed "extraordinary" and require insurance regulatory approval. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by a formula, which varies by state. Some states have an additional stipulation that dividends may only be paid out of earned surplus. States also regulate transactions between our insurance company subsidiaries and our other subsidiaries, such as those relating to the shared services, and in some instances, require prior approval of such transactions within the holding company structure. If insurance regulators determine that payment of an ordinary dividend or any other payments by our insurance subsidiaries to us (such as payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block or otherwise restrict such payments that would otherwise be permitted without prior approval. In addition, there could be future regulatory actions restricting the ability of our insurance subsidiaries to pay dividends or share services.

Our success is dependent upon the retention and acquisition of talented people and the skills and abilities of our management team and key personnel.

Our business depends on the efforts, abilities and expertise of our senior executives, particularly our Chairman, President and Chief Executive Officer, Richard S. Kahlbaugh. Mr. Kahlbaugh and our other senior executives are important to our success because they have been instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, maintaining relationships with our clients, and identifying business opportunities. The loss of one or more of these key individuals could impair our business and development until qualified replacements are found. We may not be able to replace these individuals quickly or with persons of equal experience and capabilities. Although we have employment agreements with certain of these individuals, we cannot prevent them from terminating their employment with us. In addition, our non-compete agreements with such individuals may not be enforced by the courts. We do not maintain key man life insurance policies on any of our executive officers except for Mr. Kahlbaugh. If we are unable to attract and retain talented employees, it could have a material adverse effect on our business, operating results and financial condition.

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We may need to raise additional capital in the future, but there is no assurance that such capital will be available on a timely basis, on acceptable terms or at all.

We may need to raise additional funds in order to grow our businesses or fund our strategy or acquisitions. Additional financing may not be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders if raised through additional equity offerings. A significant portion of our funding is under our existing credit facility, which matures in June 2017. Additionally, any securities issued to raise such funds may have rights, preferences and privileges senior to those of our existing stockholders. If adequate funds are not available on a timely basis or on acceptable terms, our ability to expand, develop or enhance our services and products, enter new markets, consummate acquisitions or respond to competitive pressures could be materially limited.

Risks Related to Our Payment Protection Business

Our Payment Protection business relies on independent financial institutions, lenders and retailers to distribute its services and products, and the loss of these distribution sources, or the failure of our distribution sources to sell our Payment Protection products could materially and adversely affect our business and results of operations.

We distribute our Payment Protection products through financial institutions, lenders and retailers. Although our contracts with these clients are typically exclusive, they can be canceled on relatively short notice. In addition, the distributors typically do not have any minimum performance or sales requirements and our Payment Protection revenue is dependent on the level of business conducted by the distributor as well as the effectiveness of their sales efforts for our Payment Protection products, each of which is beyond our control. The impairment of our distribution relationships, the loss of a significant number of our distribution relationships, the failure to establish new distribution relationships, the failure to offer increasingly competitive products, the increase in sales of competitors' services and products by these distributors or the decline in their overall business activity or the effectiveness of their sales of our Payment Protection products could materially reduce our Payment Protection sales and revenues. Also, the growth of our Payment Protection business is dependent in part on our ability to identify, attract and retain new distribution relationships and successfully implement our information systems with those of our new distributors.

Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers.

As part of our overall risk and capacity management strategy, we purchase reinsurance for a substantial portion of the risks underwritten by our Payment Protection business through captive reinsurance companies owned by our Payment Protection clients as well as third party reinsurance companies. Market conditions beyond our control determine the availability and cost of the reinsurance protection we seek to renew or purchase. Our clients may face difficulties forming, capitalizing and operating captive reinsurance companies, which could impact their ability to reinsure future business that we typically cede to them. States also could impose restrictions on these reinsurance arrangements, such as requiring the insurance company subsidiary to retain a minimum amount of underwriting risk, which could affect our profitability and results of operations. Reinsurance for certain types of catastrophes generally could become unavailable or prohibitively expensive for some of our businesses. Such changes could substantially increase our exposure to the risk of significant losses from natural or man-made catastrophes and could hinder our ability to write future business.

Although the reinsurer is liable to the respective insurance subsidiary to the extent of the ceded reinsurance, the insurance company remains liable to the insured as the direct insurer on all risks reinsured. Ceded reinsurance arrangements, therefore, do not eliminate our insurance company obligation to pay claims. While the captive reinsurance companies owned by our clients are generally required to maintain trust accounts with sufficient assets to cover the reinsurance liabilities and we manage these trust accounts on behalf of these reinsurance companies, we are subject to credit risk with respect to our ability to recover amounts due from reinsurers. The inability to collect amounts due from reinsurers could have a material adverse effect on our results of operations and financial condition.

Our reinsurance facilities are generally subject to annual renewal. We may not be able to maintain our current reinsurance facilities and our clients may not be able to continue to operate their captive reinsurance companies. As a result, even where highly desirable or necessary, we may not be able to obtain other reinsurance facilities in adequate amounts and at favorable rates. If we are unable to renew our expiring facilities or to obtain or structure new reinsurance facilities, either our net exposures would increase or, if we are unwilling to bear an increase in net exposures, we may have to reduce the level of our underwriting commitments. Either of these potential developments could have a material adverse effect on our results of operations and financial condition.

Due to the structure of some of our commissions, we are exposed to risks related to the creditworthiness of some of our agents.

We are subject to the credit risk of some of the agents with which we contract within our Payment Protection business. We typically advance agents' commissions as part of our product offerings. These advances are a percentage of the premium charged. If we over-advance such commissions to agents, they may not be able to fulfill their payback obligations, and it could have a material adverse effect on our results of operations and financial condition.

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A downgrade in the ratings of our insurance company subsidiaries may materially and adversely affect relationships with clients and adversely affect our results of operations.

Claims paying ability and financial strength ratings are each a factor in establishing the competitive position of our insurance company subsidiaries. A ratings downgrade, or the potential for such a downgrade, could, among other things, materially and adversely affect relationships with clients, brokers and other distributors of our services and products, thereby negatively impacting our results of operations, and materially and adversely affect our ability to compete in our markets. Rating agencies can be expected to continue to monitor our financial strength and claims paying ability, and no assurances can be given that future ratings downgrades will not occur, whether due to changes in our performance, changes in rating agencies' industry views or ratings methodologies, or a combination of such factors.

Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves that may materially and adversely reduce our business, results of operations and financial condition.

We maintain reserves to cover our estimated ultimate exposure for claims with respect to reported claims and incurred but not reported claims as of the end of each accounting period. Reserves, whether calculated under accounting principles generally accepted in the United States or statutory accounting principles, do not represent an exact calculation of exposure. Instead, they represent our best estimates, generally involving actuarial projections, of the ultimate settlement and administration costs for a claim or group of claims, based on our assessment of facts and circumstances known at the time of calculation. The adequacy of reserves will be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are affected by external factors such as changes in the economic cycle, unemployment, changes in the social perception of the value of work, emerging medical perceptions regarding physiological or psychological causes of disability, emerging health issues, new methods of treatment or accommodation, inflation, judicial trends, legislative changes, as well as changes in claims handling procedures. Many of these items are not directly quantifiable, particularly on a prospective basis. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the statement of income of the period in which such estimates are updated. Because the establishment of reserves is an inherently uncertain process involving estimates of future losses, we can give no assurances that ultimate losses will not exceed existing claims reserves. In general, future loss development could require reserves to be increased, which could have a material adverse effect on our business, results of operations and financial condition.

Our investment portfolio is subject to several risks that may diminish the fair value of our invested assets and cash and may materially and adversely affect our business and profitability.

Investment returns are an important part of our overall profitability and significant interest rate fluctuations, or prolonged periods of low interest rates, could impair our profitability. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. We have a significant portion of our investments in cash and highly liquid short-term investments. Accordingly, during prolonged periods of declining or low market interest rates, such as those we have been experiencing since 2008, the interest we receive on such investments decreases and affects our profitability. In addition, certain factors affecting our business, such as volatility of claims experience, could force us to liquidate securities prior to maturity, causing us to incur capital losses. If we do not structure our investment portfolio so that it is appropriately matched with our insurance liabilities, we may be forced to liquidate investments prior to maturity at a significant loss to cover such liabilities.

The fair value of the fixed maturity securities in our portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. Because all of our fixed maturity securities are classified as available for sale, changes in the fair value of these securities are reflected on our Consolidated Balance Sheets. The fair value generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk may differ from those anticipated at the time of investment as a result of interest rate fluctuations.

We employ asset/liability management strategies to reduce the adverse effects of interest rate volatility and to increase the likelihood that cash flows are available to pay claims as they become due. Our asset/liability management strategies may fail to eliminate or reduce the adverse effects of interest rate volatility, and significant fluctuations in the level of interest rates may therefore have a material adverse effect on our results of operations and financial condition.

We are subject to credit risk in our investment portfolio, primarily from our investments in corporate bonds and municipal bonds. Defaults by third parties in the payment or performance of their obligations could reduce our investment income and realized investment gains or result in the recognition of investment losses. The fair value of our investments may be materially and adversely affected by increases in interest rates, downgrades in the corporate bonds included in the portfolio and by other factors that may result in the recognition of other-than-temporary impairments. Each of these events may cause us to reduce the fair value of our

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investment portfolio.

Further, the fair value of any particular fixed maturity security is subject to impairment based on the creditworthiness of a given issuer. Our fixed maturity portfolio may include below investment grade securities (rated "BB" or lower by nationally recognized securities rating organizations). These investments generally provide higher expected returns, but present greater risk and can be less liquid than investment grade securities. A significant increase in defaults and impairments on our fixed maturity investment portfolio could have a material adverse effect on our results of operations and financial condition.

Risks Related to Our BPO Business

A significant portion of our BPO revenues are attributable to one client, and any loss of business from, or change in our relationship with this client could materially and adversely affect our business, results of operations and financial condition.

We have derived and are likely to continue to derive a significant portion of our BPO revenues from a limited number of clients, specifically, in our BPO business, services provided to National Union Fire Insurance Company of Pittsburgh, PA ("NUFIC"). See the section "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Concentration Risk in this report, regarding our concentration risk. The loss of business or a reduction in the fees or other change in relationship with any of our significant clients, particularly NUFIC, could have a material adverse effect on our business, results of operations and financial condition. Additionally, there is no guarantee that we would be able to generate new business in the event that we lose a significant client.

The profitability of our BPO business will suffer if we are not able to price our outsourcing services appropriately, maintain asset utilization levels and control our costs.

The profitability of our BPO business is largely a function of the efficiency with which we utilize our assets and the pricing that we are able to obtain for our services. Our utilization rates are affected by a number of factors, including hiring and assimilating new employees, forecasting demand for our services and our need to devote time and resources to training, professional development and other typically non-chargeable activities. The prices we are able to charge for our services are affected by a number of factors, including our clients' perceptions of our ability to add value through our services, competition, the introduction of new services or products by us or our competitors and general economic conditions. Our ability to accurately estimate, attain and sustain revenues over increasingly longer contract periods could negatively impact our margins and cash flows. Therefore, if we are unable to price appropriately or manage our asset utilization levels, there could be a material adverse effect on our business, results of operations and financial condition. The profitability of our BPO business is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and grow our business, we may not be able to manage the significantly larger workforce that may result and our profitability may not improve.

We enter into fixed-term contracts and per-unit priced contracts with our BPO clients, and our failure to correctly price these contracts may negatively affect our profitability.

The pricing of our services is usually included in contracts entered into with our clients, many of which are for terms of between one and three years. In certain cases, we have committed to pricing over this period with only limited sharing of risk regarding inflation. If we fail to estimate accurately future wage inflation rates or our costs, or if we fail to accurately estimate the productivity benefits we can achieve under a contract, it could have a material adverse effect on our profitability.

Some of our BPO contracts contain provisions which, if triggered, could result in the payment of penalties or lower future revenues and could materially and adversely affect our business, results of operations and financial condition.

Many of our BPO contracts contain service level and performance provisions, including standards relating to the quality of our services, that would provide our clients with the right to terminate their contract if we do not meet pre-agreed service level requirements and in the case of our contract with NUFIC, require us to pay penalties. Our contract with NUFIC also provides that, during the term of the contract and for 18 months thereafter, we may not develop or service products for NUFIC's competitors that are substantially similar to those we administer on behalf of NUFIC. Failure to meet these requirements could result in the payment of significant penalties by us to our clients which, in turn, could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to our Brokerage Business

We may not be able to accurately forecast our brokerage commissions and fee revenues because our commissions and fees depend on premiums charged by insurance companies, which historically have varied and, as a result, have been difficult to predict.

Our Brokerage business derives revenue principally from commissions and fees paid by insurance companies. Commissions and fees are based upon a percentage of premiums paid by customers for insurance products. The amount of such commissions and fees are therefore highly dependent on premium rates charged by insurance companies. We do not determine insurance premium rates. Premium rates are determined by insurance companies based on a fluctuating market and in many cases are regulated by

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the states in which they operate. We have generally encountered declining rates for property and casualty insurance since late 2006.

Premium pricing within the commercial property and casualty insurance market in which we operate historically has been cyclical based on the underwriting capacity of the insurance carriers operating in this market and has been impacted by general economic conditions. In a period of decreasing insurance capacity, insurance carriers typically raise premium rates. This type of market frequently is referred to as a "hard" market. In a period of increasing insurance capacity, insurance carriers tend to reduce premium rates. This type of market frequently is referred to as a "soft" market, which the commercial P&C market has experienced since 2006, with a slight firming of the market in 2012. Because our commission rates usually are calculated as a percentage of the gross premium charged for the insurance products that we place, our revenues are affected by the pricing cycle of the market and the amount of risk that is insured. General economic conditions may impact the amount of risk that is insured by companies by affecting the value of the insured properties, the size of company workforces and the willingness of companies to self-insure certain risks to reduce insurance expenses. The frequency and severity of natural disasters and other catastrophic events can affect the timing, duration and extent of industry cycles for many of the product lines we distribute. It is very difficult to predict the severity, timing or duration of these cycles. The cyclical nature of premium pricing in the commercial property and casualty insurance market may make our results of operations volatile and unpredictable. To the extent that an economic downturn and/or "soft" market persists for an extended period of time, our Brokerage commissions and fees, financial condition and results of operations may be materially and adversely affected.

We may experience reductions in the commission revenues we receive from risk-bearing insurance companies as these insurance companies seek to reduce their expenses by reducing commission rates payable to non-affiliated brokers or agents such as us, which may significantly affect the profitability of our Brokerage business.

As traditional risk-bearing insurance companies continue to outsource the production of premium revenues to non-affiliated brokers or agents such as us, those insurance companies may seek to reduce further their expenses by reducing the commission rates payable to those insurance agents or brokers. The reduction of these commission rates, along with general volatility and/or declines in premiums, may significantly affect the profitability of our Brokerage business. Because we do not determine the timing or extent of premium pricing changes, we may not be able to accurately forecast our commission revenues, including whether they will significantly decline. As a result, we may have to adjust our budgets to account for unexpected changes in revenues, and any decreases in premium rates may have a material adverse effect on our results of operations.

The loss of the services of any of our highly qualified brokers could harm our business and operating results.

Our future performance depends on our ability to recruit and retain highly qualified brokers, including brokers who work in the businesses that we have acquired or may acquire in the future. Competition for productive brokers is intense, and our inability to recruit or retain these brokers could harm our business and operating results. While many of our senior brokers own an equity interest in us and many have entered into employment agreements with us, these brokers may not serve the term of their employment agreements or renew their employment agreements upon expiration. Moreover, any of the brokers who leave our firm may not comply with the provisions of their employment agreements that preclude them from competing with us or soliciting our customers and employees, or these provisions may not be enforceable under applicable law or sufficient to protect us from the loss of any business. In addition, we do not have employment, non-competition or non-solicitation agreements with all of our brokers. We may not be able to retain or replace the business generated by a broker who leaves our firm or replace that broker with an equally qualified broker who is acceptable to our clients.

Because our Brokerage business is highly concentrated in California, adverse economic conditions or regulatory changes in that state could materially and adversely affect our financial condition, results of operations and cash flows.

A significant portion of our Brokerage business is concentrated in California. We believe the regulatory environment for insurance intermediaries in California currently is no more restrictive than in other states. The insurance business is a state-regulated industry, and therefore, state legislatures may enact laws, and state insurance regulators may adopt regulations, that adversely affect the profitability of insurance industries in their states. Because our Brokerage business is concentrated in a few states, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could have a material adverse effect on our financial condition, results of operations and cash flows.

If insurance carriers begin to transact business without relying on wholesale insurance brokers, our business, results of operations, financial condition and cash flows could suffer.

Our Brokerage business acts as an intermediary between retail agents and insurance carriers that, in some cases, will not transact business directly with retail insurance brokers and agents. If insurance carriers change the way they conduct business and begin to transact business with retail agents without including us or if retail agents are enabled to transact business directly with insurance carriers as a result of changes in the surplus lines and specialty insurance markets, technological advancements or other factors,

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our role in the distribution of surplus lines and specialty insurance products could be eliminated or substantially reduced, and our business, results of operations, financial condition and cash flows could suffer. In addition, if insurers retain more risk or cede risks that have traditionally been placed facultatively to treaty reinsurance arrangements, then revenue and cash flow attributable to eReinsure could suffer.

Our growth strategy may involve opening or acquiring new offices and expanding internationally and will involve hiring new brokers and underwriters for our Brokerage business, which will require substantial investment by us and may materially and adversely affect our results of operations and cash flows.

Our ability to grow our Brokerage business organically depends in part on our ability to open or acquire new offices, expand internationally and recruit new brokers and underwriters. We may not be successful in any efforts to open new offices, expand internationally or hire new brokers or underwriters. The costs of opening a new office, expanding internationally and hiring the necessary personnel to staff the office can be substantial, and we often are required to commit to multi-year, non-cancelable lease agreements. It has been our experience that our new Brokerage offices may not achieve profitability on a stand-alone basis until they have been in operation for at least three years. In addition, we often hire new brokers and underwriters with the expectation that they will not become profitable until 12 months after they are hired. The cost of investing in new offices, brokers and underwriters may have a material adverse effect on our results of operations and cash flows. Moreover, we may not be able to recover our investments or these offices, brokers and underwriters may not achieve profitability.

Our financial results may be materially and adversely affected by the occurrence of catastrophes.

Portions of our Brokerage business involve the placement of insurance policies that cover losses from unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes, riots, floods and other man-made or natural disasters, including acts of terrorism. The incidence and severity of these catastrophes in any given period are inherently unpredictable, and climate change could further exacerbate the severity and frequency of weather-related events. We are generally eligible to earn profit commissions, which are commissions we receive from carriers based upon the ultimate profitability of the business that we place with those carriers. The occurrence and severity of catastrophes could impair the amount of profit commissions that we receive in the future which could have a material adverse effect on our results of operations and financial condition. Capacity in the reinsurance market is adversely impacted by catastrophes, which can adversely impact our results of operations.

We are subject to risks related to our profit commission arrangements and other compensation arrangements.

We derive a portion of our Brokerage revenues from profit commissions based on the profitability of the insurance business we place with a carrier. Due to the inherent uncertainty of loss in our industry and changes in underwriting criteria due in part to the high loss ratios experienced by some carriers, we cannot predict the receipt of these profit commissions and the amount of such profit commissions may be less than we anticipated. Because profit commissions affect our revenues, any decrease in such amounts could have a material adverse effect on our results of operations and financial condition.

In addition, other companies have been the subject of investigations regarding profit commission arrangements by various governmental authorities within the past several years. Some of these investigations have focused on whether retail insurance brokers have adequately disclosed to their customers the receipt of profit commissions that are paid by insurance carriers to brokers based on the volume of business placed by the broker with the insurance carrier and other factors. We have not been subject to any investigations that are focused on our disclosure of profit commissions. The legislatures of various states may adopt new laws addressing profit commission arrangements, including laws limiting or prohibiting such arrangements, and adding new or different disclosure of such arrangements to insureds. Various state departments of insurance may also adopt new regulations addressing these matters. While we cannot predict the outcome of future governmental actions regarding commission payment practices or the responses by the market and government regulators, any unfavorable resolution of these matters could have a material adverse effect on our results of operations.

Risks Related to Regulatory and Legal Matters

We are subject to extensive governmental laws and regulations, which increase our costs and could restrict the conduct of our business.

Our operating subsidiaries are subject to extensive regulation and supervision in the jurisdictions in which they do business. Such regulation or compliance could reduce our profitability or limit our growth by increasing the costs of compliance, limiting or restricting the products or services we sell, or the methods by which we sell our services and products, or subjecting our businesses to the possibility of regulatory actions or proceedings. In all jurisdictions, the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities have broad discretion to grant, renew or revoke licenses and approvals and to implement new regulations. We may be precluded or temporarily suspended from carrying on some or all of our activities or otherwise fined or penalized in any jurisdiction in which we operate. We can give no assurances that our businesses can continue to be conducted in each jurisdiction as they have been in the past. Such regulation is generally designed

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to protect the interests of policyholders. To that end, the laws of the various states establish insurance departments with broad powers with respect to matters, such as:

• licensing and authorizing companies and agents to transact business;

• regulating capital and surplus and dividend requirements;

• regulating underwriting limitations;

• regulating the ability of companies to enter and exit markets;

• imposing statutory accounting requirements and annual statement disclosures;

• approving changes in control of insurance companies;

• regulating premium rates, including the ability to increase or maintain premium rates;

• regulating trade and claims practices;

• regulating certain transactions between affiliates;

• regulating reinsurance arrangements, including the balance sheet credit that may be taken by the ceding or direct insurer;

• mandating certain insurance benefits;

• regulating the content of disclosures to consumers;

• regulating the type, amounts and valuation of investments;

• mandating assessments or other surcharges for guaranty funds and the ability to recover such assessments in the future through premium increases;

• regulating market conduct and sales practices of insurers and agents, including compensation arrangements; and

• regulating a variety of other financial and non-financial components of an insurer's business.

Our non-insurance operations and certain aspects of our insurance operations are subject to various other federal and state regulations, including state and federal consumer protection, privacy and other laws.

An insurer's ability to write new business is partly a function of its statutory surplus. Maintaining appropriate levels of surplus as measured by Statutory Accounting Principles is considered important by insurance regulatory authorities and the private agencies that rate insurers' claims-paying abilities and financial strength. Failure to maintain certain levels of statutory surplus could result in increased regulatory scrutiny, a downgrade by rating agencies or enforcement action by regulatory authorities.

We may be unable to maintain all required licenses and approvals and, despite our best efforts, our business may not fully comply with the wide variety of applicable laws and regulations or the relevant regulators' interpretations of such laws and regulations. Also, some regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals or to limit or restrain operations in their jurisdiction. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from operating, limit some or all of our activities or financially penalize us. These types of actions could have a material adverse effect on our results of operations and financial condition.

Failure to protect our clients' confidential information and privacy could result in the loss of our reputation and customers, reduction in our profitability and subject us to fines, penalties and litigation and adversely affect our results of operations and financial condition.

We retain confidential information in our information systems, and we are subject to a variety of privacy regulations and confidentiality obligations. For example, some of our activities are subject to the privacy regulations of the Gramm-Leach-Bliley Act. We also have contractual obligations to protect confidential information we obtain from our clients. These obligations generally require us, in accordance with applicable laws, to protect such information to the same extent that we protect our own confidential information. We have implemented physical, administrative and logical security systems with the intent of maintaining the physical security of our facilities and systems and protecting our, our clients' and their customers' confidential information and personally-identifiable information against unauthorized access through our information systems or by other electronic transmission or through the misdirection, theft or loss of data. Despite such efforts, we maybe subject to a breach of our security systems that results in unauthorized access to our facilities and/or the information we are trying to protect. Anyone who is able to circumvent our security measures and penetrate our information systems could access, view, misappropriate, alter, or delete any information in the systems, including personally identifiable customer information and proprietary business information. In addition, most states require that customers be notified if a security breach results in the disclosure of personally-identifiable customer information. Any compromise of the security of our information systems that results in inappropriate disclosure of such information could result in, among other things, unfavorable publicity and damage to our reputation, governmental inquiry and oversight, difficulty in marketing our services, loss of clients, significant civil and criminal liability and the incurrence of significant technical, legal and other expenses, any of which may have a material adverse effect on our results of operations and financial condition.

Changes in regulation may adversely affect our business, results of operations and financial condition and limit our growth.

Legislation or other regulatory reform that increases the regulatory requirements imposed on us or that changes the way we are able to do business may significantly harm our business or results of operations in the future. If we were unable for any reason to comply with these requirements, it could result in substantial costs to us and may have a material adverse effect on our results of

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operations and financial condition. Legislative or regulatory changes that could significantly harm us and our subsidiaries include, but are not limited to:

• prohibiting retailers from providing debt cancellation policies;

• prohibiting insurers from fronting captive reinsurance arrangements;

• placing or reducing interest rate caps on the consumer finance products our clients offer;

• limitations or imposed reductions on premium levels or the ability to raise premiums on existing policies;

• increases in minimum capital, reserves and other financial viability requirements;

• impositions of increased fines, taxes or other penalties for improper licensing, the failure to promptly pay claims, however defined, or other regulatory violations;

• increased licensing requirements;

• restrictions on the ability to offer certain types of products;

• new or different disclosure requirements on certain types of products; and

• imposition of new or different requirements for coverage determinations.

In recent years, the state insurance regulatory framework has come under increased federal scrutiny and some state legislatures have considered or enacted laws that may alter or increase state authority to regulate insurance companies and insurance holding companies. Further, the National Association of Insurance Commissioners ("NAIC") and state insurance regulators are re-examining existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws and regulations. Additionally, there have been attempts by the NAIC and several states to limit the use of discretionary clauses in policy forms. The elimination of discretionary clauses could increase our costs under our Payment Protection products. New interpretations of existing laws and the passage of new legislation may harm our ability to sell new services and products and increase our claims exposure on policies we issued previously. In addition, the NAIC's proposed expansion of the Market Conduct Annual Statement could increase the likelihood of examinations of insurance companies operating in niche markets. Court decisions that impact the insurance industry could result in the release of previously protected confidential and privileged information by departments of insurance, which could increase the risk of litigation.

Traditionally, the U.S. federal government has not directly regulated the business of insurance. However, federal legislation and administrative policies in several areas can significantly and adversely affect insurance companies. These areas include financial services regulation, securities regulation, privacy, tort reform legislation and taxation. In view of recent events involving certain financial institutions and the financial markets, Congress passed and the President signed into law the Dodd-Frank Act, which provides for the enhanced federal supervision of financial institutions, including insurance companies in certain circumstances, and financial activities that represent a systemic risk to financial stability or the U.S. economy.

Under the Dodd-Frank Act, the Federal Insurance Office will be established within the U.S. Treasury Department to monitor all aspects of the insurance industry and its authority would likely extend to all lines of insurance that our insurance subsidiaries write. The director of the Federal Insurance Office will serve in an advisory capacity to the Financial Stability Oversight Council and have the ability to recommend that an insurance company or an insurance holding company be subject to heightened prudential standards by the Federal Reserve, if it is determined that financial distress at the company could pose a threat to the financial stability of the U.S. economy. The Dodd-Frank Act also provides for the preemption of state laws when inconsistent with certain international agreements and would streamline the regulation of reinsurance and surplus lines insurance. At this time, we cannot assess whether any other proposed legislation or regulatory changes will be adopted, or what impact, if any, the Dodd-Frank Act or any other legislation or changes could have on our results of operations, financial condition or liquidity.

With regard to payment protection products, there are federal and state laws and regulations that govern the disclosures related to lenders' sales of those products. Our ability to administer those products on behalf of financial institutions is dependent upon their continued ability to sell those products. To the extent that federal or state laws or regulations change to restrict or prohibit the sale of these products, our administration services and fees revenues would be adversely affected. The Dodd-Frank Act created a new Consumer Financial Protection Bureau ("CFPB") designed to add new regulatory oversight for these lender products. Recently, the CFPB's enforcement actions have resulted in large refunds and civil penalties against financial institutions in connection with their marketing of payment protection and other products. Due to such regulatory actions, some lenders may reduce their sales and marketing of payment protection and other ancillary products, which may adversely affect our administration services and fees revenues. The full impact of the CFPB's oversight is unpredictable and has not yet been realized fully.

Further, in a time of financial uncertainty or a prolonged economic downturn, regulators may choose to adopt more restrictive insurance laws and regulations. For example, insurance regulators may choose to restrict the ability of insurance subsidiaries to make payments to their parent companies or reject rate increases due to the economic environment.

With respect to the property and casualty insurance policies our Payment Protection business underwrites, federal legislative proposals regarding National Catastrophe Insurance, if adopted, could reduce the business need for some of the related products we provide. Additionally, as the U.S. Congress continues to respond to the recent housing foreclosure crisis, it could enact legislation

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placing additional barriers on creditor-placed insurance.

In recent years, several large organizations became subjects of intense public scrutiny due to high-profile data security breaches involving sensitive financial and health information. These events focused national attention on identity theft and the duty of organizations to notify impacted consumers in the event of a data security breach. Existing legislation in most states requires customer notification in the event of a data security breach. In addition, some states are adopting laws and regulations requiring minimum information security practices with respect to the collection and storage of personally-identifiable consumer data, and several bills before Congress contain provisions directed to national information security standards and breach notification requirements. Several significant legal, operational and reputational risks exist with regard to a data breach and customer notification. A breach of data security requiring public notification can result in regulatory fines, penalties or sanctions, civil lawsuits, loss of reputation, loss of clients and reduction of our profitability.

Our business is subject to risks related to litigation and regulatory actions.

We may be materially and adversely affected by judgments, settlements, unanticipated costs or other effects of legal and administrative proceedings now pending or that may be instituted in the future, or from investigations by regulatory bodies or administrative agencies. From time to time, we have had inquiries from regulatory bodies and administrative agencies relating to the operation of our business. Such inquiries may result in various audits, reviews and investigations. An adverse outcome of any investigation by, or other inquiries from, such bodies or agencies could have a material adverse effect on us and result in the institution of administrative or civil proceedings, sanctions and the payment of fines and penalties, changes in personnel, and increased review and scrutiny of us by our clients, regulatory authorities, potential litigants, the media and others.

In particular, our insurance-related operations are subject to comprehensive regulation and oversight by insurance departments in jurisdictions in which we do business. These insurance departments have broad administrative powers with respect to all aspects of the insurance business and, in particular, monitor the manner in which an insurance company offers, sells and administers its products. Therefore, we may from time to time be subject to a variety of legal and regulatory actions relating to our current and past business operations, including, but not limited to:

• disputes over coverage or claims adjudication;

• disputes over claim payment amounts and compliance with individual state regulatory requirements;

• disputes regarding sales practices, disclosures, premium refunds, licensing, regulatory compliance, underwriting and compensation arrangements;

• disputes with taxation and insurance authorities regarding our tax liabilities;

• periodic examinations of compliance with applicable federal and state laws; and

• industry-wide investigations regarding business practices including, but not limited to, the use of finite reinsurance and the marketing and refunding of insurance policies or certificates of insurance.

The prevalence and outcomes of any such actions cannot be predicted, and such actions or any litigation may have a material adverse effect on our results of operations and financial condition. In addition, if we were to experience difficulties with our relationship with a regulatory body in a given jurisdiction, it could have a material adverse effect on our ability to do business in that jurisdiction.

In addition, plaintiffs continue to bring new types of legal claims against insurance and related companies. Current and future court decisions and legislative activity may increase our exposure to these types of claims. Multi-party or class action claims may present additional exposure to substantial economic, non-economic and/or punitive damage awards. The success of even one of these claims, if it resulted in a significant damage award or a detrimental judicial ruling could have a material adverse effect on our results of operations and financial condition. This risk of potential liability may make reasonable settlements of claims more difficult to obtain. We cannot determine with any certainty what new theories of liability or recovery may evolve or what their impact may be on our businesses.

We cannot predict at this time the effect that current litigation, investigations and regulatory activity will have on the industries in which we operate or our business. In light of the regulatory and judicial environments in which we operate, we will likely become subject to further investigations and lawsuits from time to time in the future. Our involvement in any investigations and lawsuits would cause us to incur legal and other costs and, if we were found to have violated any laws, we could be required to pay fines and damages, perhaps in material amounts. In addition, we could be materially and adversely affected by the negative publicity for the insurance and other financial services industries related to any such proceedings and by any new industry-wide regulations or practices that may result from any such proceedings.

Risks Related to Our Indebtedness

Our indebtedness may limit our financial and operating activities and may materially and adversely affect our ability to incur additional debt to fund future needs.

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Our debt service obligations vary annually based on the amount of our indebtedness and the associated fixed and floating interest rates. See "Management Discussion & Analysis -- Liquidity and Capital Resources -- Liquidity" regarding the amount of outstanding debt and our annual debt service. Our total indebtedness was $106.2 million at September 30, 2012 compared to $108.0 million at December 31, 2011. Although we believe that our current cash flow will be sufficient to cover our annual interest expense, any increase in our indebtedness or any decline in the amount of cash available increases the possibility that we could not pay, when due, the principal of, interest on or other amounts due with respect to our indebtedness. In addition, our indebtedness and any future indebtedness we may incur could:

• make it more difficult for us to satisfy our obligations with respect to our indebtedness, including financial and other restrictive covenants, which could result in an event of default under the agreements governing our indebtedness;

• make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• place us at a competitive disadvantage compared to competitors that have less debt; and

• limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes.

Any of the above-listed factors could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Increases in interest rates could increase interest payable under our variable rate indebtedness.

We are subject to interest rate risk in connection with our variable rate indebtedness. See "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK- Interest Rate Risk" regarding our interest rate risk and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital Resources - Liquidity" regarding the amount of outstanding variable rate debt. Interest rate changes could increase the amount of our interest payments and thus negatively impact our future earnings and cash flows. If we do not have sufficient earnings, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or sell more securities, none of which we can guarantee we will be able to do.

We may enter into hedging transactions that may become ineffective which adversely impact our financial condition.

Part of our interest rate risk strategy involves entering into hedging transactions to mitigate the risk of variable interest rate instruments by converting the variable interest rate to a fixed interest rate. Each hedging item must be regularly evaluated for hedge effectiveness. If it is determined that a hedging transaction is ineffective, we may be require to record losses reflected in our results of operations which could adversely impact our financial condition.

Despite our indebtedness levels, we and our subsidiaries may still be able to incur more indebtedness, which could further exacerbate the risks related to our indebtedness described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future subject to the limitations contained in the agreements governing our indebtedness. If we or our subsidiaries incur additional debt, the risks that we and they now face as a result of our indebtedness could intensify.

Restrictive covenants in the agreements governing our indebtedness may restrict our ability to pursue our business strategies.

The agreements governing our indebtedness contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to pursue our business strategies or undertake actions that may be in our best interests. The agreements governing our indebtedness include covenants restricting, among other things, our ability to:

• incur or guarantee additional debt;

• incur liens;

• complete mergers, consolidations and dissolutions;

• sell certain of our assets that have been pledged as collateral; and

• undergo a change in control.

Our assets have been pledged to secure some of our existing indebtedness.

Our credit facility, entered into in August 2012, with Wells Fargo Bank is secured by substantially all of our property and assets and property and assets owned by LOTS Intermediate Co. and certain of our subsidiaries that act as guarantors of our existing indebtedness. Such assets include the stock of LOTS Intermediate Co. and the right, title and interest of the borrowers and each guarantor in their respective material real estate property, fixtures, accounts, equipment, investment property, inventory, instruments, general intangibles, intellectual property, money, cash or cash equivalents, software and other assets and, in each

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case, the proceeds thereof, subject to certain exceptions. In the event of a default under our indebtedness, the lender could foreclose against the assets securing such obligations. A foreclosure on these assets would have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Related to Our Technology and Intellectual Property

Our information systems may fail or their security may be compromised, which could damage our business and materially and adversely affect our results of operations and financial condition.

Our business is highly dependent upon the effective operation of our information systems and our ability to store, retrieve, process and manage significant databases and expand and upgrade our information systems. We rely on these systems throughout our businesses for a variety of functions, including marketing and selling our Payment Protection products, providing our BPO services, providing eReinsure's services to the reinsurance market, managing our operations, processing claims and applications, providing information to clients, performing actuarial analyses and maintaining financial records. The interruption or loss of our information processing capabilities through the loss of stored data, programming errors, the breakdown or malfunctioning of computer equipment or software systems, telecommunications failure or damage caused by weather or natural disasters or any other significant disruptions could harm our business, ability to generate revenues, client relationships, competitive position and reputation. Although we have additional data processing locations in Jacksonville, Florida and Atlanta, Georgia, disaster recovery procedures and insurance to protect against certain contingencies, such measures may not be effective or insurance may not continue to be available at reasonable prices, cover all such losses or be sufficient to compensate us for the loss of business that may result from any failure of our information systems. In addition, our information systems may be vulnerable to physical or electronic intrusions, computer viruses or other attacks which could disable our information systems and our security measures may not prevent such attacks. The failure of our systems as a result of any security breaches, intrusions or attacks could cause significant interruptions to our operations, which could result in a material adverse effect on our business, results of operations and financial condition.

The failure to effectively maintain and modernize our systems to keep up with technological advances could materially and adversely affect our business.

Our businesses are dependent upon our ability to ensure that our information systems keep up with technological advances. Our ability to keep our systems integrated with those of our clients is critical to the success of our businesses. If we do not effectively maintain our systems and update them to address technological advancements, our relationships and ability to do business with our clients may be materially and adversely affected. Our businesses depend significantly on effective information systems, and we have many different information systems for our various businesses. We must commit significant resources to maintain and enhance existing information systems and develop new systems that allow us to keep pace with continuing changes in information processing technology, evolving industry, regulatory and legal standards and changing client preferences. A failure to maintain effective and efficient information systems, or a failure to efficiently and effectively consolidate our information systems and eliminate redundant or obsolete applications, could have a material adverse effect on our results of operations and financial condition or our ability to do business in particular jurisdictions. If we do not effectively maintain adequate systems, we could experience adverse consequences, including:

• the inability to effectively market and price our services and products and make underwriting and reserving decisions;

• the loss of existing clients;

• difficulty attracting new clients;

• regulatory problems, such as a failure to meet prompt payment obligations;

• internal control problems;

• exposure to litigation;

• security breaches resulting in loss of data; and

• increases in administrative expenses.

Our success will depend, in part, on our ability to protect our intellectual property rights and our ability not to infringe upon the intellectual property rights of third parties.

The success of our business will depend, in part, on preserving our trade secrets, maintaining the security of our know-how and data and operating without infringing upon patents and proprietary rights held by third parties. Failure to protect, monitor and control the use of our intellectual property rights could cause us to lose a competitive advantage and incur significant expenses. We rely on a combination of contractual provisions, confidentiality procedures and copyright, trademark, service mark and trade secret laws to protect the proprietary aspects of our brands, technology and data. These legal measures afford only limited protection, and competitors or others may gain access to our intellectual property and proprietary information.

Our trade secrets, data and know-how could be subject to unauthorized use, misappropriation, or disclosure. Our trademarks could be challenged, forcing us to re-brand our services or products, resulting in loss of brand recognition and requiring us to devote resources to advertising and marketing new brands or licensing. If we are found to have infringed upon the intellectual property rights of third parties, we may be subject to injunctive relief restricting our use of affected elements of intellectual property used in the business, or we may be required to, among other things, pay royalties or enter into licensing agreements in order to obtain

62

the rights to use necessary technologies, which may not be possible on commercially reasonable terms, or redesign our systems, which may not be feasible.

Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of our proprietary rights. The intellectual property laws and other statutory and contractual arrangements we currently depend upon may not provide sufficient protection in the future to prevent the infringement, use or misappropriation of our trademarks, data, technology and other services and products. Policing unauthorized use of intellectual property rights can be difficult and expensive, and adequate remedies may not be available. Any future litigation, regardless of outcome, could result in substantial expense and diversion of resources with no assurance of success and could have a material adverse effect on our business, results of operation and financial condition.

Risks Related to Our Common Stock

There may not be an active, liquid trading market for our common stock.

Prior to our Initial Public Offering, there had been no public market for shares of our common stock. We cannot predict the extent to which investor interest in the Company will continue to maintain a trading market on the New York Stock Exchange ("NYSE") or how liquid that market may continue to be. If an active trading market in our common stock does not continue, you may have difficulty selling any of our common stock that you purchase.

As a public company, we are subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy.

We are required to file with the SEC, annual and quarterly information and other reports that are specified in the Exchange Act. We are required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. We are subject to other reporting and corporate governance requirements, including the requirements of the NYSE and certain provisions of the Sarbanes-Oxley Act of 2002 ("SOX") and the regulations promulgated thereunder, which impose significant compliance obligations upon us. Should we fail to comply with these rules and regulations we may face de-listing from the NYSE and face disciplinary actions from the SEC which may adversely affect our stock price.

If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected.

Our most recent evaluation resulted in our conclusion that as of December 31, 2011, we were in compliance with Section 404 of SOX. In addition, our management concluded that our internal control over financial reporting was effective as of our most recent quarter end. We believe that we currently have adequate internal control procedures in place for future periods; however, if our internal control over financial reporting is found to be ineffective or if we identify a material weakness in our financial reporting, investors may lose confidence in the reliability of our financial statements, which may adversely affect our financial results or our stock price.

Our principal stockholder has substantial control over us.

Affiliates of Summit Partners collectively and beneficially own approximately 63.3% of our outstanding common stock at September 30, 2012. As a consequence, Summit Partners or its affiliates continue to be able to exert a significant degree of influence or actual control over our management and affairs and matters requiring stockholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets, and any other significant transaction. The interests of this stockholder may not always coincide with our interests or the interests of our other stockholders. For instance, this concentration of ownership may have the effect of delaying or preventing a change in control of us otherwise favored by our other stockholders and could depress our stock price.

We expect that our stock price will fluctuate significantly, which could cause a decline in the stock price, and holders of our common stock may not be able to resell shares at or above the cost of such shares.

Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common stock regardless of our operating performance. The trading price of our common stock may be volatile and subject to wide price fluctuations in response to various factors, including:

• market conditions in the broader stock market;

• actual or anticipated fluctuations in our quarterly financial and operating results;

• introduction of new products or services by us or our competitors;

• issuance of new or changed securities analysts' reports or recommendations;

• investor perceptions of us and the industries in which we operate;

• sales, or anticipated sales, of large blocks of our stock;

• additions or departures of key personnel;

• regulatory or political developments;

63

• litigation and governmental investigations; and

• changing economic conditions.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our results of operations and reputation.

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

At September 30, 2012, we had 20,681,252 shares of common stock outstanding, including shares held in treasury, with our directors, executive officers and affiliates holding a significant majority of these shares. If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could decrease significantly. The perception in the public market that our existing stockholders might sell shares of common stock could also depress the market price of our common stock. A decline in the market price of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

If securities or industry analysts do not publish research or reports about our business, publish research or reports containing negative information about our business, adversely change their recommendations regarding our stock or if our results of operations do not meet their expectations, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

Some provisions of Delaware law and our amended and restated certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our common stock.

Our amended and restated certificate of incorporation and bylaws provide for, among other things:

• restrictions on the ability of our stockholders to call a special meeting and the business that can be conducted at such meeting;

• restrictions on the ability of our stockholders to remove a director or fill a vacancy on the board of directors;

• our ability to issue preferred stock with terms that the board of directors may determine, without stockholder approval;

• the absence of cumulative voting in the election of directors;

• a prohibition of action by written consent of stockholders unless such action is recommended by all directors then in office; and

• advance notice requirements for stockholder proposals and nominations.

These provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay or prevent a transaction involving a change in control of the Company that is in the best interest of our non-controlling stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts.

Applicable insurance laws may make it difficult to effect a change in control of us.

State insurance regulatory laws contain provisions that require advance approval, by the state insurance commissioner, of any change in control of an insurance company that is domiciled, or, in some cases, having such substantial business that it is deemed to be commercially domiciled, in that state. We own, directly or indirectly, all of the shares of stock of insurance companies domiciled in Delaware, Georgia, Mississippi and Louisiana, and 85% of the shares of stock of an insurance company domiciled in Kentucky. Because any purchaser of shares of our common stock representing 10% or more of the voting power of the capital stock of Fortegra generally will be presumed to have acquired control of these insurance company subsidiaries, the insurance change in control laws of Delaware, Georgia, Louisiana and Kentucky would apply to such a transaction.

In addition, the laws of many states contain provisions requiring pre-notification to state agencies prior to any change in control of a non-domestic insurance company subsidiary that transacts business in that state. While these pre-notification statutes do not authorize the state agency to disapprove the change in control, they do authorize issuance of cease and desist orders with respect to the non-domestic insurer if it is determined that conditions, such as undue market concentration, would result from the change in control.

These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of the Company, including through transactions, and in particular unsolicited transactions, that some or all of our stockholders might consider to

64

be desirable.

We do not anticipate paying any cash dividends for the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and for general corporate purposes. We do not intend to pay any dividends for the foreseeable future to holders of our common stock. As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not Applicable

(b) Not Applicable

(c) Issuer Purchases of Equity Securities

As of September 30, 2012, Fortegra had an active share repurchase plan which allows the Company to purchase up to $10.0 million of the Company's common stock to be purchased from time to time through open market or private transactions. The plan was approved by the Board of Directors in November 2011 and provides for shares to be repurchased for general corporate purposes, which may include serving as a resource for funding potential acquisitions and employee benefit plans. The timing, price and quantity of purchases are at our discretion, and the plan may be discontinued or suspended at any time.

The following table shows Fortegra's share repurchase plan activity for the three months ended September 30, 2012:

Period			Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
						832,131	$	4,707,525
July 1, 2012	to	July 31, 2012	122,650	$	8.02	122,650	3,723,500
August 1, 2012	to	August 31, 2012	24,853	8.01		24,853	3,524,376
September 1, 2012	to	September 30, 2012	—	—		—	3,524,376
Total			147,503	$	8.02	979,634

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See the Exhibit Index following the signature page of this Form 10-Q for a list of exhibits filed with, furnished with, or incorporated by reference into this report, which Exhibit Index is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			Fortegra Financial Corporation
Date:	November 14, 2012	By:	/s/ Richard S. Kahlbaugh
			Richard S. Kahlbaugh
			Chairman, President and Chief Executive Officer
Date:	November 14, 2012	By:	/s/ Walter P. Mascherin
			Walter P. Mascherin
			Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

		Incorporated by Reference
Exhibit Number	Description of Exhibits	Form	File Number	Date Filed	Original Exhibit Number	Filed Herewith	Furnished Herewith
1.1	Form of Underwriting Agreement.	S-1/A	333-169550	11/29/2010	1.1
2.1	Agreement and Plan of Merger, dated as of March 7, 2007, by and among, Summit Partners Private Equity Fund VII-A, L.P., Summit Partners Private Equity Fund VII-B, L.P., Summit Subordinated Debt Fund III-A, L.P., Summit Subordinated Debt Fund III-B, L.P., Summit Investors VI, L.P., LOS Acquisition Co., the signing stockholders and Life of the South Corporation and N.G. Houston III, as Stockholder Representative.	S-1	333-169550	9/23/2010	2.1
2.2	First Amendment to Merger Agreement, dated as of June 20, 2007 by and among Summit Partners Private Equity Fund VII-A, L.P., Summit Partners Private Equity Fund VII-B, L.P., Summit Subordinated Debt Fund III-A, L.P., Summit Subordinated Debt Fund III-B, L.P., Summit Investors VI, L.P., LOS Acquisition Co., Life of the South Corporation and N.G. Houston, III, as Stockholder Representative.	S-1	333-169550	9/23/2010	2.2
2.3	Stock Purchase Agreement, dated as of April 15, 2009, by and among Willis HRH, Inc., Bliss and Glennon, Inc., LOTS Intermediate Co., Willis North America Inc. and Fortegra Financial Corporation.	S-1	333-169550	9/23/2010	2.3
2.4	Agreement and Plan of Merger, dated March 3, 2011 by and among eReinsure.com, Inc., a Delaware corporation, Alpine Acquisition Sub., Inc., a Delaware corporation, and Century Capital Partners III, L.P., as Agent solely for the purposes of Section 10.02, and LOTS Intermediate Co., a Delaware corporation.	8-K	001-35009	3/7/2011	2.1
3.1	Third Amended and Restated Certificate of Incorporation of Fortegra Financial Corporation.	S-1/A	333-169550	12/13/2010	3.3
3.3	Amended and Restated Bylaws of Fortegra Financial Corporation.	S-1/A	333-169550	11/29/2010	3.2
4.1	Form of Common Stock Certificate.	S-1/A	333-169550	12/13/2010	4.1
4.2	Stockholders Agreement, dated as of March 7, 2007, among Life of the South Corporation(together with its successors), the Rollover Stockholders (as defined therein), Employee Stockholders (as defined therein) and Investors (as defined therein).	S-1/A	333-169550	10/29/2010	4.2
10.1	Indenture, dated as of June 20, 2007, between LOTS Intermediate Co. and Wilmington Trust Company.	S-1	333-169550	9/23/2010	10.1
10.2	Form of Fixed/Floating Rate Senior Debenture (included in Exhibit 10.1).	S-1	333-169550	9/23/2010	10.2
10.3	Subordinated Debenture Purchase Agreement, dated as of June 20, 2007, among Summit Subordinated Debt Fund III-A, L.P., Summit Subordinated Debt Fund III-B, L.P., Summit Investors VI, L.P. and LOTS Intermediate Co.	S-1	333-169550	9/23/2010	10.3
10.4	Form of Subordinated Debenture (included in Exhibit 10.3).	S-1	333-169550	9/23/2010	10.4
10.5	Amended Subordinated Debenture Purchase Agreement, dated June 16, 2010, among Summit Subordinated Debt Fund III-A, L.P., Summit Subordinated Debt Fund III-B, L.P., Summit Investors VI, L.P. and LOTS Intermediate Co.	S-1	333-169550	9/23/2010	10.5

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		Incorporated by Reference
Exhibit Number	Description of Exhibits	Form	File Number	Date Filed	Original Exhibit Number	Filed Herewith	Furnished Herewith
10.6	Revolving Credit Agreement, dated June 16, 2010, among Fortegra Financial Corporation and LOTS Intermediate Co., as borrowers, and the lenders from time to time a party thereto and SunTrust Bank, as administrative agent.	S-1	333-169550	9/23/2010	10.6
10.6.1	First Amendment to Credit Agreement, dated as of October 6, 2010, by and among Fortegra Financial Corporation and LOTS Intermediate Co., as borrowers, and the lenders from time to time a party thereto and SunTrust Bank, as administrative agent.	S-1/A	333-169550	10/29/2010	10.6.1
10.6.2	Joinder Agreement, dated November 30, 2010, by CB&T, a division of Synovus Bank, Suntrust Bank, as Administrative Agent and Fortegra Financial Corporation and LOTS Intermediate Co., as Borrowers.	S-1/A	333-169550	12/13/2010	10.6.2
10.6.3	Joinder Agreement, dated March 1, 2011, by Wells Fargo Bank, N.A., Suntrust Bank, as Administrative Agent and Fortegra Financial Corporation and LOTS Intermediate Co., as Borrowers	8-K	001-35009	3/7/2011	10.1
10.7	Revolving Credit Note, dated June 16, 2010, among Fortegra Financial Corporation and LOTS Intermediate Co., as borrowers, and SunTrust Bank, as lender.	S-1	333-169550	9/23/2010	10.7
10.8	Subsidiary Guaranty Agreement, dated June 16, 2010, among Bliss and Glennon, Inc., LOTSolutions, Inc., as guarantors and SunTrust Bank, as administrative agent.	S-1	333-169550	9/23/2010	10.8
10.9	Security Agreement, dated June 16, 2010, by Fortegra Financial Corporation and LOTS Intermediate Co., as borrowers and SunTrust Bank, as administrative agent.	S-1	333-169550	9/23/2010	10.9
10.10	Pledge Agreement, dated June 16, 2010 by and among Fortegra Financial Corporation, as pledgor and SunTrust Bank, as administrative agent.	S-1	333-169550	9/23/2010	10.10
10.11	Form of Fortegra Financial Corporation Director Indemnification Agreement for John R. Carroll and J.J. Kardwell.	S-1/A	333-169550	11/29/2010	10.18
10.12	Form of Fortegra Financial Corporation Director Indemnification Agreement for Alfred R. Berkeley, III, Francis M. Colalucci, Frank P. Filipps and Ted W. Rollins.	S-1/A	333-169550	11/29/2010	10.19
10.13	Form of Fortegra Financial Corporation Officer Indemnification Agreement.	S-1/A	333-169550	12/3/2010	10.20
10.14	Form of Indemnity Agreement between Fortegra Financial Corporation and the executive officers serving as plan committee members for the Fortegra Financial Corporation 401(k) Savings Plan.	S-1/A	333-169550	10/29/2010	10.21
10.15 *	Executive Employment and Non-Competition Agreement, dated as of March 7, 2007, by and between Life of the South Corporation and Richard S. Kahlbaugh.	S-1/A	333-169550	12/3/2010	10.22
10.15.1*	Amendment No. 1 to Executive Employment and Non-Competition Agreement, dated as of November 1, 2010, by and between Fortegra Financial Corporation and Richard S. Kahlbaugh.	S-1/A	333-169550	12/3/2010	10.22.1

68

		Incorporated by Reference
Exhibit Number	Description of Exhibits	Form	File Number	Date Filed	Original Exhibit Number	Filed Herewith	Furnished Herewith
10.16 *	Executive Employment and Non-Competition Agreement, dated as of October 1, 2010, by and between Fortegra Financial Corporation and Walter P. Mascherin.	S-1/A	333-169550	12/3/2010	10.27
10.17 *	2005 Equity Incentive Plan.	S-1/A	333-169550	10/29/2010	10.28
10.18 *	Key Employee Stock Option Plan (1995) Agreement.	S-1/A	333-169550	10/29/2010	10.29
10.19	Stock Option Agreement by and between Life of the South Corporation and Richard S. Kahlbaugh, dated as of November 18, 2005, as amended on March 7, 2007 and June 20, 2007.	S-1/A	333-169550	11/16/2010	10.30
10.20	Stock Option Agreement by and between Life of the South Corporation and Richard Kahlbaugh, dated as of October 25, 2007.	S-1/A	333-169550	11/16/2010	10.31
10.21 *	2010 Omnibus Incentive Plan.	S-1/A	333-169550	12/3/2010	10.32
10.22 *	Employee Stock Purchase Plan.	S-1/A	333-169550	12/3/2010	10.33
10.23 *	Deferred Compensation Agreement, dated January 1, 2006 between Life of the South Corporation and Richard S. Kahlbaugh.	S-1/A	333-169550	10/29/2010	10.35
10.24	Administrative Services Agreement, dated August 1, 2002, by and between Life of the South Insurance Company and National Union Fire Insurance Company of Pittsburgh, PA., as amended on February 1, 2003, October 1, 2003 and August 1, 2008. (CONFIDENTIAL TREATEMENT HAS BEEN GRANTED WITH RESPECT TO CERTAIN PORTIONS, WHICH HAVE BEEN FILED SEPERATELY WITH THE SECURTIES AND EXHANGE COMMISSION)	S-1/A	333-169550	11/16/2010	10.37
10.25	Claims Services Agreement, dated December 1, 2008, by and between LOTSolutions, Inc. and National Union Fire Insurance Company of Pittsburgh, PA., as amended on August 1, 2010. (CONFIDENTIAL TREATEMENT HAS BEEN GRANTED WITH RESPECT TO CERTAIN PORTIONS, WHICH HAVE BEEN FILED SEPERATELY WITH THE SECURTIES AND EXHANGE COMMISSION)	S-1/A	333-169550	11/16/2010	10.38
10.26 *	Form of Restricted Stock Award Agreement for Directors.	S-1/A	333-169550	12/3/2010	10.47
10.27 *	Form of Restricted Stock Award Agreement for Employees.	S-1/A	333-169550	12/3/2010	10.48
10.28 *	Form of Restricted Stock Award Agreement (Bonus Pool).	S-1/A	333-169550	12/3/2010	10.49
10.29 *	Form of Nonqualified Stock Option Award Agreement.	S-1/A	333-169550	12/3/2010	10.50
10.30 *	Form of Nonqualified Stock Option Award Agreement for Walter P. Mascherin.	S-1/A	333-169550	12/3/2010	10.51
10.31*	Executive Employment and Non-Competition Agreement, dated as of January 1, 2011, by and between Fortegra Financial Corporation and Alex Halikias.	10-Q	001-35009	5/15/2012	10.38
10.32 *	Executive Employment and Non-Competition Agreement, dated as of January 1, 2009, by and between Fortegra Financial Corporation and Joseph McCaw.	10-Q	001-35009	5/15/2012	10.39
10.33 *	Executive Employment and Non-Competition Agreement, dated as of October 1, 2010, by and between Fortegra Financial Corporation and John G. Short.	10-Q	001-35009	5/15/2012	10.40

69

		Incorporated by Reference
Exhibit Number	Description of Exhibits	Form	File Number	Date Filed	Original Exhibit Number	Filed Herewith	Furnished Herewith
10.34	Credit Agreement, dated August 2, 2012, among Fortegra Financial Corporation and LOTS Intermediate Co., as borrowers; the initial lenders named therein; Wells Fargo Bank, N.A., as administrative agent, swingline lender, and issuing lender; Wells Fargo Securities, LLC, as bookrunner and joint lead arranger; and Synovus Bank as joint lead arranger and syndication agent.	8-K	001-35009	8/7/2012	10.1
10.35	Subsidiary Guaranty Agreement, dated August 2, 2012, among certain subsidiaries of Fortegra Financial Corporation and LOTS Intermediate Co., as guarantors, and Wells Fargo Bank, N.A.	8-K	001-35009	8/7/2012	10.2
10.36	Pledge Agreement, dated August 2, 2012, by Fortegra Financial Corporation and LOTS Intermediate Co., as pledgors, and Wells Fargo Bank, N.A.	8-K	001-35009	8/7/2012	10.3
10.37	Security Agreement, dated August 2, 2012, among Fortegra Financial Corporation, LOTS Intermediate Co. and certain of its subsidiaries, as grantors, and Wells Fargo Bank, N.A.	8-K	001-35009	8/7/2012	10.4
10.38	Trademark Security Agreement, dated August 2, 2012, among the Fortegra Financial Corporation, LOTSolutions, Inc., Pacific Benefits Group Northwest, L.L.C., eReinsure.com, Inc., as grantors, and Wells Fargo Bank, N.A.	8-K	001-35009	8/7/2012	10.5
10.39	Patent Security Agreement, dated August 2, 2012, by eReinsure.com, Inc., as grantor, and Wells Fargo Bank, N.A.	8-K	001-35009	8/7/2012	10.6
11.1	Statement Regarding Computation of Per Share Earnings (incorporated by reference to Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.					X
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.					X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.						X
32.1	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.						X
101	The following materials from Fortegra Financial Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets (Unaudited) at September 30, 2012 and December 31, 2011, (ii) the Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2012 and 2011, (iii) the Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2012 and 2011, (iv) the Consolidated Statements of Stockholders' Equity (Unaudited) for the nine month ended September 30, 2012 , (v) the Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2012 and 2011, and (vi) the Notes to Consolidated Financial Statements (Unaudited).						(1)

70

		Incorporated by Reference
Exhibit Number	Description of Exhibits	Form	File Number	Date Filed	Original Exhibit Number	Filed Herewith	Furnished Herewith
*	Management contract or compensatory plan or arrangement.
(1)	In accordance with Rule 406T of SEC Regulation S-T, the XBRL related documents in Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these Sections.

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EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION FOR THE CHIEF EXECUTIVE OFFICER

I, Richard S. Kahlbaugh, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Fortegra Financial Corporation (Registrant);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date:	November 14, 2012	/s/ Richard S. Kahlbaugh
		Richard S. Kahlbaugh
		Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION FOR THE CHIEF FINANCIAL OFFICER

I, Walter P. Mascherin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Fortegra Financial Corporation (Registrant);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date:	November 14, 2012	/s/ Walter P. Mascherin
		Walter P. Mascherin
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fortegra Financial Corporation on Form 10-Q as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of Fortegra Financial Corporation as of the dates and for the periods expressed in the Report.

Date:	November 14, 2012	By:	/s/ Richard S. Kahlbaugh
			Richard S. Kahlbaugh
			Chairman, President and Chief Executive Officer
Date:	November 14, 2012	By:	/s/ Walter P. Mascherin
			Walter P. Mascherin
			Executive Vice President and Chief Financial Officer

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Derivative Financial Instruments - Interest Rate Swap Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]

The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of derivative instruments and indicates where within the Consolidated Balance Sheets each is reported:

		At
	Balance Sheet Location	September 30, 2012			December 31, 2011
Derivatives designated as cash flow hedging instruments:
Interest rate swap - notional value		$	35,000		$	35,000
Fair value of the Swap	Other Liabilities	$	(4,599	)	$	(3,601	)
Unrealized loss, net of tax, on the fair value of the Swap	AOCI	$	(2,989	)	$	(2,340	)
Variable rate of the interest rate swap (1)		0.39		%	—		%
Fixed rate of the interest rate swap (1)		3.47		%	—		%

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table summarizes the pretax impact of the interest rate swap designated as a cash flow hedge on the Consolidated Financial Statements for the following periods:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
(Loss) recognized in AOCI on the derivative-effective portion	$	(159	)	$	(2,030	)	$	(915	)	$	(3,300	)
(Loss) reclassified from AOCI into income-effective portion	$	39		$	—		$	83		$	—
Gain (loss) recognized in income on the derivative-ineffective portion	$	—		$	—		$	—		$	—

Schedule of Interest Rate Derivatives [Table Text Block]

The table below shows the estimated amount to be reclassified to earnings from AOCI during the next 12 months. These net losses reclassified into earnings are expected to primarily increase net interest expense related to the respective hedged item.

	At
	September 30, 2012
Estimated loss to be reclassified to earnings from AOCI during the next 12 months	$	1,105

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Other Intangible Assets Level 4 Other Intangible Assets, Carrying Values and Amortization Periods (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 46,999	$ 46,831
Accumulated Amortization	(17,811)	(14,036)
Net Carrying Amount	29,188	32,795
Customer and Agent Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	34,720	34,552
Accumulated Amortization	(11,458)	(8,724)
Net Carrying Amount	23,262	25,828
Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	8,773	8,773
Accumulated Amortization	(3,114)	(2,345)
Net Carrying Amount	5,659	6,428
Present Value of Future Profits [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	548	548
Accumulated Amortization	(548)	(548)
Net Carrying Amount	0	0
Noncompete Agreements [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,958	2,958
Accumulated Amortization	(2,691)	(2,419)
Net Carrying Amount	$ 267	$ 539
Amortization Period (Years) [Member] | Customer and agent relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	5 years
Amortization Period (Years) [Member] | Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	7 years
Amortization Period (Years) [Member] | Present value of future profits [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	3 months 18 days
Amortization Period (Years) [Member] | Noncompete Agreements [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	1 year 6 months
Amortization Period (Years) [Member] | Customer and agent relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	15 years
Amortization Period (Years) [Member] | Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	10 years
Amortization Period (Years) [Member] | Present value of future profits [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	9 months
Amortization Period (Years) [Member] | Noncompete Agreements [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period (Years)	6 years

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Recently Issued Accounting Standards Level 4 Income Statement Adjustments (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total revenues	$ 64,262	$ 56,451	$ 181,636	$ 164,998
Net losses and loss adjustment expenses	11,430	9,714	32,272	28,338
Commissions	21,548	17,926	61,479	53,766
Personnel costs	12,708	10,945	36,467	33,365
Other operating expenses	7,959	7,267	21,635	23,779
Depreciation	871	886	2,584	2,283
Amortization of intangibles	1,127	998	3,775	3,428
Interest expense	2,025	1,906	5,267	5,862
Loss on sale of subsidiary	0	477	0	477
Total expenses	57,668	50,119	163,479	151,298
Income before income taxes and non-controlling interest	6,594	6,332	18,157	13,700
Income taxes	2,455	2,259	6,520	4,847
Income before non-controlling interest	4,139	4,073	11,637	8,853
Less: net income (loss) attributable to non-controlling interest	29	1	62	(171)
Net Income	4,110	4,072	11,575	9,024
Basic	$ 0.21	$ 0.20	$ 0.59	$ 0.44
Diluted	$ 0.20	$ 0.19	$ 0.56	$ 0.42
As Restated [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total revenues		56,451		164,998
Net losses and loss adjustment expenses		9,714		28,338
Commissions		17,926		53,766
Personnel costs		10,945		33,365
Other operating expenses		7,267		23,779
Depreciation		886		2,283
Amortization of intangibles		998		3,428
Interest expense		1,906		5,862
Loss on sale of subsidiary		477		477
Total expenses		50,119		151,298
Income before income taxes and non-controlling interest		6,332		13,700
Income taxes		2,259		4,847
Income before non-controlling interest		4,073		8,853
Less: net income (loss) attributable to non-controlling interest		1		(171)
Net Income		4,072		9,024
Basic		$ 0.20		$ 0.44
Diluted		$ 0.19		$ 0.42
As Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total revenues		56,451		164,998
Net losses and loss adjustment expenses		9,714		28,338
Commissions		17,926		53,766
Personnel costs		10,945		33,365
Other operating expenses		7,171		23,331
Depreciation		886		2,283
Amortization of intangibles		998		3,428
Interest expense		1,906		5,862
Loss on sale of subsidiary		477		477
Total expenses		50,023		150,850
Income before income taxes and non-controlling interest		6,428		14,148
Income taxes		2,292		5,003
Income before non-controlling interest		4,136		9,145
Less: net income (loss) attributable to non-controlling interest		1		(171)
Net Income		4,135		9,316
Basic		$ 0.20		$ 0.46
Diluted		$ 0.19		$ 0.44
Effect of the Change [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total revenues		0		0
Net losses and loss adjustment expenses		0		0
Commissions		0		0
Personnel costs		0		0
Other operating expenses		96		448
Depreciation		0		0
Amortization of intangibles		0		0
Interest expense		0		0
Total expenses		96		448
Income before income taxes and non-controlling interest		(96)		(448)
Income taxes		(33)		(156)
Income before non-controlling interest		(63)		(292)
Less: net income (loss) attributable to non-controlling interest		0		0
Net Income		$ (63)		$ (292)
Basic		$ 0.00		$ (0.02)
Diluted		$ 0.00		$ (0.02)

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Derivative Financial Instruments - Interest Rate Swap Level 4 Amounts in AOCI (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Rate	Sep. 30, 2011	Dec. 31, 2011 Rate
Derivative Instruments, Gain (Loss) [Line Items]
(Loss) recognized in AOCI on the derivative-effective portion	$ (159)	$ (2,030)	$ (915)	$ (3,300)
Estimated loss to be reclassified to earnings from AOCI during the next 12 months			1,105
Other Comprehensive Income (Loss) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Description of Location of Gain (Loss) on Interest Rate Cash Flow Hedge Derivative in Financial Statements			AOCI
Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest rate swap - notional value	35,000		35,000		35,000
Variable rate of the interest rate swap (1)	0.39%		0.39%		0.00%	[1]
Fixed rate of the interest rate swap (1)	3.47%		3.47%		0.00%	[1]
(Loss) reclassified from AOCI into income-effective portion	39	0	83	0
Gain (loss) recognized in income on the derivative-ineffective portion	0	0	0	0
Interest Rate Swap [Member] | Other Comprehensive Income (Loss) [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Unrealized loss, net of tax, on the fair value of the Swap	(2,989)		(2,989)		(2,340)
Other Liabilities [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Description of Location of Gain (Loss) on Interest Rate Cash Flow Hedge Derivative in Financial Statements			Other Liabilities
Other Liabilities [Member] | Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Fair Value of the Swap	$ (4,599)		$ (4,599)		$ (3,601)

[1] The swap took effect in June 2012.

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Other Intangible Assets Level 4 Indefinite lived intangible assets (Details) (Trade Names [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Trade Names [Member]
Acquired Indefinite-lived Intangible Assets [Line Items]
Tradenames	$ 21,615	$ 21,615

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Summary of Significant Accounting Policies Immaterial Correction of Prior Period Errors (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Goodwill	$ 104,668	$ 104,500
Deferred income taxes	26,023	24,614	2,300
Property and equipment, net	17,227	14,666
Auto Knight Acquisition [Member]
Goodwill		600
Deferred income taxes		600
B&G Acquisition [Member]
Goodwill		400
Deferred income taxes		300
Property and equipment, net		$ 700

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Business Acquisitions and Dispositions Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The following table presents assets acquired, liabilities assumed and goodwill recorded for the 2011 acquisitions of eReinsure and PBG based on their fair values as of the respective acquisition date and the effects of the measurement period adjustments recorded in 2012, as discussed above:

	eReinsure			PBG
ASSETS:
Cash	$	3,694		$	38
Investments	1,212			—
Other receivables	1,828			—
Property and equipment, net	142			65
Other intangible assets, net	13,908			3,650
Other assets	54			22
Net deferred tax asset	—			127
LIABILITIES:
Accrued expenses and accounts payable	(2,801		)	(304		)
Commissions payable	—			(60		)
Deferred revenue	(835		)	—
Net deferred tax liability	(1,783		)	—
Net assets acquired	15,419			3,538
Purchase consideration (1)	38,931			7,607
Goodwill	$	23,512		$	4,069

(1) - Reflects a purchase price reduction of $0.3 million for the final eReinsure working capital adjustments.

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Fair Value of Financial Instruments Level 4 Fair Value Assets and Liabilities Measured with Level 1,2,& 3 (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 Securities	Dec. 31, 2011 Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of Level 3 Securities	7	12
Percent of Total Investments	1.00%	1.30%
Fixed Maturity Securities	$ 110,833	$ 93,509
Equity Securities	6,085	1,219
Short-term investments	970	1,070
Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed Maturity Securities	110,833	93,509
Equity Securities	6,085	1,219
Short-term investments	970	1,070
Total Assets	117,888	95,798
Interest Rate Swap	4,599	3,601
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed Maturity Securities	0	0
Equity Securities	4,960	91
Short-term investments	970	1,070
Total Assets	5,930	1,161
Interest Rate Swap	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed Maturity Securities	110,781	93,433
Equity Securities	46	0
Short-term investments	0	0
Total Assets	110,827	93,433
Interest Rate Swap	4,599	3,601
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed Maturity Securities	52	76
Equity Securities	1,079	1,128
Short-term investments	0	0
Total Assets	1,131	1,204
Interest Rate Swap	$ 0	$ 0

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Other Intangible Assets Level 4 Future Amortization Expense (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Finite Lived Intangible Future Amortization [Abstract]
2012 (remaining three months)	$ 1,128
2013	4,490
2014	4,478
2015	4,471
2016	3,904
Therafter	10,717
Total	$ 29,188	$ 32,795

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Segment Results Level 4 (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Service and administrative fees	$ 10,056	$ 10,125	$ 28,790	$ 28,041
Ceding commission	11,122	7,027	25,396	21,428
Net Investment Income, Insurance Entity	744	801	2,219	2,636
Net realized gains on the sale of investments	0	1,346	10	2,573
Other income	52	18	172	138
Net earned premium	33,893	28,673	97,770	84,646
Net losses and loss adjustment expenses	(11,430)	(9,714)	(32,272)	(28,338)
Commissions	(21,548)	(17,926)	(61,479)	(53,766)
Earnings before depreciation, amortization and interest expense	53,645	46,329	151,853	139,725
Brokerage commissions and fees	8,411	8,611	27,295	25,686
Segment Net Revenue	31,284	28,811	87,885	82,894
Operating Expenses	20,667	18,689	58,102	57,621
Earnings before interest, taxes, depreciation and amortization	10,617	10,122	29,783	25,273
Depreciation and Amortization	1,998	1,884	6,359	5,711
Interest expense	2,025	1,906	5,267	5,862
Income before income taxes and non-controlling interest	6,594	6,332	18,157	13,700
Income taxes	2,455	2,259	6,520	4,847
Less: net income (loss) attributable to non-controlling interest	29	1	62	(171)
Net Income	4,110	4,072	11,575	9,024
Payment Protection [Member]
Segment Reporting Information [Line Items]
Service and administrative fees	4,677	5,695	13,876	14,704
Ceding commission	11,122	7,027	25,396	21,428
Net Investment Income, Insurance Entity	744	801	2,219	2,636
Net realized gains on the sale of investments	(16)	1,196	(6)	2,423
Other income	52	18	172	138
Net earned premium	33,893	28,673	97,770	84,646
Net losses and loss adjustment expenses	(11,430)	(9,714)	(32,272)	(28,338)
Commissions	(21,548)	(17,926)	(61,479)	(53,766)
Segment Net Revenue, Payment Protection	17,494	15,770	45,676	43,871
Operating Expenses	9,563	8,445	26,205	25,857
Earnings before interest, taxes, depreciation and amortization	7,931	7,325	19,471	18,014
Depreciation and Amortization	863	927	2,577	3,204
Interest expense	1,359	1,053	3,342	3,622
Income before income taxes and non-controlling interest	5,709	5,345	13,552	11,188
BPO [Member]
Segment Reporting Information [Line Items]
Segment Net Revenue, BPO	4,951	3,833	13,565	11,088
Operating Expenses	3,836	2,717	10,320	8,164
Earnings before interest, taxes, depreciation and amortization	1,115	1,116	3,245	2,924
Depreciation and Amortization	494	307	1,495	824
Interest expense	294	96	820	258
Income before income taxes and non-controlling interest	327	713	930	1,842
Brokerage [Member]
Segment Reporting Information [Line Items]
Brokerage commissions and fees	8,411	8,611	27,295	25,686
Service and administrative fees, Brokerage Segement	428	597	1,349	2,249
Segment Net Revenue, Brokerage	8,839	9,208	28,644	27,935
Operating Expenses	7,268	7,491	21,577	21,837
Earnings before interest, taxes, depreciation and amortization	1,571	1,717	7,067	6,098
Depreciation and Amortization	641	650	2,287	1,683
Interest expense	372	757	1,105	1,982
Income before income taxes and non-controlling interest	558	310	3,675	2,433
Corporate [Member]
Segment Reporting Information [Line Items]
Operating Expenses	0	36	0	1,763
Earnings before interest, taxes, depreciation and amortization	0	(36)	0	(1,763)
Income before income taxes and non-controlling interest	$ 0	$ (36)	$ 0	$ (1,763)

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Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Related Party Transactions [Abstract]
Income recorded by the Company from related parties	$ 0	$ 0	$ 218	$ 0
Accounts receivable from related parties	$ 134		$ 134		$ 125

XML

Income Taxes (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2012
Income Tax Disclosure [Abstract]
Deferred Tax Liabilities, Net, Noncurrent	$ 0.2
Deferred Tax Assets, Tax Credit Carryforwards, Research	$ 0.7

XML

Segment Results

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Segment Results

The Company conducts business through three business segments: (i) Payment Protection; (ii) BPO; and (iii) Brokerage. The revenue for each segment is presented to reflect the operating characteristics of the segment. The Company allocates certain revenues and expenses to the segments. These items consist primarily of corporate-related income, transaction related costs, executive stock compensation and other overhead expenses. Segment assets are not presented to the Company's chief operating decision maker for operational decision-making and therefore are not disclosed in the accompanying table.

The Company measures the profitability of its business segments with the allocation of Corporate revenues and expenses and without taking into account amortization, depreciation, interest expense and income taxes. The Company refers to this financial performance measure as segment EBITDA (earnings before interest, taxes, depreciation and amortization). The Company's financial measure of segment EBITDA meets the definition of a Non-GAAP financial measure and is not a recognized term under U.S. GAAP, nor is it an alternative to the U.S. GAAP financial measures presented in this Form 10-Q. The Non-GAAP financial measure in this Form 10-Q should be used in addition to, but not as a substitute for, the U.S. GAAP financial measures presented elsewhere in this Form 10-Q. The Company believes that this Non-GAAP financial measure provides useful information to management, analysts and investors regarding financial and business trends relating to the Company's results of operations and financial condition. The variability of the Company's segment EBITDA is significantly affected by segment net revenues because a large portion of the Company's operating expenses are fixed. The Company's industry peers may also provide similar supplemental Non-GAAP financial measures, although they may not use the same or comparable terminology and may not make identical adjustments. 

The following table presents the Company's business segment results:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Segment Net Revenue
Payment Protection
Service and administrative fees	$	4,677		$	5,695		$	13,876		$	14,704
Ceding commission	11,122			7,027			25,396			21,428
Net investment income	744			801			2,219			2,636
Net realized (losses) gains on the sale of investments	(16		)	1,196			(6		)	2,423
Other income	52			18			172			138
Net earned premium	33,893			28,673			97,770			84,646
Net losses and loss adjustment expenses	(11,430		)	(9,714		)	(32,272		)	(28,338		)
Commissions	(21,548		)	(17,926		)	(61,479		)	(53,766		)
Total Payment Protection Net Revenue	17,494			15,770			45,676			43,871
BPO	4,951			3,833			13,565			11,088
Brokerage
Brokerage commissions and fees	8,411			8,611			27,295			25,686
Service and administrative fees	428			597			1,349			2,249
Total Brokerage	8,839			9,208			28,644			27,935
Total segment net revenue	31,284			28,811			87,885			82,894
Operating Expenses

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
Payment Protection	9,563		8,445			26,205		25,857
BPO	3,836		2,717			10,320		8,164
Brokerage	7,268		7,491			21,577		21,837
Corporate	—		36			—		1,763
Total operating expenses	20,667		18,689			58,102		57,621
EBITDA
Payment Protection	7,931		7,325			19,471		18,014
BPO	1,115		1,116			3,245		2,924
Brokerage	1,571		1,717			7,067		6,098
Corporate	—		(36		)	—		(1,763		)
Total EBITDA	10,617		10,122			29,783		25,273
Depreciation and Amortization
Payment Protection	863		927			2,577		3,204
BPO	494		307			1,495		824
Brokerage	641		650			2,287		1,683
Total depreciation and amortization	1,998		1,884			6,359		5,711
Interest Expense
Payment Protection	1,359		1,053			3,342		3,622
BPO	294		96			820		258
Brokerage	372		757			1,105		1,982
Total interest expense	2,025		1,906			5,267		5,862
Income before income taxes and non-controlling interest
Payment Protection	5,709		5,345			13,552		11,188
BPO	327		713			930		1,842
Brokerage	558		310			3,675		2,433
Corporate	—		(36		)	—		(1,763		)
Total income before income taxes and non-controlling interest	6,594		6,332			18,157		13,700
Income taxes	2,455		2,259			6,520		4,847
Less: net income (loss) attributable to non-controlling interest	29		1			62		(171		)
Net income	$	4,110	$	4,072		$	11,575	$	9,024

The following table reconciles segment information to the Company's Consolidated Statements of Income and provides a summary of other key financial information for each segment:

	For the Three Months Ended				For the Nine Months Ended
Reconciliation of Segment Net Revenue to Total Revenue and EBITDA to Net Income	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Segment Net Revenue
Payment Protection	$	17,494	$	15,770	$	45,676	$	43,871
BPO	4,951		3,833		13,565		11,088
Brokerage	8,839		9,208		28,644		27,935
Segment net revenues	31,284		28,811		87,885		82,894
Net losses and loss adjustment expenses	11,430		9,714		32,272		28,338
Commissions	21,548		17,926		61,479		53,766

	For the Three Months Ended					For the Nine Months Ended
Reconciliation of Segment Net Revenue to Total Revenue and EBITDA to Net Income	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
Total segment revenue	64,262		56,451			181,636		164,998
Operating Expenses
Payment Protection	9,563		8,445			26,205		25,857
BPO	3,836		2,717			10,320		8,164
Brokerage	7,268		7,491			21,577		21,837
Corporate	—		36			—		1,763
Total operating expenses	20,667		18,689			58,102		57,621
Net losses and loss adjustment expenses	11,430		9,714			32,272		28,338
Commissions	21,548		17,926			61,479		53,766
Total operating expenses before depreciation, amortization and interest expense	53,645		46,329			151,853		139,725
EBITDA
Payment Protection	7,931		7,325			19,471		18,014
BPO	1,115		1,116			3,245		2,924
Brokerage	1,571		1,717			7,067		6,098
Corporate	—		(36		)	—		(1,763		)
Total EBITDA	10,617		10,122			29,783		25,273
Depreciation and amortization
Payment Protection	863		927			2,577		3,204
BPO	494		307			1,495		824
Brokerage	641		650			2,287		1,683
Total depreciation and amortization	1,998		1,884			6,359		5,711
Interest Expense
Payment Protection	1,359		1,053			3,342		3,622
BPO	294		96			820		258
Brokerage	372		757			1,105		1,982
Total interest expense	2,025		1,906			5,267		5,862
Income before income taxes and non-controlling interest
Payment Protection	5,709		5,345			13,552		11,188
BPO	327		713			930		1,842
Brokerage	558		310			3,675		2,433
Corporate	—		(36		)	—		(1,763		)
Total income before income taxes and non-controlling interest	6,594		6,332			18,157		13,700
Income taxes	2,455		2,259			6,520		4,847
Less: net income (loss) attributable to non-controlling interest	29		1			62		(171		)
Net income	$	4,110	$	4,072		$	11,575	$	9,024

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Earnings Per Share Level 4 (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net Income	$ 4,110	$ 4,072	$ 11,575	$ 9,024
Total average basic common shares outstanding	19,531,694	20,404,441	19,705,105	20,355,057
Effect of dilutive stock options and restricted stock awards	931,544	809,924	914,979	1,020,127
Total average diluted common shares outstanding	20,463,238	21,214,365	20,620,084	21,375,184
Basic	$ 0.21	$ 0.20	$ 0.59	$ 0.44
Diluted	$ 0.20	$ 0.19	$ 0.56	$ 0.42
Weighted average anti-dilutive common shares	567,995	512,298	431,446	283,762

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Segment Results Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Segment Net Revenue
Payment Protection
Service and administrative fees	$	4,677		$	5,695		$	13,876		$	14,704
Ceding commission	11,122			7,027			25,396			21,428
Net investment income	744			801			2,219			2,636
Net realized (losses) gains on the sale of investments	(16		)	1,196			(6		)	2,423
Other income	52			18			172			138
Net earned premium	33,893			28,673			97,770			84,646
Net losses and loss adjustment expenses	(11,430		)	(9,714		)	(32,272		)	(28,338		)
Commissions	(21,548		)	(17,926		)	(61,479		)	(53,766		)
Total Payment Protection Net Revenue	17,494			15,770			45,676			43,871
BPO	4,951			3,833			13,565			11,088
Brokerage
Brokerage commissions and fees	8,411			8,611			27,295			25,686
Service and administrative fees	428			597			1,349			2,249
Total Brokerage	8,839			9,208			28,644			27,935
Total segment net revenue	31,284			28,811			87,885			82,894
Operating Expenses

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
Payment Protection	9,563		8,445			26,205		25,857
BPO	3,836		2,717			10,320		8,164
Brokerage	7,268		7,491			21,577		21,837
Corporate	—		36			—		1,763
Total operating expenses	20,667		18,689			58,102		57,621
EBITDA
Payment Protection	7,931		7,325			19,471		18,014
BPO	1,115		1,116			3,245		2,924
Brokerage	1,571		1,717			7,067		6,098
Corporate	—		(36		)	—		(1,763		)
Total EBITDA	10,617		10,122			29,783		25,273
Depreciation and Amortization
Payment Protection	863		927			2,577		3,204
BPO	494		307			1,495		824
Brokerage	641		650			2,287		1,683
Total depreciation and amortization	1,998		1,884			6,359		5,711
Interest Expense
Payment Protection	1,359		1,053			3,342		3,622
BPO	294		96			820		258
Brokerage	372		757			1,105		1,982
Total interest expense	2,025		1,906			5,267		5,862
Income before income taxes and non-controlling interest
Payment Protection	5,709		5,345			13,552		11,188
BPO	327		713			930		1,842
Brokerage	558		310			3,675		2,433
Corporate	—		(36		)	—		(1,763		)
Total income before income taxes and non-controlling interest	6,594		6,332			18,157		13,700
Income taxes	2,455		2,259			6,520		4,847
Less: net income (loss) attributable to non-controlling interest	29		1			62		(171		)
Net income	$	4,110	$	4,072		$	11,575	$	9,024

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

The following table reconciles segment information to the Company's Consolidated Statements of Income and provides a summary of other key financial information for each segment:

	For the Three Months Ended				For the Nine Months Ended
Reconciliation of Segment Net Revenue to Total Revenue and EBITDA to Net Income	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Segment Net Revenue
Payment Protection	$	17,494	$	15,770	$	45,676	$	43,871
BPO	4,951		3,833		13,565		11,088
Brokerage	8,839		9,208		28,644		27,935
Segment net revenues	31,284		28,811		87,885		82,894
Net losses and loss adjustment expenses	11,430		9,714		32,272		28,338
Commissions	21,548		17,926		61,479		53,766

	For the Three Months Ended					For the Nine Months Ended
Reconciliation of Segment Net Revenue to Total Revenue and EBITDA to Net Income	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
Total segment revenue	64,262		56,451			181,636		164,998
Operating Expenses
Payment Protection	9,563		8,445			26,205		25,857
BPO	3,836		2,717			10,320		8,164
Brokerage	7,268		7,491			21,577		21,837
Corporate	—		36			—		1,763
Total operating expenses	20,667		18,689			58,102		57,621
Net losses and loss adjustment expenses	11,430		9,714			32,272		28,338
Commissions	21,548		17,926			61,479		53,766
Total operating expenses before depreciation, amortization and interest expense	53,645		46,329			151,853		139,725
EBITDA
Payment Protection	7,931		7,325			19,471		18,014
BPO	1,115		1,116			3,245		2,924
Brokerage	1,571		1,717			7,067		6,098
Corporate	—		(36		)	—		(1,763		)
Total EBITDA	10,617		10,122			29,783		25,273
Depreciation and amortization
Payment Protection	863		927			2,577		3,204
BPO	494		307			1,495		824
Brokerage	641		650			2,287		1,683
Total depreciation and amortization	1,998		1,884			6,359		5,711
Interest Expense
Payment Protection	1,359		1,053			3,342		3,622
BPO	294		96			820		258
Brokerage	372		757			1,105		1,982
Total interest expense	2,025		1,906			5,267		5,862
Income before income taxes and non-controlling interest
Payment Protection	5,709		5,345			13,552		11,188
BPO	327		713			930		1,842
Brokerage	558		310			3,675		2,433
Corporate	—		(36		)	—		(1,763		)
Total income before income taxes and non-controlling interest	6,594		6,332			18,157		13,700
Income taxes	2,455		2,259			6,520		4,847
Less: net income (loss) attributable to non-controlling interest	29		1			62		(171		)
Net income	$	4,110	$	4,072		$	11,575	$	9,024

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Statutory Reporting and Dividend Restrictions Level 4 (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Statutory Accounting Practices [Line Items]
Cash Dividends Paid to Parent Company by Consolidated Subsidiaries	$ 285	$ 8,388
Combined statutory capital and surplus of the Company's insurance subsidiaries	54,157	50,230
Required minimum statutory capital and surplus	15,300	15,300
Amount available for ordinary dividends of the Company's insurance subsidiaries	2,060	2,344
Ordinary dividends paid to the parent compary by insurance company subsidiaries [Member]
Statutory Accounting Practices [Line Items]
Cash Dividends Paid to Parent Company by Consolidated Subsidiaries	285	7,558
Extraordinary dividends paid to the parent compary by insurance company subsidiaries [Member]
Statutory Accounting Practices [Line Items]
Cash Dividends Paid to Parent Company by Consolidated Subsidiaries	$ 0	$ 830

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Reinsurance Receivables Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Reinsurance Disclosures [Abstract]

Premiums Written and Earned [Table Text Block]

The effects of reinsurance on premiums written and earned and losses and loss adjustment expenses ("LAE") incurred are presented in the tables below:

Premiums	For the Three Months Ended												For the Nine Months Ended
	September 30, 2012						September 30, 2011						September 30, 2012						September 30, 2011
	Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct and assumed	$	100,409		$	98,287		$	94,432		$	80,982		$	272,317		$	269,132		$	241,979		$	235,420
Ceded	(65,935		)	(64,394		)	(61,361		)	(52,309		)	(169,971		)	(171,362		)	(154,227		)	(150,774		)
Net	$	34,474		$	33,893		$	33,071		$	28,673		$	102,346		$	97,770		$	87,752		$	84,646

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

Losses and LAE incurred	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Direct and assumed	$	23,069		$	21,589		$	66,198		$	60,752
Ceded	(11,639		)	(11,875		)	(33,926		)	(32,414		)
Net losses and LAE incurred	$	11,430		$	9,714		$	32,272		$	28,338

Components of Reinsurance Receivable [Table Text Block]

The following table reflects the components of the reinsurance receivables:	At
	September 30, 2012		December 31, 2011
Prepaid reinsurance premiums (1):
Life	$	53,451	$	59,545
Accident and health	33,257		30,759
Property	81,427		80,758
Total	168,135		171,062
Ceded claim reserves:
Life	1,508		1,794
Accident and health	8,966		9,896
Property	8,493		7,743
Total ceded claim reserves recoverable	18,967		19,433
Other reinsurance settlements recoverable	10,082		4,245
Reinsurance receivables	$	197,184	$	194,740
(1)  Including policyholder account balances ceded.

Schedule of Ceded Credit Risk by Reinsurer [Table Text Block]

The following table shows the amount included in reinsurance receivable that is recoverable from three unrelated insurers:

	At
	September 30, 2012		December 31, 2011
Total recoverable from three unrelated reinsurers	$	124,311	$	124,160

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Business Acquisitions and Dispositions Level 4 (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Business Acquisition [Line Items]
Cash	$ 11,284		$ 31,339	$ 23,114	$ 43,389
Other receivables	15,708		9,103
Property and equipment, net	17,227		14,666
Other Intangible Assets, Net	50,803
Other assets	6,452		6,070
Deferred Revenue	(19,164)		(20,781)
Acquistion of eReinsure [Member]
Business Acquisition [Line Items]
Cash	3,694
Investments	1,212
Other receivables	1,828
Property and equipment, net	142
Other Intangible Assets, Net	13,908
Other assets	54
Deferred Tax Assets, Net	0
Accrued expenses and accounts payable	(2,801)
Commissions Payable	0
Deferred Revenue	(835)
Net deferred tax liability	(1,783)
Net Assets Acquired	15,419
Purchase Consideration	38,931	[1]
Goodwill	23,512
Acquisition of PBG [Member]
Business Acquisition [Line Items]
Cash	38
Investments	0
Other receivables	0
Property and equipment, net	65
Other Intangible Assets, Net	3,650
Other assets	22
Deferred Tax Assets, Net	127
Accrued expenses and accounts payable	(304)
Commissions Payable	(60)
Deferred Revenue	0
Net deferred tax liability	0
Net Assets Acquired	3,538
Purchase Consideration	7,607
Goodwill	$ 4,069

[1] Reflects a purchase price reduction of $0.3 million for the final eReinsure working capital adjustments.

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Reinsurance Receivables Level 4 Components of Reinsurance Receivables (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Reinsurance Recoverables	$ 168,135	$ 171,062
Other Reinsurance Settlements Recoverable	10,082	4,245
Reinsurance Receivables	197,184	194,740
Life [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Reinsurance Recoverables	53,451	59,545
Ceded claim reserves recoverable	1,508	1,794
Accident and Health [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Reinsurance Recoverables	33,257	30,759
Ceded claim reserves recoverable	8,966	9,896
Property [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Reinsurance Recoverables	81,427	80,758
Ceded claim reserves recoverable	8,493	7,743
Ceded claim reserves [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Ceded claim reserves recoverable	$ 18,967	$ 19,433

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Investments Level 4 Investments in a unrealized loss position for <> 12 Months, current period (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Obligations of the U.S. Treasury and U.S. Government agencies [Member}
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	$ 345	$ 1,902
Unrealized Losses, Less than Twelve Months	(1)	(2)
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	0
Unrealized Losses,Twelve months or Greater	0	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	345	1,902
Total Unrealized Losses	(1)	(2)
Total, Number of Securities	0	0
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	0	486
Unrealized Losses, Less than Twelve Months	0	(1)
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	478
Unrealized Losses,Twelve months or Greater	0	(4)
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	0	964
Total Unrealized Losses	0	(5)
Total, Number of Securities	0	0
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	10,189	16,861
Unrealized Losses, Less than Twelve Months	(29)	(426)
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	167	0
Unrealized Losses,Twelve months or Greater	(34)	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	10,356	16,861
Total Unrealized Losses	(63)	(426)
Total, Number of Securities	0	0
Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	0	0
Unrealized Losses, Less than Twelve Months	0	0
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	0
Unrealized Losses,Twelve months or Greater	0	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	0	0
Total Unrealized Losses	0	0
Total, Number of Securities	0	0
Asset-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	0	0
Unrealized Losses, Less than Twelve Months	0	0
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	0
Unrealized Losses,Twelve months or Greater	0	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	0	0
Total Unrealized Losses	0	0
Total, Number of Securities	0	0
Total Fixed Maturity Securites [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	10,534	19,249
Unrealized Losses, Less than Twelve Months	(30)	(429)
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	167	478
Unrealized Losses,Twelve months or Greater	(34)	(4)
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	10,701	19,727
Total Unrealized Losses	(64)	(433)
Total, Number of Securities	0	0
Common Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	39	83
Unrealized Losses, Less than Twelve Months	(5)	(17)
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	0
Unrealized Losses,Twelve months or Greater	0	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	39	83
Total Unrealized Losses	(5)	(17)
Total, Number of Securities	0	0
Preferred Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	0	0
Unrealized Losses, Less than Twelve Months	0	0
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	0
Unrealized Losses,Twelve months or Greater	0	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	0	0
Total Unrealized Losses	0	0
Total, Number of Securities	0	0
Total Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than Twelve Months	39	83
Unrealized Losses, Less than Twelve Months	(5)	(17)
Number of securities, Less than Twelve Months	0	0
Fair Value, Twelve months or Greater	0	0
Unrealized Losses,Twelve months or Greater	0	0
Number of securities,Twelve months or Greater	0	0
Total, Fair Value	39	83
Total Unrealized Losses	(5)	(17)
Total, Number of Securities	$ 0	$ 0

XML

Recently Issued Accounting Standards Level 4 Balance Sheet Adjustments(details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011		Dec. 31, 2010
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred acquisition costs	$ 56,903	$ 55,467		$ 6,400
Total assets	629,801	604,977
Deferred income taxes	26,023	24,614		2,300
Total liabilities	492,518	477,393
Retained earnings	46,725	35,150		4,200
Non-controlling interest	580	511
Total stockholders' equity	137,283	127,584
Total liabilities and stockholders' equity	629,801	604,977
As Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred acquisition costs		62,687	[1]
Total assets		612,197	[1]
Deferred income taxes		27,141	[1]
Total liabilities		479,920	[1]
Retained earnings		39,822	[1]
Non-controlling interest		532	[1]
Total stockholders' equity		132,277	[1]
Total liabilities and stockholders' equity		612,197	[1]
Effect of the Change [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred acquisition costs		(7,220)
Total assets		(7,220)
Deferred income taxes		(2,527)
Total liabilities		(2,527)
Retained earnings		(4,672)
Non-controlling interest		(21)
Total stockholders' equity		(4,693)
Total liabilities and stockholders' equity		(7,220)
As Restated [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred acquisition costs		55,467
Total assets		604,977
Deferred income taxes		24,614
Total liabilities		477,393
Retained earnings		35,150
Non-controlling interest		511
Total stockholders' equity		127,584
Total liabilities and stockholders' equity		$ 604,977

[1] Includes the business acquisition valuation measurement period adjustments described in Notes 6, 7 and 8.

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Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Presentation and Significant Accounting Policies [Abstract]

Basis of Accounting [Text Block]

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements of Fortegra have been prepared in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP") promulgated by the Financial Accounting Standards Board ("FASB"), Accounting Standards Codification ("ASC" or "the guidance") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company's Annual Report.

The interim financial statements in this Form 10-Q have not been audited. In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, including normal recurring adjustments and the adjustments for the retrospective adoption of the new accounting guidance for Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts as described in Note 3, necessary to present fairly Fortegra's financial position, results of operations and other comprehensive income for each of the interim periods presented. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2012.

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Investments Level 4 Gross Proceeds from sales of available-for-sale investments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2010	Sep. 30, 2012	Sep. 30, 2011
Investments [Abstract]
Gross Proceeds from Sales	$ 503	$ 11,143	$ 4,980	$ 33,663

XML

Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Schedule of Related Party Transactions [Table Text Block]

The following table details the amounts recorded on the Company's Consolidated Balance Sheets and Consolidated Income Statement resulting from related party transactions:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Income recorded by the Company from related parties	$	—	$	—	$	218	$	—
					At
					September 30, 2012		December 31, 2011
Accounts receivable from related parties					$	134	$	125

XML

Summary of Significant Accounting Policies Change in Accounting Estimate (Tables)

3 Months Ended

Sep. 30, 2012

SOSAP change in accounting estimate [Abstract]

Schedule of Change in Accounting Estimate [Table Text Block]

	For the Three and Nine Months Ended
	September 30, 2012
Revenues:
Net earned premium	$	1,845
Ceding commission	2,135
Net increase to total revenues from the change in accounting estimate	3,980
Expenses:
Commissions	2,739
Other operating expenses	(268		)
Net increase to total expenses from the change in accounting estimate	2,471
Net increase to income before income taxes from the change in accounting estimate	1,509
Income taxes	533
Net increase to net income from the change in accounting estimate	$	976
Increase to earnings per share from the change in accounting estimate:
Basic	$	0.05
Diluted	$	0.05

XML

Summary of Significant Accounting Policies Level 2 (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Nature of Operations [Text Block]

Nature of Operations

Fortegra Financial Corporation (Traded on the New York Stock Exchange under the symbol: FRF), including its subsidiaries ("Fortegra" or the "Company"), is a diversified insurance services company headquartered in Jacksonville, Florida that provides distribution and administration services on a wholesale basis to insurance companies, insurance brokers and agents and other financial services companies primarily in the United States. In 2008, the Company changed its name from Life of the South Corporation to Fortegra Financial Corporation. The Company was incorporated in 1981 in the State of Georgia and re-incorporated in the State of Delaware in 2010. Most of the Company's business is generated through networks of small to mid-sized community and regional banks, small loan companies and automobile dealerships. The Consolidated Financial Statements include the Company and its majority-owned and controlled subsidiaries, including:

• LOTS Intermediate Co. ("LOTS IM")

• Bliss and Glennon, Inc. ("B&G")

• CRC Reassurance Company, Ltd. ("CRC")

• Insurance Company of the South ("ICOTS")

• Life of the South Insurance Company ("LOTS") and its subsidiary, Bankers Life of Louisiana ("Bankers Life")

• LOTS Reassurance Company ("LOTS RE")

• LOTSolutions, Inc.

• Lyndon Southern Insurance Company ("Lyndon Southern")

• Southern Financial Life Insurance Company ("SFLAC")

• South Bay Acceptance Corporation ("South Bay")

• Continental Car Club, Inc. ("Continental")

• United Motor Club of America, Inc. ("United")

• Auto Knight Motor Club, Inc. ("Auto Knight")

• eReinsure.com, Inc. ("eReinsure")

• Pacific Benefits Group Northwest, LLC ("PBG")

• Magna Insurance Company ("Magna")

The Company operates in three business segments: (i) Payment Protection, (ii) Business Process Outsourcing ("BPO") and (iii) Brokerage. Payment Protection specializes in protecting lenders and their consumers from death, disability or other events that could otherwise impair their ability to repay a debt and also offers warranty and service contracts and motor club solutions. BPO provides an assortment of administrative services tailored to insurance and other financial services companies through a virtual insurance company platform. Brokerage uses a pure wholesale sell-through model to sell specialty casualty and surplus lines insurance and also provides web-hosted applications used by insurers, reinsurers and reinsurance brokers for the global reinsurance market.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The unaudited Consolidated Financial Statements include the accounts of Fortegra Financial Corporation and its majority-owned and controlled subsidiaries. All material intercompany account balances and transactions have been eliminated. The third-party ownership of 15% of the common stock of SFLAC has been reflected as non-controlling interest on the Consolidated Balance Sheets. Income (loss) attributable to SFLAC's minority shareholders has been reflected on the Consolidated Statements of Income as income (loss) attributable to non-controlling interest and on the Consolidated Statements of Comprehensive Income as comprehensive income (loss) attributable to non-controlling interest.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income (Loss)

Comprehensive income (loss) includes both net income and other items of comprehensive income comprised of unrealized gains and losses on investment securities classified as available-for-sale and unrealized gains and losses on the interest rate swap.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

Preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comparability of Prior Year Financial Data, Policy [Policy Text Block]

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation, which had no material impact on net income, comprehensive income or loss, net cash provided by operating activities or stockholders' equity, except as disclosed in Note 3.

Accounting Changes and Error Correction [Policy Text Block]

Immaterial Correction of Prior Period Errors

Prior to the filing of the Company’s Form 10-Q for the three months ended September 30, 2012, the Company identified errors related to the purchase accounting adjustments for the April 2009 acquisition of B&G and the 2011 acquisition of Auto Knight. As a result, the Company’s historical balances for goodwill, property and equipment and deferred taxes were incorrectly reported in prior period filings for the years ending December 31, 2009, 2010 and 2011, respectively. Management evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that the errors were immaterial to each of the prior periods noted above.

As a result, in this Form 10-Q, the Consolidated Balance Sheet data as of December 31, 2011 has been revised to reflect the correction of the error associated with the Auto Knight acquisition. This correction increased goodwill by $0.6 million and increased deferred income tax liabilities by $0.6 million.

In addition, the Consolidated Balance Sheet data as of December 31, 2009 has been revised to reflect the correction of the error associated with the B&G acquisition. This correction increased goodwill by $0.4 million, decreased deferred income tax liabilities by $0.3 million and decreased property and equipment by $0.7 million. The revised financial data will be reflected in future filings containing Consolidated Balance Sheet information for the year ending December 31, 2009.

Change in Accounting Estimate - Unearned Premium Reserves for the Payment Protection Segment

Prior to the three months ended September 30, 2012, the Company's method of estimating unearned premium reserves in relation to the loss patterns and the related recognition of income for certain types of credit property and vendor single interest payment protection products was based on the pro-rata method.  The use of the pro-rata method was based on the best information available at the time the Company's financial statements were prepared.

During the past two years the Company has increased the volume of business related to these product types, thereby increasing the volume of policy and claims data specific to the Company's product types. During the three months ended September 30, 2012, the Company determined it had accumulated a sufficient volume of policy and claims data to be able to perform an actuarial analysis in order to determine the preferable estimation approach. As a result of the analysis of the recently collected additional data, the Company has gained better insight into its product loss patterns and can provide improved judgment and estimation to more accurately calculate the unearned premium reserves and the associated recognition of income. Upon completion of the analysis, Management determined that the Rule of 78s applied on a daily basis provides a more accurate representation of historical loss patterns and the recognition of the related income; as such, the estimation method was changed. The change in approach has been accounted for as a change in accounting estimate that is effected by a change in accounting principle and is justifiable in that it is the preferable approach for income recognition based on the Company's actuarial study.  This change in accounting estimate was applied prospectively in accordance with ASC 250-10-45-18. Summarized below is the effect of the change in accounting estimate on the Consolidated Statement of Income for the following periods:

	For the Three and Nine Months Ended
	September 30, 2012
Revenues:
Net earned premium	$	1,845
Ceding commission	2,135
Net increase to total revenues from the change in accounting estimate	3,980
Expenses:
Commissions	2,739
Other operating expenses	(268		)
Net increase to total expenses from the change in accounting estimate	2,471
Net increase to income before income taxes from the change in accounting estimate	1,509
Income taxes	533
Net increase to net income from the change in accounting estimate	$	976
Increase to earnings per share from the change in accounting estimate:
Basic	$	0.05
Diluted	$	0.05

Earnings Per Share, Policy [Policy Text Block]

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding adjusted to include the effect of potentially dilutive common shares, which includes outstanding stock options and non-vested restricted stock awards, using the treasury stock method. Potentially dilutive common shares for which the exercise price was greater than the average market price of common shares are excluded from the computation of diluted earnings per share, as the effect would be anti-dilutive.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

The Company's investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as Variable Interest Entities ("VIEs") and the Company is the primary beneficiary, in which case the investments are consolidated in accordance with ASC 810, "Consolidation." Investments that do not meet the above criteria are accounted for under the cost method.

Business Combinations Policy [Policy Text Block]

The values of certain assets and liabilities acquired in acquisitions are preliminary in nature, and are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and loss reserves. The valuations will be finalized within one year of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill. A change to the acquisition date value of the identifiable net assets during the measurement period (up to one year from the acquisition date) affects the amount of the purchase price allocated to goodwill. Changes to the purchase price allocation are adjusted retrospectively in the consolidated financial statements.

Derivatives, Policy [Policy Text Block]

Cash Flow Hedge

The Company uses interest rate swaps as part of its risk management strategy to manage interest rate risk and cash flow risk that may arise in connection with the variable interest rate provision of the Company's preferred trust securities. The Company accounts for its derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, which requires all derivative instruments to be carried at fair value on the balance sheet.

Changes in fair value associated with the effective portion of a derivative instrument designated as a qualifying cash flow hedge are recognized initially in other comprehensive income (loss). When the cash flows for which the derivative is hedging materialize and are recorded in income or expense, the associated gain or (loss) from the hedging derivative previously recorded in accumulated other comprehensive income (loss) is recognized in earnings. If a cash flow hedge is de-designated because it is no longer highly effective, or if the hedge relationship is terminated, the cumulative gain or loss on the hedging derivative to that date will continue to be reported in accumulated other comprehensive income (loss) unless the hedged forecasted transaction is no longer expected to occur, at which time the cumulative gain or loss is recorded into earnings.

The Company records the fair value of the derivative instrument in other assets or other liabilities. To the extent a derivative is an effective hedge of the cash flow risk of the hedged debt obligation, any change in the derivative's fair value is recorded in accumulated other comprehensive income ("AOCI"), net of income tax. To the extent the derivative is an ineffective hedge, that portion of the change in fair value is recorded in other operating expenses or interest expense as appropriate. The Company is not a party to leveraged derivatives and does not enter into derivative financial instruments for trading or speculative purposes.

Fair Value of Financial Instruments, Policy [Policy Text Block]

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents: The estimated fair value of cash and cash equivalents approximates their carrying value.

Fixed maturity securities: Fair values were obtained from market value quotations provided by an independent pricing service.

Equity securities: The fair values of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service. The fair values of non-publicly traded common stocks were based on prices obtained from an independent pricing service.

Notes receivable: The carrying amounts approximate fair value because the interest rates charged approximate current market rates for similar credit risks. These values are net of allowance for doubtful accounts.

Accounts and premiums receivable, net, and other receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets.

Short-term investments:The carrying amounts approximate fair value because of the short maturities of these instruments.

Notes payable and preferred trust securities: The carrying amounts approximate fair value because the applicable interest rates approximate current rates offered to the Company for similar instruments.

Interest rate swap: The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active

markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted

prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable

for the asset or liability and market-corroborated inputs.

Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value

measurement. These unobservable inputs are derived from the Company's internal calculations, estimates and assumptions and

require significant management judgment or estimation.

The Company's policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer.

Segment Reporting, Policy [Policy Text Block]

The Company conducts business through three business segments: (i) Payment Protection; (ii) BPO; and (iii) Brokerage. The revenue for each segment is presented to reflect the operating characteristics of the segment. The Company allocates certain revenues and expenses to the segments. These items consist primarily of corporate-related income, transaction related costs, executive stock compensation and other overhead expenses. Segment assets are not presented to the Company's chief operating decision maker for operational decision-making and therefore are not disclosed in the accompanying table.

The Company measures the profitability of its business segments with the allocation of Corporate revenues and expenses and without taking into account amortization, depreciation, interest expense and income taxes. The Company refers to this financial performance measure as segment EBITDA (earnings before interest, taxes, depreciation and amortization). The Company's financial measure of segment EBITDA meets the definition of a Non-GAAP financial measure and is not a recognized term under U.S. GAAP, nor is it an alternative to the U.S. GAAP financial measures presented in this Form 10-Q. The Non-GAAP financial measure in this Form 10-Q should be used in addition to, but not as a substitute for, the U.S. GAAP financial measures presented elsewhere in this Form 10-Q. The Company believes that this Non-GAAP financial measure provides useful information to management, analysts and investors regarding financial and business trends relating to the Company's results of operations and financial condition. The variability of the Company's segment EBITDA is significantly affected by segment net revenues because a large portion of the Company's operating expenses are fixed. The Company's industry peers may also provide similar supplemental Non-GAAP financial measures, although they may not use the same or comparable terminology and may not make identical adjustments. 

The following table presents the Company's business segment results:

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

The Company reviewed all material subsequent events that occurred up to the date the Company's Consolidated Financial Statements were issued to determine whether any event required recognition or disclosure in the financial statements and/or disclosure in the notes thereto. For more information, please see the note, "Subsequent Events."

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Other Intangible Assets Level 4 Other Intangible Assets Rollforward (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011 Final valuation adjustments as required under ASC 805 for eReinsure [Member]	Dec. 31, 2011 Final valuation adjustments as required under ASC 805 for PBG [Member]	Dec. 31, 2011 Scenario, Actual [Member]	Dec. 31, 2011 Balance as originally reported at December 31, 2011 [Member]
Indefinite-lived Intangible Assets [Line Items]
Other Intangible Assets, Net							$ 54,410	$ 47,022
Finite-Lived Intangible Assets, Purchase Accounting Adjustments					4,508	2,880
Finite-lived Intangible Assets Acquired			168
Less: Amortization Expense	1,127	998	3,775	3,428
Other Intangible Assets, Net	$ 50,803		$ 50,803				$ 54,410	$ 47,022

XML

Summary of Significant Accounting Policies Level 4 (Details)	Sep. 30, 2012
Noncontrolling Interest [Line Items]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	15.00%

XML

Recently Issued Accounting Standards Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	December 31, 2011
Consolidated Balance Sheets	As Previously Reported (1)		Effect of the Change			As Restated
Assets
Deferred acquisition costs	$	62,687	$	(7,220	)	$	55,467
Total assets	$	612,197	$	(7,220	)	$	604,977
Liabilities
Deferred income taxes	$	27,141	$	(2,527	)	$	24,614
Total Liabilities	479,920		(2,527		)	477,393
Stockholders' Equity
Retained earnings	39,822		(4,672		)	35,150
Non-controlling interest	532		(21		)	511
Total Stockholders' Equity	132,277		(4,693		)	127,584
Total Liabilities and Stockholders' Equity	$	612,197	(7,220		)	$	604,977

(1) - Includes the business acquisition valuation measurement period adjustments described in Notes 6, 7 and 8.

	For the Three Months Ended							For the Nine Months Ended
	September 30, 2011							September 30, 2011
Consolidated Statements of Income	As Previously Reported		Effect of the Change			As Restated		As Previously Reported			Effect of the Change			As Restated
Revenues:
Total Revenues	$	56,451	$	—		$	56,451	$	164,998		$	—		$	164,998
Expenses:
Net losses and loss adjustment expenses	9,714		—			9,714		28,338			—			28,338
Commissions	17,926		—			17,926		53,766			—			53,766
Personnel costs	10,945		—			10,945		33,365			—			33,365
Other operating expenses	7,171		96			7,267		23,331			448			23,779
Depreciation	886		—			886		2,283			—			2,283
Amortization of intangibles	998		—			998		3,428			—			3,428
Interest expense	1,906		—			1,906		5,862			—			5,862
Loss on sale of subsidiary	477					477		477						477
Total expenses	50,023		96			50,119		150,850			448			151,298
Income before income taxes and non-controlling interest	6,428		(96		)	6,332		14,148			(448		)	13,700
Income taxes	2,292		(33		)	2,259		5,003			(156		)	4,847
Income before non-controlling interest	4,136		(63		)	4,073		9,145			(292		)	8,853
Less: net (loss) income attributable to non-controlling interest	1		—			1		(171		)	—			(171		)
Net income	$	4,135	$	(63	)	$	4,072	$	9,316		$	(292	)	$	9,024
Earnings per share:
Basic	$	0.20	$	—		$	0.20	$	0.46		$	(0.02	)	$	0.44
Diluted	$	0.19	$	—		$	0.19	$	0.44		$	(0.02	)	$	0.42

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Earnings Per Share Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Earnings per share is calculated as follows:	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Numerator for both basic and diluted earnings per share:
Net income	$	4,110	$	4,072	$	11,575	$	9,024
Denominator:
Total average basic common shares outstanding	19,531,694		20,404,441		19,705,105		20,355,057
Effect of dilutive stock options and restricted stock awards	931,544		809,924		914,979		1,020,127
Total average diluted common shares outstanding	20,463,238		21,214,365		20,620,084		21,375,184
Earnings per share-basic	$	0.21	$	0.20	$	0.59	$	0.44
Earnings per share-diluted	$	0.20	$	0.19	$	0.56	$	0.42
Weighted average anti-dilutive common shares	567,995		512,298		431,446		283,762

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Nature of Operations

9 Months Ended

Sep. 30, 2012

Nature of Operations [Abstract]

Nature of Operations [Text Block]

Nature of Operations

Fortegra Financial Corporation (Traded on the New York Stock Exchange under the symbol: FRF), including its subsidiaries ("Fortegra" or the "Company"), is a diversified insurance services company headquartered in Jacksonville, Florida that provides distribution and administration services on a wholesale basis to insurance companies, insurance brokers and agents and other financial services companies primarily in the United States. In 2008, the Company changed its name from Life of the South Corporation to Fortegra Financial Corporation. The Company was incorporated in 1981 in the State of Georgia and re-incorporated in the State of Delaware in 2010. Most of the Company's business is generated through networks of small to mid-sized community and regional banks, small loan companies and automobile dealerships. The Consolidated Financial Statements include the Company and its majority-owned and controlled subsidiaries, including:

• LOTS Intermediate Co. ("LOTS IM")

• Bliss and Glennon, Inc. ("B&G")

• CRC Reassurance Company, Ltd. ("CRC")

• Insurance Company of the South ("ICOTS")

• Life of the South Insurance Company ("LOTS") and its subsidiary, Bankers Life of Louisiana ("Bankers Life")

• LOTS Reassurance Company ("LOTS RE")

• LOTSolutions, Inc.

• Lyndon Southern Insurance Company ("Lyndon Southern")

• Southern Financial Life Insurance Company ("SFLAC")

• South Bay Acceptance Corporation ("South Bay")

• Continental Car Club, Inc. ("Continental")

• United Motor Club of America, Inc. ("United")

• Auto Knight Motor Club, Inc. ("Auto Knight")

• eReinsure.com, Inc. ("eReinsure")

• Pacific Benefits Group Northwest, LLC ("PBG")

• Magna Insurance Company ("Magna")

The Company operates in three business segments: (i) Payment Protection, (ii) Business Process Outsourcing ("BPO") and (iii) Brokerage. Payment Protection specializes in protecting lenders and their consumers from death, disability or other events that could otherwise impair their ability to repay a debt and also offers warranty and service contracts and motor club solutions. BPO provides an assortment of administrative services tailored to insurance and other financial services companies through a virtual insurance company platform. Brokerage uses a pure wholesale sell-through model to sell specialty casualty and surplus lines insurance and also provides web-hosted applications used by insurers, reinsurers and reinsurance brokers for the global reinsurance market.

XML

Variable Interest Entity Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]

Schedule of Variable Interest Entities [Table Text Block]

The Company's maximum exposure to loss in the VIE is limited to the outstanding balance of the note receivable, which is presented in the table below:

	At
	September 30, 2012		December 31, 2011
The Company's maximum exposure to loss in the VIE	$	1,139	$	1,142

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Fair Value of Financial Instruments Level 3 (Tables)

3 Months Ended

9 Months Ended

Sep. 30, 2012

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

The carrying and fair values of financial instruments are as follows:	At
	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	11,284	$	11,284	$	31,339	$	31,339
Fixed maturity securities	110,833		110,833		93,509		93,509
Equity securities	6,085		6,085		1,219		1,219
Notes receivable	4,281		4,281		3,603		3,603
Accounts and premiums receivable, net	25,056		25,056		20,172		20,172
Other receivables	15,708		15,708		9,103		9,103
Short-term investments	970		970		1,070		1,070
Total financial assets	$	174,217	$	174,217	$	160,015	$	160,015
Financial liabilities:
Notes payable	$	71,168	$	71,168	$	73,000	$	73,000
Preferred trust securities	35,000		35,000		35,000		35,000
Interest rate swap	4,599		4,599		3,601		3,601
Total financial liabilities	$	110,767	$	110,767	$	111,601	$	111,601

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following tables set forth the Company's financial assets and liabilities accounted for at fair value by level within the fair value hierarchy at:

September 30, 2012			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	110,833	$	—	$	110,781	$	52
Equity securities	6,085		4,960		46		1,079
Short-term investments	970		970		—		—
Total assets	$	117,888	$	5,930	$	110,827	$	1,131
Liabilities
Interest rate swap	$	4,599	$	—	$	4,599	$	—

December 31, 2011			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	93,509	$	—	$	93,433	$	76
Equity securities	1,219		91		—		1,128
Short-term investments	1,070		1,070		—		—
Total Assets	$	95,798	$	1,161	$	93,433	$	1,204
Liabilities
Interest rate swap	$	3,601	$	—	$	3,601	$	—

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table summarizes the changes in Level 3 assets measured at fair value:

	For the Nine Months Ended
	September 30, 2012			September 30, 2011
Beginning balance, January 1,	$	1,204		$	1,425
Total investment gains or losses (realized/unrealized):
Included in net income	—			372
Included in other comprehensive (loss) income	(19		)	(148		)
Sales	(47		)	(607		)
Transfers (out of) into Level 3	(7		)	45
Ending balance, September 30,	$	1,131		$	1,087

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Goodwill Level 4 (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Goodwill [Line Items]
Goodwill	$ 104,500
Final valuation adjustments as required under ASC 805 for eReinsure		(2,626)
Final valuation adjustments as required under ASC 805 for PBG		(2,662)
Goodwill, Acquired During 2012	168
Goodwill	104,668	104,500
Payment Protection [Member]
Goodwill [Line Items]
Goodwill adjustment under ASC 250 for Auto Knight for the year ending December 31, 2011		608
Final valuation adjustments as required under ASC 805 for eReinsure		0
Final valuation adjustments as required under ASC 805 for PBG		0
Goodwill	37,240
Business Process Outsourcing [Member]
Goodwill [Line Items]
Final valuation adjustments as required under ASC 805 for eReinsure		0
Final valuation adjustments as required under ASC 805 for PBG		(2,662)
Goodwill	12,970
Brokerage [Member]
Goodwill [Line Items]
Prior period adjustments for the year ending December 31, 2009 increasing goodwill (1)		383	[1]
Final valuation adjustments as required under ASC 805 for eReinsure		(2,626)
Final valuation adjustments as required under ASC 805 for PBG		0
Goodwill, Acquired During 2012	168
Goodwill	54,458
Scenario, Previously Reported [Member]
Goodwill [Line Items]
Goodwill		108,797
Scenario, Previously Reported [Member] | Payment Protection [Member]
Goodwill [Line Items]
Goodwill		36,632
Scenario, Previously Reported [Member] | Business Process Outsourcing [Member]
Goodwill [Line Items]
Goodwill		15,632
Scenario, Previously Reported [Member] | Brokerage [Member]
Goodwill [Line Items]
Goodwill		56,533
Scenario, Actual [Member]
Goodwill [Line Items]
Goodwill		104,500
Scenario, Actual [Member] | Payment Protection [Member]
Goodwill [Line Items]
Goodwill		37,240
Scenario, Actual [Member] | Business Process Outsourcing [Member]
Goodwill [Line Items]
Goodwill		12,970
Scenario, Actual [Member] | Brokerage [Member]
Goodwill [Line Items]
Goodwill		$ 54,290

[1] (1) - Immaterial correction of an error adjustment from the year ending December 31, 2009 is shown as an adjustment to the December 31, 2011 balance since the goodwill balances from December 31, 2009 and December 31, 2010 are not being presented in this Form 10-Q.

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Fair Value of Financial Instruments Level 4 Carrying and Fair Values of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 11,284	$ 31,339	$ 23,114	$ 43,389
Fixed Maturity Securities	110,833	93,509
Equity Securities	6,085	1,219
Notes receivable	4,281	3,603
Accounts and Premiums Receivable, Net	25,056	20,172
Other receivables	15,708	9,103
Short-term investments	970	1,070
Notes payable	71,168	73,000
Preferred trust securities	35,000	35,000
Carrying Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	11,284	31,339
Fixed Maturity Securities	110,833	93,509
Equity Securities	6,085	1,219
Notes receivable	4,281	3,603
Accounts and Premiums Receivable, Net	25,056	20,172
Other receivables	15,708	9,103
Short-term investments	970	1,070
Total Financial Assets	174,217	160,015
Notes payable	71,168	73,000
Preferred trust securities	35,000	35,000
Interest Rate Swap	4,599	3,601
Total Financial Liabilities	110,767	111,601
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	11,284	31,339
Fixed Maturity Securities	110,833	93,509
Equity Securities	6,085	1,219
Notes receivable	4,281	3,603
Accounts and Premiums Receivable, Net	25,056	20,172
Other receivables	15,708	9,103
Short-term investments	970	1,070
Total Financial Assets	174,217	160,015
Notes payable	71,168	73,000
Preferred trust securities	35,000	35,000
Interest Rate Swap	4,599	3,601
Total Financial Liabilities	$ 110,767	$ 111,601

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Investments
Fixed maturity securities available-for-sale at fair value (amortized cost of $107,150 at September 30, 2012 and $92,311 at December 31, 2011)	$ 110,833	$ 93,509
Equity securities available-for-sale at fair value (cost of $5,882 at September 30, 2012 and $1,203 at December 31, 2011)	6,085	1,219
Short-term investments	970	1,070
Total investments	117,888	95,798
Cash and cash equivalents	11,284	31,339
Restricted cash	21,232	14,180
Accrued investment income	1,115	929
Notes receivable	4,281	3,603
Accounts receivable, Net	25,056	20,172
Other receivables	15,708	9,103
Reinsurance receivables	197,184	194,740
Deferred acquisition costs	56,903	55,467
Property and equipment, net	17,227	14,666
Goodwill	104,668	104,500
Other intangibles, net	50,803	54,410
Other assets	6,452	6,070
Total assets	629,801	604,977
Liabilities:
Unpaid claims	32,041	32,583
Unearned premiums	231,114	227,929
Policyholder account balances	26,223	28,040
Accrued expenses, accounts payable, income taxes and other liabilities	51,785	35,446
Deferred revenue	19,164	20,781
Notes payable	71,168	73,000
Preferred trust securities	35,000	35,000
Deferred income taxes	26,023	24,614
Total liabilities	492,518	477,393
Commitments and Contingencies (Note 16 )
Stockholders' Equity:
Preferred stock, par value $0.01; 10,000,000 shares authorized; none issued	0	0
Common stock, par value $0.01; 150,000,000 shares authorized; 20,681,252 and 20,561,328 shares issued at September 30, 2012 and December 31, 2011, respectively, including shares in treasury	207	206
Treasury stock, at cost; 1,024,212 shares and 516,132 shares at September 30, 2012 and December 31, 2011, respectively	(6,651)	(2,728)
Additional paid-in capital	97,095	96,199
Accumulated other comprehensive loss income, net of tax	(673)	(1,754)
Retained earnings	46,725	35,150
Stockholders' equity before non-controlling interest	136,703	127,073
Non-controlling interest	580	511
Total stockholders' equity	137,283	127,584
Total liabilities and stockholders' equity	$ 629,801	$ 604,977

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Summary of Significant Accounting Policies Change in Accouting Estimate (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Change in Accounting Estimate [Line Items]
Net earned premium	$ 33,893	$ 28,673	$ 97,770	$ 84,646
Ceding commission	11,122	7,027	25,396	21,428
Commissions	21,548	17,926	61,479	53,766
Other operating expenses	7,959	7,267	21,635	23,779
Income taxes	2,455	2,259	6,520	4,847
Change in Accounting Method Accounted for as Change in Estimate [Member]
Change in Accounting Estimate [Line Items]
Net earned premium	1,845		1,845
Ceding commission	2,135		2,135
Net increase to total revenues from the change in accounting estimate	3,980		3,980
Commissions	2,739		2,739
Other operating expenses	(268)		(268)
Net increase to total expenses from the change in accounting estimate	2,471		2,471
Net increase to income before income taxes from the change in accounting estimate	1,509		1,509
Income taxes	533		533
Net increase to net income from the change in accounting estimate	$ 976		$ 976
Earnings Per Share, Basic	$ 0.05		$ 0.05
Earnings Per Share, Diluted	$ 0.05		$ 0.05

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Consolidated Statements of Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Noncontrolling Interest [Member]	Scenario, Previously Reported [Member]	Scenario, Previously Reported [Member] Common Stock [Member]	Scenario, Previously Reported [Member] Treasury Stock [Member]	Scenario, Previously Reported [Member] Additional Paid-in Capital [Member]	Scenario, Previously Reported [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Scenario, Previously Reported [Member] Retained Earnings [Member]	Scenario, Previously Reported [Member] Noncontrolling Interest [Member]	Scenario, Actual [Member]	Scenario, Actual [Member] Common Stock [Member]	Scenario, Actual [Member] Treasury Stock [Member]	Scenario, Actual [Member] Additional Paid-in Capital [Member]	Scenario, Actual [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Scenario, Actual [Member] Retained Earnings [Member]	Scenario, Actual [Member] Noncontrolling Interest [Member]
Treasury Stock, Shares at Dec. 31, 2010
Common Stock, Shares at Dec. 31, 2010
Total stockholders' equity	$ 127,584							$ 132,277	$ 206	$ (2,728)	$ 96,199	$ (1,754)	$ 39,822	$ 532	$ 127,584	$ 206	$ (2,728)	$ 96,199	$ (1,754)	$ 35,150	$ 511
Cumulative effect of adjustment resulting from new accounting guidance								(4,693)					(4,672)	(21)
Total stockholders' equity at Dec. 31, 2011	127,584							132,277	206	(2,728)	96,199	(1,754)	39,822	532	127,584	206	(2,728)	96,199	(1,754)	35,150	511
Common Stock, Shares at Dec. 31, 2011	20,561,328								20,561,328							20,561,328
Treasury Stock, Shares at Dec. 31, 2011	(516,132)									516,132							(516,132)
Total stockholders' equity	137,283	207	(6,651)	97,095	(673)	46,725	580
Net income	11,637					11,575	62
Other comprehensive income	1,088				1,081		7
Stock-based compensation, shares		90,519
Stock-based compensation	711	1		710
Shares issued for the Employee Stock Purchase Plan, shares	29,405
Shares issued for the Employee Stock Purchase Plan	167			167
Treasury stock purchased, shares			(508,080)
Treasury stock purchased	(3,923)		(3,923)
Stock Issued During Period, Value, Stock Options Exercised	19			19
Total stockholders' equity at Sep. 30, 2012	$ 137,283	$ 207	$ (6,651)	$ 97,095	$ (673)	$ 46,725	$ 580
Common Stock, Shares at Sep. 30, 2012	20,681,252	20,681,252
Treasury Stock, Shares at Sep. 30, 2012	(1,024,212)		1,024,212

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Investments Level 4 Restricted Investments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Investments [Abstract]
Fair Value of restricted investments	$ 19,080	$ 18,319
Fair value of restricted investments for special deposits required by state insurance departments	$ 12,375	$ 11,618

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Other Intangible Assets Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Other Intangible Assets [Abstract]

Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]

Other intangible assets consist of finite- and indefinite-lived intangible assets. The following table shows finite-lived other intangible assets and their respective amortization periods:

				September 30, 2012							December 31, 2011
	Amortization Period (Years)			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets with finite lives:
Customer and agent relationships	5	to	15	$	34,720	$	(11,458	)	$	23,262	$	34,552	$	(8,724	)	$	25,828
Software	7	to	10	8,773		(3,114		)	5,659		8,773		(2,345		)	6,428
Present value of future profits	0.3	to	0.75	548		(548		)	—		548		(548		)	—
Non-compete agreements	1.5	to	6	2,958		(2,691		)	267		2,958		(2,419		)	539
Total finite-lived intangible assets				$	46,999	$	(17,811	)	$	29,188	$	46,831	$	(14,036	)	$	32,795

Schedule of Indefinite-Lived Intangible Assets [Table Text Block]

The following table shows the carrying amount of indefinite-lived intangible assets at :	September 30, 2012		December 31, 2011
Tradenames	$	21,615	$	21,615

Schedule of Finite-Lived Intangible Assets [Table Text Block]

The following table includes the retrospective adjustments made to the balance of other intangible assets at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with the accounting requirements under ASC 805 and the current period activity.

Balance as originally reported at December 31, 2011	$	47,022
Final valuation adjustments as required under ASC 805 for eReinsure	4,508
Final valuation adjustments as required under ASC 805 for PBG	2,880
Adjusted balance at December 31, 2011	54,410
Intangible assets acquired in 2012	168
Less:Amortization expense	3,775
September 30, 2012	$	50,803

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Estimated amortization of other intangible assets for the next five years and thereafter ending December 31 is presented below:

2012 (remaining three months)	$	1,128
2013	4,490
2014	4,478
2015	4,471
2016	3,904
Thereafter	10,717
Total	$	29,188

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Reinsurance Receivables Level 4 Premiums, Direct and Assumed, Ceded (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reinsurance Disclosures [Abstract]
Direct and Assumed, Premiums Written	$ 100,409	$ 94,432	$ 272,317	$ 241,979
Direct and Assume Premiums Earned	98,287	80,982	269,132	235,420
Ceded Premiums Written	(65,935)	(61,361)	(169,971)	(154,227)
Ceded Premiums Earned	(64,394)	(52,309)	(171,362)	(150,774)
Premiums Written, Net	34,474	33,071	102,346	87,752
Net earned premium	$ 33,893	$ 28,673	$ 97,770	$ 84,646

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Fair Value of Financial Instruments 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents: The estimated fair value of cash and cash equivalents approximates their carrying value.

Fixed maturity securities: Fair values were obtained from market value quotations provided by an independent pricing service.

Equity securities: The fair values of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service. The fair values of non-publicly traded common stocks were based on prices obtained from an independent pricing service.

Notes receivable: The carrying amounts approximate fair value because the interest rates charged approximate current market rates for similar credit risks. These values are net of allowance for doubtful accounts.

Accounts and premiums receivable, net, and other receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets.

Short-term investments:The carrying amounts approximate fair value because of the short maturities of these instruments.

Notes payable and preferred trust securities: The carrying amounts approximate fair value because the applicable interest rates approximate current rates offered to the Company for similar instruments.

Interest rate swap: The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The carrying and fair values of financial instruments are as follows:	At
	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	11,284	$	11,284	$	31,339	$	31,339
Fixed maturity securities	110,833		110,833		93,509		93,509
Equity securities	6,085		6,085		1,219		1,219
Notes receivable	4,281		4,281		3,603		3,603
Accounts and premiums receivable, net	25,056		25,056		20,172		20,172
Other receivables	15,708		15,708		9,103		9,103
Short-term investments	970		970		1,070		1,070
Total financial assets	$	174,217	$	174,217	$	160,015	$	160,015
Financial liabilities:
Notes payable	$	71,168	$	71,168	$	73,000	$	73,000
Preferred trust securities	35,000		35,000		35,000		35,000
Interest rate swap	4,599		4,599		3,601		3,601
Total financial liabilities	$	110,767	$	110,767	$	111,601	$	111,601

The FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active

markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted

prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable

for the asset or liability and market-corroborated inputs.

Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value

measurement. These unobservable inputs are derived from the Company's internal calculations, estimates and assumptions and

require significant management judgment or estimation.

The Company's policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer.

The following tables set forth the Company's financial assets and liabilities accounted for at fair value by level within the fair value hierarchy at:

September 30, 2012			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	110,833	$	—	$	110,781	$	52
Equity securities	6,085		4,960		46		1,079
Short-term investments	970		970		—		—
Total assets	$	117,888	$	5,930	$	110,827	$	1,131
Liabilities
Interest rate swap	$	4,599	$	—	$	4,599	$	—

December 31, 2011			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	93,509	$	—	$	93,433	$	76
Equity securities	1,219		91		—		1,128
Short-term investments	1,070		1,070		—		—
Total Assets	$	95,798	$	1,161	$	93,433	$	1,204
Liabilities
Interest rate swap	$	3,601	$	—	$	3,601	$	—

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2012. For the nine months ended September 30, 2012, a single equity security was transferred from Level 3 to Level 2. This transfer occurred due to the availability of Level 2 pricing for the equity security, which was unavailable in prior periods. The Company's use of Level 3 unobservable inputs included 7 individual securities that accounted for 1.0% of total investments at September 30, 2012. The Company utilized an independent third party pricing service to value 6 individual fixed maturity securities for Level 3.The value of the single equity security in Level 3, which is a non-publicly traded preferred stock, was calculated by the Company taking into account the strength of the issuer's parent company guaranteeing the dividend of the issuer. At December 31, 2011, the Company had 12 individual securities valued under Level 3 that accounted for 1.3% of total investments.

The following table summarizes the changes in Level 3 assets measured at fair value:

	For the Nine Months Ended
	September 30, 2012			September 30, 2011
Beginning balance, January 1,	$	1,204		$	1,425
Total investment gains or losses (realized/unrealized):
Included in net income	—			372
Included in other comprehensive (loss) income	(19		)	(148		)
Sales	(47		)	(607		)
Transfers (out of) into Level 3	(7		)	45
Ending balance, September 30,	$	1,131		$	1,087

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Investments Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Available-for-sale Securities [Table Text Block]

The following table summarizes the Company's available-for-sale fixed maturity and equity securities:

	September 30, 2012
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	20,853	$	923	$	(1	)	$	21,775
Municipal securities	15,770		473		—			16,243
Corporate securities	69,835		2,336		(63		)	72,108
Mortgage-backed securities	501		11		—			512
Asset-backed securities	191		4		—			195
Total fixed maturity securities	$	107,150	$	3,747	$	(64	)	$	110,833
Common stock	$	99	$	18	$	(5	)	$	112
Preferred stock	5,783		190		—			5,973
Total equity securities	$	5,882	$	208	$	(5	)	$	6,085

	December 31, 2011
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	25,751	$	611	$	(2	)	$	26,360
Municipal securities	17,609		388		(5		)	17,992
Corporate securities	47,304		594		(426		)	47,472
Mortgage-backed securities	1,272		26		—			1,298
Asset-backed securities	375		12		—			387
Total fixed maturity securities	$	92,311	$	1,631	$	(433	)	$	93,509
Common stock	$	144	$	26	$	(17	)	$	153
Preferred stock	1,059		7		—			1,066
Total equity securities	$	1,203	$	33	$	(17	)	$	1,219

Restricted investments [Table Text Block]

The following table details the Company's restricted investments:

	At
	September 30, 2012		December 31, 2011
Fair value of restricted investments	$	19,080	$	18,319
Fair value of restricted investments for special deposits required by state insurance departments	$	12,375	$	11,618

Investments Classified by Contractual Maturity Date [Table Text Block]

The amortized cost and fair value of fixed maturity securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	At
	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,706	$	5,751	$	3,890	$	3,923
Due after one year through five years	57,739		59,580		51,210		51,839
Due after five years through ten years	26,392		27,423		23,623		23,973
Due after ten years	16,621		17,372		11,941		12,089
Mortgage-backed securities	501		512		1,272		1,298
Asset-backed securities	191		195		375		387
Total fixed maturity securities	$	107,150	$	110,833	$	92,311	$	93,509

Schedule of Unrealized Loss on Investments [Table Text Block]

The following table provides information on unrealized losses on investment securities that have been in an unrealized loss position for less than twelve months, and twelve months or greater, as of:

	September 30, 2012
	Less than Twelve Months						Twelve Months or Greater						Total
Description of Security	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	345	$	(1	)	6	$	—	$	—		—	$	345	$	(1	)	6
Municipal securities	—		—			—	—		—			—	—		—			—
Corporate securities	10,189		(29		)	11	167		(34		)	1	10,356		(63		)	12
Mortgage-backed securities	—		—			—	—		—			—	—		—			—
Asset-backed securities	—		—			—	—		—			—	—		—			—
Total fixed maturity securities	$	10,534	$	(30	)	17	$	167	$	(34	)	1	$	10,701	$	(64	)	18
Common stock	$	39	$	(5	)	2	$	—	$	—		—	$	39	$	(5	)	2
Preferred stock	—		—			—	—		—			—	—		—			—
Total equity securities	$	39	$	(5	)	2	$	—	$	—		—	$	39	$	(5	)	2

	December 31, 2011
	Less than Twelve Months						Twelve Months or Greater						Total
Description of Security	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	1,902	$	(2	)	7	$	—	$	—		—	$	1,902	$	(2	)	7
Municipal securities	486		(1		)	1	478		(4		)	1	964		(5		)	2
Corporate securities	16,861		(426		)	26	—		—			—	16,861		(426		)	26
Mortgage-backed securities	—		—			—	—		—			—	—		—			—
Asset-backed securities	—		—			—	—		—			—	—		—			—
Total fixed maturity securities	$	19,249	$	(429	)	34	$	478	$	(4	)	1	$	19,727	$	(433	)	35
Common stock	$	83	$	(17	)	5	$	—	$	—		—	$	83	$	(17	)	5
Preferred stock	—		—			—	—		—			—	—		—			—
Total equity securities	$	83	$	(17	)	5	$	—	$	—		—	$	83	$	(17	)	5

Gross proceeds from the sale of available-for-sale securities [Table Text Block]

The following table summarizes the gross proceeds from the sale of available-for-sale investment securities:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Gross proceeds from sales	$	503	$	11,143	$	4,980	$	33,663

Gain (Loss) on Investments [Table Text Block]

The following table summarizes the gross realized gains and gross realized losses for both fixed maturity and equity securities and realized losses for other-than-temporary impairments for available-for-sale investment securities:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Gross realized gains	$	—		$	1,414		$	22		$	2,663
Gross realized losses	—			(68		)	(12		)	(90		)
Total net gains from sales	$	—		$	1,346		$	10		$	2,573
Impairment write-downs (other-than-temporary impairments)	$	(16	)	$	(150	)	$	(16	)	$	(150	)
Total net realized investment (losses) gains	$	(16	)	$	1,196		$	(6	)	$	2,423

Investment Income [Table Text Block]

The following schedule details the components of net investment income:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Fixed income securities	$	628		$	782		$	1,954		$	2,544
Cash on hand and on deposit	47			63			143			180
Common and preferred stock dividends	77			24			191			56
Notes receivable	75			34			201			123
Other income	34			23			104			107
Investment expenses	(117		)	(125		)	(374		)	(374		)
Net investment income	$	744		$	801		$	2,219		$	2,636

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Commitments and Contingencies

The Company is a party to claims and litigation in the normal course of its operations. Management believes that the ultimate outcome of these matters will not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.

In the Payment Protection segment, the Company is currently a defendant in lawsuits that relate to marketing and/or pricing issues that involve claims for punitive, exemplary or extra-contractual damages in amounts substantially in excess of the covered claim.  Such litigation includes Lawson v. Life of the South Insurance Co., which was filed on March 13, 2006, in the Superior Court of Muscogee County, Georgia, and later moved to the United States District Court for the Middle District of Georgia, Columbus Division.  The action is brought by the plaintiff, individually and on behalf of a class of all persons similarly situated.   The allegations involve the Company's alleged duty to refund unearned premiums on credit insurance policies, even when the Company has not been informed of the payoff of the underlying finance contract. The action seeks an injunction requiring remedial action, as well as a variety of damages, including punitive damages and attorney fees and costs.

The Company filed a Motion to Strike or Dismiss Plaintiffs' Class Action Allegations, or in the Alternative, to Deny Class Certification on May 11, 2012. On September 28, 2012, the United States District Court for the Middle District of Georgia granted such motion.  Plaintiffs have filed a petition for permission to appeal this ruling with the United States Eleventh Circuit Court of Appeals.

Also in the Payment Protection segment, the Company is currently a defendant in Mullins v. Southern Financial Life Insurance Co., which was filed on February 2, 2006, in the Pike County Circuit Court, in the Commonwealth of Kentucky.  A class was certified on June 25, 2010.  At issue is the duration or term of coverage under certain policies.  The action alleges violations of the Consumer Protection Act and certain insurance statutes, as well as common law fraud.  The action seeks compensatory and punitive damages, attorney fees and interest.  The parties are currently involved in the merits discovery phase and discovery disputes have arisen.  Plaintiffs filed a Motion for Sanctions on April 5, 2012 in connection with the Company's efforts to locate and gather certificates and other documents from the Company's agents.  While the Pike County Circuit Court did not award sanctions, it did order the Company to subpoena certain records from its agents.  The Company is currently appealing this order. To date, no trial date has been set.

The Company considers all of the above-described litigation customary in the Company's lines of business.  In management's opinion, based on information available at this time, the ultimate resolution of such litigation, which it is vigorously defending, should not be materially adverse to the financial position, results of operations or cash flows of the Company. It should be noted that large punitive damage awards, bearing little relation to actual damages sustained by plaintiffs, have been awarded in certain states against other companies in the credit insurance business. Loss contingencies may be taken as developments warrant, although such amounts are not reasonably estimable at this time.

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Reinsurance Receivables Level 4 Reinsurer concentration of Credit Risk (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Reinsurance Disclosures [Abstract]
Total recoverable from three unrelated reinsurers	$ 124,311	$ 124,160

XML

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating Activities
Net Income	$ 11,575	$ 9,024
Adjustments to reconcile net income to net cash flows (used in) provided by operating activities:
Change in deferred policy acquisition costs	(1,437)	3,369
Depreciation and amortization	6,359	5,711
Deferred income tax expense	822	2,704
Net realized (gains) losses	6	(2,423)
Loss on sale of subsidiary	0	477
Stock-based compensation expense	711	615
Amortization of premiums and accretions of discounts on investments	932	408
Non-controlling interest	62	(171)
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions:
Accrued investment income	(186)	39
Accounts and premiums receivable, net	(4,884)	(5,300)
Other receivables	(6,605)	8,152
Reinsurance recoverables	(2,444)	(527)
Other assets	(382)	559
Unpaid claims	(542)	(2,296)
Unearned premiums	3,185	6,558
Policyholder account balances	(1,817)	0
Accrued expenses, accounts payable, income taxes and other liabilities	15,340	(20,964)
Deferred revenue	(1,617)	(5,595)
Net cash flows provided by (used in) operating activities	19,078	340
Investing activities
Proceeds from maturities, calls and prepayments of available-for-sale investments	8,052	7,418
Proceeds from sales of available-for-sale investments	4,980	33,663
Proceeds from maturities of short term investments	100	100
Purchases of available-for-sale investments	(33,484)	(37,859)
Purchases of property and equipment	(5,174)	(5,411)
Net received (paid) for acquisitions of subsidiaries, net of cash received	(308)	(40,611)
Sale of subsidiary, net of cash paid	0	(153)
Net (issuance) proceeds from notes receivable	(678)	24
Change in restricted cash	(7,052)	6,043
Net cash flows used in investing activities	(33,564)	(36,786)
Financing activities
Payments on notes payable	(126,200)	(64,263)
Proceeds from notes payable	124,368	91,550
Payments for intial public offering costs	0	(827)
Payments on redeemable preferred stock	0	(10,940)
Net proceeds from exercise of stock options	19	651
Purchase of treasury stock	(3,923)	0
Net proceeds received from stock issued in the Employee Stock Purchase Plan	167	0
Net cash flows (used in) provided by financing activities	(5,569)	16,171
Net (decrease) in cash and cash equivalents	(20,055)	(20,275)
Cash and cash equivalents, beginning of period	31,339	43,389
Cash and cash equivalents, end of period	$ 11,284	$ 23,114

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Consolidated Balance Sheets Parentheticals (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Investments
Fixed maturity securities available-for-sale amortized cost basis	$ 107,150	$ 92,311
Equity securities available-for-sale amortized cost basis	$ 5,882	$ 1,203
Stockholders' Equity:
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	20,681,252	20,561,328
Common stock, shares outstanding	20,681,252	20,561,328
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Treasury stock, shares	1,024,212	516,132

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Investments

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Investments

The following table summarizes the Company's available-for-sale fixed maturity and equity securities:

	September 30, 2012
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	20,853	$	923	$	(1	)	$	21,775
Municipal securities	15,770		473		—			16,243
Corporate securities	69,835		2,336		(63		)	72,108
Mortgage-backed securities	501		11		—			512
Asset-backed securities	191		4		—			195
Total fixed maturity securities	$	107,150	$	3,747	$	(64	)	$	110,833
Common stock	$	99	$	18	$	(5	)	$	112
Preferred stock	5,783		190		—			5,973
Total equity securities	$	5,882	$	208	$	(5	)	$	6,085

	December 31, 2011
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	25,751	$	611	$	(2	)	$	26,360
Municipal securities	17,609		388		(5		)	17,992
Corporate securities	47,304		594		(426		)	47,472
Mortgage-backed securities	1,272		26		—			1,298
Asset-backed securities	375		12		—			387
Total fixed maturity securities	$	92,311	$	1,631	$	(433	)	$	93,509
Common stock	$	144	$	26	$	(17	)	$	153
Preferred stock	1,059		7		—			1,066
Total equity securities	$	1,203	$	33	$	(17	)	$	1,219

Pursuant to certain reinsurance agreements and statutory licensing requirements, the Company has deposited invested assets in custody accounts or insurance department safekeeping accounts. The Company is not permitted to remove invested assets from these accounts without prior approval of the contractual party or regulatory authority. The following table details the Company's restricted investments:

	At
	September 30, 2012		December 31, 2011
Fair value of restricted investments	$	19,080	$	18,319
Fair value of restricted investments for special deposits required by state insurance departments	$	12,375	$	11,618

The amortized cost and fair value of fixed maturity securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	At
	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,706	$	5,751	$	3,890	$	3,923
Due after one year through five years	57,739		59,580		51,210		51,839
Due after five years through ten years	26,392		27,423		23,623		23,973
Due after ten years	16,621		17,372		11,941		12,089
Mortgage-backed securities	501		512		1,272		1,298
Asset-backed securities	191		195		375		387
Total fixed maturity securities	$	107,150	$	110,833	$	92,311	$	93,509

The following table provides information on unrealized losses on investment securities that have been in an unrealized loss position for less than twelve months, and twelve months or greater, as of:

	September 30, 2012
	Less than Twelve Months						Twelve Months or Greater						Total
Description of Security	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	345	$	(1	)	6	$	—	$	—		—	$	345	$	(1	)	6
Municipal securities	—		—			—	—		—			—	—		—			—
Corporate securities	10,189		(29		)	11	167		(34		)	1	10,356		(63		)	12
Mortgage-backed securities	—		—			—	—		—			—	—		—			—
Asset-backed securities	—		—			—	—		—			—	—		—			—
Total fixed maturity securities	$	10,534	$	(30	)	17	$	167	$	(34	)	1	$	10,701	$	(64	)	18
Common stock	$	39	$	(5	)	2	$	—	$	—		—	$	39	$	(5	)	2
Preferred stock	—		—			—	—		—			—	—		—			—
Total equity securities	$	39	$	(5	)	2	$	—	$	—		—	$	39	$	(5	)	2

	December 31, 2011
	Less than Twelve Months						Twelve Months or Greater						Total
Description of Security	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities	Fair Value		Unrealized Losses			# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	1,902	$	(2	)	7	$	—	$	—		—	$	1,902	$	(2	)	7
Municipal securities	486		(1		)	1	478		(4		)	1	964		(5		)	2
Corporate securities	16,861		(426		)	26	—		—			—	16,861		(426		)	26
Mortgage-backed securities	—		—			—	—		—			—	—		—			—
Asset-backed securities	—		—			—	—		—			—	—		—			—
Total fixed maturity securities	$	19,249	$	(429	)	34	$	478	$	(4	)	1	$	19,727	$	(433	)	35
Common stock	$	83	$	(17	)	5	$	—	$	—		—	$	83	$	(17	)	5
Preferred stock	—		—			—	—		—			—	—		—			—
Total equity securities	$	83	$	(17	)	5	$	—	$	—		—	$	83	$	(17	)	5

The Company does not intend to sell the investments that are in an unrealized loss position at September 30, 2012 and it is more likely than not that the Company will be able to hold these securities until full recovery of their amortized cost basis for fixed maturity securities or cost for equity securities. At September 30, 2012, based on management's quarterly review, the Company deemed that 1 individual equity security was other than temporarily impaired and recorded an impairment charge of $16 thousand for the three months ended September 30, 2012. For the three months and nine months ended September 30, 2011, the Company deemed that 8 individual equity securities were other than temporarily impaired and recorded an impairment charge of $0.2 million.

The following table summarizes the gross proceeds from the sale of available-for-sale investment securities:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Gross proceeds from sales	$	503	$	11,143	$	4,980	$	33,663

The following table summarizes the gross realized gains and gross realized losses for both fixed maturity and equity securities and realized losses for other-than-temporary impairments for available-for-sale investment securities:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Gross realized gains	$	—		$	1,414		$	22		$	2,663
Gross realized losses	—			(68		)	(12		)	(90		)
Total net gains from sales	$	—		$	1,346		$	10		$	2,573
Impairment write-downs (other-than-temporary impairments)	$	(16	)	$	(150	)	$	(16	)	$	(150	)
Total net realized investment (losses) gains	$	(16	)	$	1,196		$	(6	)	$	2,423

The following schedule details the components of net investment income:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Fixed income securities	$	628		$	782		$	1,954		$	2,544
Cash on hand and on deposit	47			63			143			180
Common and preferred stock dividends	77			24			191			56
Notes receivable	75			34			201			123
Other income	34			23			104			107
Investment expenses	(117		)	(125		)	(374		)	(374		)
Net investment income	$	744		$	801		$	2,219		$	2,636

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document Information [Line Items]
Entity Registrant Name	Fortegra Financial Corp
Entity Central Index Key	0001495925
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		19,657,152

XML

Reinsurance Receivables

9 Months Ended

Sep. 30, 2012

Reinsurance Disclosures [Abstract]

Reinsurance [Text Block]

Reinsurance Receivables

The Company has various reinsurance agreements in place whereby the amount of risk in excess of the Company's retention is reinsured by unrelated domestic and foreign insurance companies. The Company remains liable to policyholders in the event that the assuming companies are unable to meet their obligations. The effects of reinsurance on premiums written and earned and losses and loss adjustment expenses ("LAE") incurred are presented in the tables below:

Premiums	For the Three Months Ended												For the Nine Months Ended
	September 30, 2012						September 30, 2011						September 30, 2012						September 30, 2011
	Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct and assumed	$	100,409		$	98,287		$	94,432		$	80,982		$	272,317		$	269,132		$	241,979		$	235,420
Ceded	(65,935		)	(64,394		)	(61,361		)	(52,309		)	(169,971		)	(171,362		)	(154,227		)	(150,774		)
Net	$	34,474		$	33,893		$	33,071		$	28,673		$	102,346		$	97,770		$	87,752		$	84,646

Losses and LAE incurred	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Direct and assumed	$	23,069		$	21,589		$	66,198		$	60,752
Ceded	(11,639		)	(11,875		)	(33,926		)	(32,414		)
Net losses and LAE incurred	$	11,430		$	9,714		$	32,272		$	28,338

The following table reflects the components of the reinsurance receivables:	At
	September 30, 2012		December 31, 2011
Prepaid reinsurance premiums (1):
Life	$	53,451	$	59,545
Accident and health	33,257		30,759
Property	81,427		80,758
Total	168,135		171,062
Ceded claim reserves:
Life	1,508		1,794
Accident and health	8,966		9,896
Property	8,493		7,743
Total ceded claim reserves recoverable	18,967		19,433
Other reinsurance settlements recoverable	10,082		4,245
Reinsurance receivables	$	197,184	$	194,740
(1)  Including policyholder account balances ceded.

Reinsurance receivables include amounts related to paid benefits, unpaid benefits and prepaid reinsurance premiums. Reinsurance receivables are based upon estimates and are reported on the Consolidated Balance Sheets separately as assets, as reinsurance does not relieve the Company of its legal liability to policyholders. The Company is required to pay losses even if a reinsurer fails to meet its obligations under the applicable reinsurance agreement. Management continually monitors the financial condition and agency ratings of the Company's reinsurers and believes that the reinsurance receivables accrued are collectible. The following table shows the amount included in reinsurance receivable that is recoverable from three unrelated insurers:

	At
	September 30, 2012		December 31, 2011
Total recoverable from three unrelated reinsurers	$	124,311	$	124,160

The three unrelated reinsurers are: Munich American Reassurance Company (A. M. Best Rating-A+); London Life Reinsurance Company (A. M. Best Rating-A); and London Life International Reinsurance Corporation (A. M. Best Rating-NR-3). Because London Life International Reinsurance Corporation does not maintain an A.M. Best rating, the related receivables are collateralized by assets held in trust and letters of credit. At September 30, 2012, the Company does not believe there is a risk of loss as a result of the concentration of credit risk in the reinsurance program.

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Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenues:
Service and administrative fees	$ 10,056	$ 10,125	$ 28,790	$ 28,041
Brokerage commissions and fees	8,411	8,611	27,295	25,686
Ceding commission	11,122	7,027	25,396	21,428
Net investment income	744	801	2,219	2,636
Net realized gains(losses) on the sale of investments	(16)	1,196	(6)	2,423
Net earned premium	33,893	28,673	97,770	84,646
Other income	52	18	172	138
Total revenues	64,262	56,451	181,636	164,998
Expenses:
Net losses and loss adjustment expenses	11,430	9,714	32,272	28,338
Commissions	21,548	17,926	61,479	53,766
Personnel costs	12,708	10,945	36,467	33,365
Other operating expenses	7,959	7,267	21,635	23,779
Depreciation	871	886	2,584	2,283
Amortization of intangibles	1,127	998	3,775	3,428
Interest expense	2,025	1,906	5,267	5,862
Loss on sale of subsidiary	0	477	0	477
Total expenses	57,668	50,119	163,479	151,298
Income before income taxes and non-controlling interest	6,594	6,332	18,157	13,700
Income taxes	2,455	2,259	6,520	4,847
Income before non-controlling interest	4,139	4,073	11,637	8,853
Less: net income (loss) attributable to non-controlling interest	29	1	62	(171)
Net Income	$ 4,110	$ 4,072	$ 11,575	$ 9,024
Earnings per share:
Basic	$ 0.21	$ 0.20	$ 0.59	$ 0.44
Diluted	$ 0.20	$ 0.19	$ 0.56	$ 0.42
Weighted average common shares outstanding:
Basic	19,531,694	20,404,441	19,705,105	20,355,057
Diluted	20,463,238	21,214,365	20,620,084	21,375,184

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Earnings Per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding adjusted to include the effect of potentially dilutive common shares, which includes outstanding stock options and non-vested restricted stock awards, using the treasury stock method. Potentially dilutive common shares for which the exercise price was greater than the average market price of common shares are excluded from the computation of diluted earnings per share, as the effect would be anti-dilutive.

Earnings per share is calculated as follows:	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Numerator for both basic and diluted earnings per share:
Net income	$	4,110	$	4,072	$	11,575	$	9,024
Denominator:
Total average basic common shares outstanding	19,531,694		20,404,441		19,705,105		20,355,057
Effect of dilutive stock options and restricted stock awards	931,544		809,924		914,979		1,020,127
Total average diluted common shares outstanding	20,463,238		21,214,365		20,620,084		21,375,184
Earnings per share-basic	$	0.21	$	0.20	$	0.59	$	0.44
Earnings per share-diluted	$	0.20	$	0.19	$	0.56	$	0.42
Weighted average anti-dilutive common shares	567,995		512,298		431,446		283,762

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Recently Issued Accounting Standards

9 Months Ended

Sep. 30, 2012

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recently Issued Accounting Standards Adopted and Not Yet Adopted [Text Block]

Recent Accounting Standards

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-05, Comprehensive Income (Topic 820), which changes the presentation of comprehensive income. These changes give an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. This guidance became effective for the Company on January 1, 2012 and only requires a change in the format of the presentation of comprehensive income. The adoption of this guidance did not impact the Company’s consolidated financial position, results of operations or cash flows.

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

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

	December 31, 2011
Consolidated Balance Sheets	As Previously Reported (1)		Effect of the Change			As Restated
Assets
Deferred acquisition costs	$	62,687	$	(7,220	)	$	55,467
Total assets	$	612,197	$	(7,220	)	$	604,977
Liabilities
Deferred income taxes	$	27,141	$	(2,527	)	$	24,614
Total Liabilities	479,920		(2,527		)	477,393
Stockholders' Equity
Retained earnings	39,822		(4,672		)	35,150
Non-controlling interest	532		(21		)	511
Total Stockholders' Equity	132,277		(4,693		)	127,584
Total Liabilities and Stockholders' Equity	$	612,197	(7,220		)	$	604,977

(1) - Includes the business acquisition valuation measurement period adjustments described in Notes 6, 7 and 8.

	For the Three Months Ended							For the Nine Months Ended
	September 30, 2011							September 30, 2011
Consolidated Statements of Income	As Previously Reported		Effect of the Change			As Restated		As Previously Reported			Effect of the Change			As Restated
Revenues:
Total Revenues	$	56,451	$	—		$	56,451	$	164,998		$	—		$	164,998
Expenses:
Net losses and loss adjustment expenses	9,714		—			9,714		28,338			—			28,338
Commissions	17,926		—			17,926		53,766			—			53,766
Personnel costs	10,945		—			10,945		33,365			—			33,365
Other operating expenses	7,171		96			7,267		23,331			448			23,779
Depreciation	886		—			886		2,283			—			2,283
Amortization of intangibles	998		—			998		3,428			—			3,428
Interest expense	1,906		—			1,906		5,862			—			5,862
Loss on sale of subsidiary	477					477		477						477
Total expenses	50,023		96			50,119		150,850			448			151,298
Income before income taxes and non-controlling interest	6,428		(96		)	6,332		14,148			(448		)	13,700
Income taxes	2,292		(33		)	2,259		5,003			(156		)	4,847
Income before non-controlling interest	4,136		(63		)	4,073		9,145			(292		)	8,853
Less: net (loss) income attributable to non-controlling interest	1		—			1		(171		)	—			(171		)
Net income	$	4,135	$	(63	)	$	4,072	$	9,316		$	(292	)	$	9,024
Earnings per share:
Basic	$	0.20	$	—		$	0.20	$	0.46		$	(0.02	)	$	0.44
Diluted	$	0.19	$	—		$	0.19	$	0.44		$	(0.02	)	$	0.42

Recently Issued Accounting Pronouncements

In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The ASU permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company is evaluating the impact of the ASU; however, it is not expected to have a significant impact on the Company's consolidated financial position, results of operations or cash flows.

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

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Statutory Reporting and Dividend Restrictions

9 Months Ended

Sep. 30, 2012

Statutory Reporting and Dividend Restrictions [Abstract]

Statutory Reporting and Dividend Restrictions Disclosure [Table Text Block]

Statutory Reporting and Dividend Restrictions

The Company's insurance subsidiaries may pay dividends to the Company, subject to statutory restrictions. Payments in excess of statutory restrictions (extraordinary dividends) to the Company are permitted only with prior approval of the insurance departments of the applicable state of domicile. All dividends from subsidiaries were eliminated in the Consolidated Financial Statements. The following table sets forth the dividends paid to the Company by its insurance company subsidiaries for the following periods:

	Nine months ended		Twelve months ended
	September 30, 2012		December 31, 2011
Ordinary dividends	$	285	$	7,558
Extraordinary dividends	—		830
Total dividends	$	285	$	8,388

The following table details the combined statutory capital and surplus of the Company's insurance subsidiaries, the required minimum statutory capital and surplus and the combined amount available for ordinary dividends of the Company's insurance subsidiaries at:

	September 30, 2012		December 31, 2011
Combined statutory capital and surplus of the Company's insurance subsidiaries	$	54,157	$	50,230
Required minimum statutory capital and surplus	$	15,300	$	15,300
Amount available for ordinary dividends of the Company's insurance subsidiaries	$	2,060	$	2,344

Under the NAIC's Risk-Based Capital Act of 1995, a company's risk-based capital ("RBC") is calculated by applying certain risk factors to various asset, claim and reserve items. If a company's adjusted surplus falls below calculated RBC thresholds, regulatory intervention or oversight is required. The insurance subsidiaries' RBC levels as calculated in accordance with the NAIC's RBC instructions exceeded all RBC thresholds as of September 30, 2012 and December 31, 2011.

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Notes Payable

9 Months Ended

Sep. 30, 2012

Payables and Accruals [Abstract]

Debt Disclosure [Text Block]

Note Payable

As disclosed on August 7, 2012 in a Form 8-K, effective August 2, 2012, Fortegra terminated its existing line of credit with SunTrust Bank, N.A. and entered into a five-year $125.0 million secured credit agreement (the "Credit Agreement") with a syndicate of lenders, among them Wells Fargo Bank, N.A., who also serves as administrative agent ("Wells Fargo" or the "Administrative Agent").  The Credit Agreement provides for a $50.0 million term loan facility (the "Term Loan Facility"), as well as a $75.0 million revolving credit facility (the "Revolving Facility" and collectively with the Term Loan Facility, the "Facilities"). Subject to earlier termination, the Credit Agreement terminates on August 2, 2017. The Credit Agreement includes a provision pursuant to which, from time to time, the Borrowers may request that the lenders in their discretion increase the maximum amount of commitments under the Facilities by an amount not to exceed $50.0 million.  In connection with the termination of the SunTrust Bank, N.A. revolving line of credit, the Company recorded a charge of $0.7 million to interest expense in the three months ended September 30, 2012 for previously capitalized transaction costs associated with this line of credit.

The Company's Note Payable consisted of the following at:	September 30, 2012			December 31, 2011
Wells Fargo Bank, N.A.- credit facility, maturing August 2017	$	71,168		$	—
Maximum balance allowed on Wells Fargo Bank, N.A credit facility	$	125,000		$	—
SunTrust Bank, N.A. - revolving credit facility, maturing June 2013	$	—		$	73,000
Maximum balance allowed on SunTrust Bank, N.A revolving credit facility	$	—		$	85,000
Interest rate on the respective note payable at the end of the respective periods:	3.59		%	4.59		%

Aggregate maturities for the Company's note payable at September 30, 2012 are as follows:

2012 (remaining three months)	$	1,250
2013	5,000
2014	5,000
2015	5,000
2016	5,000
Thereafter	49,918
Total	$	71,168

The Company must comply with various covenant requirements set forth by Wells Fargo Bank, N.A in the Credit Agreement. The following summarizes the definitions of the more significant financial covenants in effect at September 30, 2012 and the calculations used to arrive at each ratio:

Total Leverage Ratio - the ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated Adjusted EBITDA for the Measurement Period ending on or immediately prior to such date.

Fixed Charge Coverage Ratio - the ratio of (a) Consolidated Adjusted EBITDA less the actual amount paid by the Borrowers and their Subsidiaries in cash on account of Capital Expenditures less cash taxes paid by the Borrowers and their Subsidiaries to (b) Consolidated Fixed Charges, in each case for the Measurement Period ending on or immediately prior to such date.

Reinsurance Ratio - the ratio (expressed as a percentage) of (a) the aggregate amounts recoverable by the Borrowers and its Subsidiaries from reinsurers divided by (b) the sum of (i) policy and claim liabilities plus (ii) unearned premiums, in each case of the Borrowers and their Subsidiaries determined in accordance with GAAP.

RBC Ratio - the ratio (expressed as a percentage) of National Association of Insurance Commissioners ("NAIC") Risk Based Capital (as defined in the NAIC standards) for any Regulated Insurance Company on an individual basis, calculated at the end of any Fiscal Year, to the authorized control level" (as defined in the NAIC standards).

The following is a summary of the Company's more significant financial covenants related to the Wells Fargo Bank, N.A. facility calculated at September 30, 2012, except for RBC Ratios, which under the Credit Agreement are to reflect the ratios calculated as of the most recent fiscal year end, in this case December 31, 2011.

		Actual At
Covenant	Covenant Requirement	September 30, 2012
Total leverage ratio	not more than 3.50	2.40
Fixed charge coverage ratio	not less than 2.00	3.86
Reinsurance ratio	not less than 50%	75.0%
RBC Ratio's		Actual at December 31, 2011
RBC Ratio - Bankers Life of Louisiana	not less than 250%	507.0%
RBC Ratio - Southern Financial Life Insurance Company	not less than 250%	2,039.0%
RBC Ratio - Insurance Company of the South	not less than 250%	495.0%
RBC Ratio - Lyndon Southern Insurance Company	not less than 250%	339.0%
RBC Ratio - Life of the South Insurance Company	not less than 250%	352.0%

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Goodwill

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Disclosure [Text Block]

Goodwill

During the three months ended March 31, 2012, the Company determined the final valuation for the 2011 acquisition of eReinsure, included in the Brokerage Segment. During the three months ended September 30, 2012, the Company determined the final valuation for the 2011 acquisition of PBG, included in the BPO segment. The following table shows the retrospective adjustments made to the balance of goodwill at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with accounting requirements under ASC 805 and the adjustments made to goodwill for the immaterial error corrections under ASC 250 that are discussed in Note 2 to the Consolidated Financial Statements.

Goodwill balances by segment are as follows:	Payment Protection		BPO			Brokerage			Total
Balance as originally reported at December 31, 2011	$	36,632	$	15,632		$	56,533		$	108,797
Prior period adjustments for the B&G acquisition for the year ending December 31, 2009 increasing goodwill (1)	—		—			383			383
Goodwill adjustment under ASC 250 for the Auto Knight acquisition for the year ending December 31, 2011	608		—			—			608
Final valuation adjustments as required under ASC 805 for eReinsure	—		—			(2,626		)	(2,626		)
Final valuation adjustments as required under ASC 805 for PBG	—		(2,662		)	—			(2,662		)
Adjusted balance at December 31, 2011	37,240		12,970			54,290			104,500
Goodwill acquired during 2012	—		—			168			168
Balance at September 30, 2012	$	37,240	$	12,970		$	54,458		$	104,668

⁽¹⁾- Immaterial correction of an error adjustment from the year ending December 31, 2009 is shown as an adjustment to the December 31, 2011 balance since the goodwill balances from December 31, 2009 and December 31, 2010 are not being presented in this Form 10-Q.

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Investments Level 4 Investments by Maturity (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Due in one year or less, Amortized Cost	$ 5,706	$ 3,890
Due in one year or less, Fair Value	5,751	3,923
Due after one year through five years, Amortized Cost Basis	57,739	51,210
Due after one year through five years, Fair Value	59,580	51,839
Due after five years through ten years, Amortized Cost Basis	26,392	23,623
Due after five years through ten years, Fair Value	27,423	23,973
Due after ten years, Amortized Cost Basis	16,621	11,941
Due after ten years, Fair Value	17,372	12,089
Total Fixed Maturity Securities, Amortized Cost Basis	107,150	92,311
Fixed Maturity Securities	110,833	93,509
Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Amortized Cost Basis	501	1,272
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	512	1,298
Asset-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Amortized Cost Basis	191	375
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	$ 195	$ 387

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Variable Interest Entity

9 Months Ended

Sep. 30, 2012

Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]

Variable Interest Entities Disclosure [Text Block]

Variable Interest Entities

The Company's investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as Variable Interest Entities ("VIEs") and the Company is the primary beneficiary, in which case the investments are consolidated in accordance with ASC 810, "Consolidation." Investments that do not meet the above criteria are accounted for under the cost method.

In July 2011, the Company sold its 100% interest in Creative Investigations Recovery Group, LLC ("CIRG"). The consideration included a note receivable, included on the Consolidated Balance Sheets, with a first priority lien security interest in the assets of CIRG and other property of the buyers. The Company performed a detailed analysis of the CIRG sale transaction and determined that CIRG is considered a VIE, as defined in ASC 810, because the Company has an interest due to the note financing. The Company further determined that it is not the primary beneficiary because the Company does not have the power to direct the activities of the VIE and has no right to receive the residual returns of CIRG. Therefore, CIRG is not consolidated in the Company's results of operations. The Company's maximum exposure to loss in the VIE is limited to the outstanding balance of the note receivable, which is presented in the table below:

	At
	September 30, 2012		December 31, 2011
The Company's maximum exposure to loss in the VIE	$	1,139	$	1,142

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Business Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Business Acquisitions and Dispositions

Business Acquisitions

The values of certain assets and liabilities acquired in acquisitions are preliminary in nature, and are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and loss reserves. The valuations will be finalized within one year of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill. A change to the acquisition date value of the identifiable net assets during the measurement period (up to one year from the acquisition date) affects the amount of the purchase price allocated to goodwill. Changes to the purchase price allocation are adjusted retrospectively in the consolidated financial statements.

During the three months ended March 31, 2012, the Company received the final valuation studies for identifiable intangible assets to determine the final valuation for the 2011 acquisition of eReinsure. In addition, during the three months ended September 30, 2012, the Company received the final valuation studies for identifiable intangible assets to determine the final valuation for the 2011 acquisition of PBG. Accordingly, the Consolidated Balance Sheet at December 31, 2011 has been retrospectively adjusted to include the effect of the measurement period adjustments as required under ASC 805, Business Combinations, ("ASC 805"). Please see the notes, "Goodwill," and "Other Intangible Assets," for more information on the retrospective measurement period adjustments made in 2012.

The following table presents assets acquired, liabilities assumed and goodwill recorded for the 2011 acquisitions of eReinsure and PBG based on their fair values as of the respective acquisition date and the effects of the measurement period adjustments recorded in 2012, as discussed above:

	eReinsure			PBG
ASSETS:
Cash	$	3,694		$	38
Investments	1,212			—
Other receivables	1,828			—
Property and equipment, net	142			65
Other intangible assets, net	13,908			3,650
Other assets	54			22
Net deferred tax asset	—			127
LIABILITIES:
Accrued expenses and accounts payable	(2,801		)	(304		)
Commissions payable	—			(60		)
Deferred revenue	(835		)	—
Net deferred tax liability	(1,783		)	—
Net assets acquired	15,419			3,538
Purchase consideration (1)	38,931			7,607
Goodwill	$	23,512		$	4,069

(1) - Reflects a purchase price reduction of $0.3 million for the final eReinsure working capital adjustments.

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Other Intangible Assets

9 Months Ended

Sep. 30, 2012

Other Intangible Assets [Abstract]

Intangible Assets Disclosure [Text Block]

Other Intangible Assets

Other intangible assets consist of finite- and indefinite-lived intangible assets. The following table shows finite-lived other intangible assets and their respective amortization periods:

				September 30, 2012							December 31, 2011
	Amortization Period (Years)			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets with finite lives:
Customer and agent relationships	5	to	15	$	34,720	$	(11,458	)	$	23,262	$	34,552	$	(8,724	)	$	25,828
Software	7	to	10	8,773		(3,114		)	5,659		8,773		(2,345		)	6,428
Present value of future profits	0.3	to	0.75	548		(548		)	—		548		(548		)	—
Non-compete agreements	1.5	to	6	2,958		(2,691		)	267		2,958		(2,419		)	539
Total finite-lived intangible assets				$	46,999	$	(17,811	)	$	29,188	$	46,831	$	(14,036	)	$	32,795

The following table shows the carrying amount of indefinite-lived intangible assets at :	September 30, 2012		December 31, 2011
Tradenames	$	21,615	$	21,615

During the three months ended March 31, 2012, the Company determined the final valuation for the 2011 acquisition of eReinsure. During the three months ended September 30, 2012, the Company determined the final valuation for the 2011 acquisition of PBG. The intangible assets acquired in 2012 relate to the purchase of a book of business. The following table includes the retrospective adjustments made to the balance of other intangible assets at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with the accounting requirements under ASC 805 and the current period activity.

Balance as originally reported at December 31, 2011	$	47,022
Final valuation adjustments as required under ASC 805 for eReinsure	4,508
Final valuation adjustments as required under ASC 805 for PBG	2,880
Adjusted balance at December 31, 2011	54,410
Intangible assets acquired in 2012	168
Less:Amortization expense	3,775
September 30, 2012	$	50,803

Estimated amortization of other intangible assets for the next five years and thereafter ending December 31 is presented below:

2012 (remaining three months)	$	1,128
2013	4,490
2014	4,478
2015	4,471
2016	3,904
Thereafter	10,717
Total	$	29,188

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Investments Level 4 Schedule of net investment income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Investments [Abstract]
Fixed Income Securities	$ 628	$ 782	$ 1,954	$ 2,544
Cash on hand and on deposit [Abstract]	47	63	143	180
Cash on hand and on deposit	77	24	191	56
Notes receivable	75	34	201	123
Other	34	23	104	107
Investment Expenses	(117)	(125)	(374)	(374)
Net Investment Income	$ 744	$ 801	$ 2,219	$ 2,636

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Reinsurance Receivables Level 4 Losses and LAE Incurred (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reinsurance Disclosures [Abstract]
Direct and Assumed	$ 23,069	$ 21,589	$ 66,198	$ 60,752
Ceded	(11,639)	(11,875)	(33,926)	(32,414)
Net losses and LAE Incurred	$ 11,430	$ 9,714	$ 32,272	$ 28,338

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Investments Level 4 Realized investment gains, losses and OTTI (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012 security	Sep. 30, 2011 security	Sep. 30, 2012 security	Sep. 30, 2011 security
Gain (Loss) on Investments [Line Items]
Gross Realized Gains	$ 0	$ 1,414	$ 22	$ 2,663
Gross Realized Losses	0	(68)	(12)	(90)
Net realized gains on the sale of investments	0	1,346	10	2,573
Impairment write-downs (other-than-temporary impairments)	(16)	(150)	(16)	(150)
Total net realized investment gains	$ (16)	$ 1,196	$ (6)	$ 2,423
Number of equity securities with other than temporary impairment losses	1	8	1	8

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Goodwill Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

The following table shows the retrospective adjustments made to the balance of goodwill at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with accounting requirements under ASC 805 and the adjustments made to goodwill for the immaterial error corrections under ASC 250 that are discussed in Note 2 to the Consolidated Financial Statements.

Goodwill balances by segment are as follows:	Payment Protection		BPO			Brokerage			Total
Balance as originally reported at December 31, 2011	$	36,632	$	15,632		$	56,533		$	108,797
Prior period adjustments for the B&G acquisition for the year ending December 31, 2009 increasing goodwill (1)	—		—			383			383
Goodwill adjustment under ASC 250 for the Auto Knight acquisition for the year ending December 31, 2011	608		—			—			608
Final valuation adjustments as required under ASC 805 for eReinsure	—		—			(2,626		)	(2,626		)
Final valuation adjustments as required under ASC 805 for PBG	—		(2,662		)	—			(2,662		)
Adjusted balance at December 31, 2011	37,240		12,970			54,290			104,500
Goodwill acquired during 2012	—		—			168			168
Balance at September 30, 2012	$	37,240	$	12,970		$	54,458		$	104,668

⁽¹⁾- Immaterial correction of an error adjustment from the year ending December 31, 2009 is shown as an adjustment to the December 31, 2011 balance since the goodwill balances from December 31, 2009 and December 31, 2010 are not being presented in this Form 10-Q.

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Variable Interest Entity Level 4 (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]
The Company's maximum exposure to loss in the VIE	$ 1,139	$ 1,142

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

Income taxes for interim periods have been computed using an estimated annual effective tax rate. This rate is revised, if necessary, at the end of each successive interim period to reflect the current estimate of the annual effective tax rate.

As part of the final valuation determinations for the 2011 acquisition of eReinsure, the Company recorded a $0.2 million liability against a $0.7 million research and experimentation credit carryforward deferred tax asset. The Company has reviewed its uncertain tax positions and management has concluded that there are no other amounts required to be recorded in accordance with ASC 740-10.

The Company is currently undergoing an examination of its federal income tax returns by the Internal Revenue Service for the tax years ending December 31, 2009 and 2010. The results of this audit, including any potential increases or decreases to the Company's tax liability for those years, are unknown at the present time.

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Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Related Party Transactions

The following table details the amounts recorded on the Company's Consolidated Balance Sheets and Consolidated Income Statement resulting from related party transactions:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Income recorded by the Company from related parties	$	—	$	—	$	218	$	—
					At
					September 30, 2012		December 31, 2011
Accounts receivable from related parties					$	134	$	125

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Recently Issued Accounting Standards Level 4 Cumulative Effect adjustment (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred acquisition costs	$ 56,903	$ 55,467	$ 6,400
Deferred income taxes	26,023	24,614	2,300
Retained Earnings (Accumulated Deficit)	$ 46,725	$ 35,150	$ 4,200

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Statutory Reporting and Dividend Restrictions Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Statutory Reporting and Dividend Restrictions [Abstract]

Statutory Accounting Practices Disclosure [Table Text Block]

The Company's insurance subsidiaries may pay dividends to the Company, subject to statutory restrictions. Payments in excess of statutory restrictions (extraordinary dividends) to the Company are permitted only with prior approval of the insurance departments of the applicable state of domicile. All dividends from subsidiaries were eliminated in the Consolidated Financial Statements. The following table sets forth the dividends paid to the Company by its insurance company subsidiaries for the following periods:

	Nine months ended		Twelve months ended
	September 30, 2012		December 31, 2011
Ordinary dividends	$	285	$	7,558
Extraordinary dividends	—		830
Total dividends	$	285	$	8,388

The following table details the combined statutory capital and surplus of the Company's insurance subsidiaries, the required minimum statutory capital and surplus and the combined amount available for ordinary dividends of the Company's insurance subsidiaries at:

	September 30, 2012		December 31, 2011
Combined statutory capital and surplus of the Company's insurance subsidiaries	$	54,157	$	50,230
Required minimum statutory capital and surplus	$	15,300	$	15,300
Amount available for ordinary dividends of the Company's insurance subsidiaries	$	2,060	$	2,344

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Income	$ 4,110	$ 4,072	$ 11,575	$ 9,024
Other comprehensive Income (Loss), net of tax:
Unrealized holding gains (losses) arising during the period	1,432	720	2,666	1,165
Related tax (expense) benefit	(501)	(252)	(933)	(454)
Less: reclassification of losses(gains) included in net income	16	(1,196)	6	(2,423)
Related tax benefit	(6)	419	(2)	848
Unrealized gains (losses) on available-for-sale securities, net of tax	941	(309)	1,737	(864)
Unrealized loss on interest rate swap	(159)	(2,030)	(915)	(3,300)
Related tax benefit	55	710	320	1,155
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax	(39)	0	(83)	0
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, Tax	15	0	29	0
Unrealized loss on interest rate swap, net of tax	(128)	(1,320)	(649)	(2,145)
Other comprehensive (loss) income before non-controlling interest, net of tax	813	(1,629)	1,088	(3,009)
Less: comprehensive income attributable to non-controlling interest	6	0	7	4
Other comprehensive income (loss)	807	(1,629)	1,081	(3,013)
Comprehensive income	$ 4,917	$ 2,443	$ 12,656	$ 6,011

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Summary of Significant Accounting Policies

Fortegra's interim Consolidated Financial Statements as of September 30, 2012 and 2011 are unaudited and have been prepared following the significant accounting policies disclosed in Note 2 of the Notes to the Consolidated Financial Statements of the Company's Annual Report, except as discussed in Note 3 of this Form 10-Q for the adoption of the new guidance on Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts effective January 1, 2012.

Principles of Consolidation

The unaudited Consolidated Financial Statements include the accounts of Fortegra Financial Corporation and its majority-owned and controlled subsidiaries. All material intercompany account balances and transactions have been eliminated. The third-party ownership of 15% of the common stock of SFLAC has been reflected as non-controlling interest on the Consolidated Balance Sheets. Income (loss) attributable to SFLAC's minority shareholders has been reflected on the Consolidated Statements of Income as income (loss) attributable to non-controlling interest and on the Consolidated Statements of Comprehensive Income as comprehensive income (loss) attributable to non-controlling interest.

Comprehensive Income (Loss)

Comprehensive income (loss) includes both net income and other items of comprehensive income comprised of unrealized gains and losses on investment securities classified as available-for-sale and unrealized gains and losses on the interest rate swap.

Use of Estimates

Preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation, which had no material impact on net income, comprehensive income or loss, net cash provided by operating activities or stockholders' equity, except as disclosed in Note 3.

Change in Accounting Estimate - Unearned Premium Reserves for the Payment Protection Segment

Prior to the three months ended September 30, 2012, the Company's method of estimating unearned premium reserves in relation to the loss patterns and the related recognition of income for certain types of credit property and vendor single interest payment protection products was based on the pro-rata method.  The use of the pro-rata method was based on the best information available at the time the Company's financial statements were prepared.

During the past two years the Company has increased the volume of business related to these product types, thereby increasing the volume of policy and claims data specific to the Company's product types. During the three months ended September 30, 2012, the Company determined it had accumulated a sufficient volume of policy and claims data to be able to perform an actuarial analysis in order to determine the preferable estimation approach. As a result of the analysis of the recently collected additional data, the Company has gained better insight into its product loss patterns and can provide improved judgment and estimation to more accurately calculate the unearned premium reserves and the associated recognition of income. Upon completion of the analysis, Management determined that the Rule of 78s applied on a daily basis provides a more accurate representation of historical loss patterns and the recognition of the related income; as such, the estimation method was changed. The change in approach has been accounted for as a change in accounting estimate that is effected by a change in accounting principle and is justifiable in that it is the preferable approach for income recognition based on the Company's actuarial study.  This change in accounting estimate was applied prospectively in accordance with ASC 250-10-45-18. Summarized below is the effect of the change in accounting estimate on the Consolidated Statement of Income for the following periods:

	For the Three and Nine Months Ended
	September 30, 2012
Revenues:
Net earned premium	$	1,845
Ceding commission	2,135
Net increase to total revenues from the change in accounting estimate	3,980
Expenses:
Commissions	2,739
Other operating expenses	(268		)
Net increase to total expenses from the change in accounting estimate	2,471
Net increase to income before income taxes from the change in accounting estimate	1,509
Income taxes	533
Net increase to net income from the change in accounting estimate	$	976
Increase to earnings per share from the change in accounting estimate:
Basic	$	0.05
Diluted	$	0.05

Immaterial Correction of Prior Period Errors

Prior to the filing of the Company’s Form 10-Q for the three months ended September 30, 2012, the Company identified errors related to the purchase accounting adjustments for the April 2009 acquisition of B&G and the 2011 acquisition of Auto Knight. As a result, the Company’s historical balances for goodwill, property and equipment and deferred taxes were incorrectly reported in prior period filings for the years ending December 31, 2009, 2010 and 2011, respectively. Management evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that the errors were immaterial to each of the prior periods noted above.

As a result, in this Form 10-Q, the Consolidated Balance Sheet data as of December 31, 2011 has been revised to reflect the correction of the error associated with the Auto Knight acquisition. This correction increased goodwill by $0.6 million and increased deferred income tax liabilities by $0.6 million.

In addition, the Consolidated Balance Sheet data as of December 31, 2009 has been revised to reflect the correction of the error associated with the B&G acquisition. This correction increased goodwill by $0.4 million, decreased deferred income tax liabilities by $0.3 million and decreased property and equipment by $0.7 million. The revised financial data will be reflected in future filings containing Consolidated Balance Sheet information for the year ending December 31, 2009.

Subsequent Events

The Company reviewed all material subsequent events that occurred up to the date the Company's Consolidated Financial Statements were issued to determine whether any event required recognition or disclosure in the financial statements and/or disclosure in the notes thereto. For more information, please see the note, "Subsequent Events."

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Investments Level 4 Investments - Cost, Gross Unrealized Gains, Losses and Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	$ 107,150	$ 92,311
Fair Value	110,833	93,509
Obligations of the U.S. Treasury and U.S. Government agencies [Member}
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	20,853	25,751
Gross Unrealized Gains	923	611
Gross Unrealized Losses	(1)	(2)
Fair Value	21,775	26,360
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	15,770	17,609
Gross Unrealized Gains	473	388
Gross Unrealized Losses	0	(5)
Fair Value	16,243	17,992
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	69,835	47,304
Gross Unrealized Gains	2,336	594
Gross Unrealized Losses	(63)	(426)
Fair Value	72,108	47,472
Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	501	1,272
Gross Unrealized Gains	11	26
Gross Unrealized Losses	0	0
Fair Value	512	1,298
Asset-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	191	375
Gross Unrealized Gains	4	12
Gross Unrealized Losses	0	0
Fair Value	195	387
Total Fixed Maturity Securites [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	107,150	92,311
Gross Unrealized Gains	3,747	1,631
Gross Unrealized Losses	(64)	(433)
Fair Value	110,833	93,509
Common Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	99	144
Gross Unrealized Gains	18	26
Gross Unrealized Losses	(5)	(17)
Fair Value	112	153
Preferred Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	5,783	1,059
Gross Unrealized Gains	190	7
Gross Unrealized Losses	0	0
Fair Value	5,973	1,066
Total Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or Amortized Cost	5,882	1,203
Gross Unrealized Gains	208	33
Gross Unrealized Losses	(5)	(17)
Fair Value	$ 6,085	$ 1,219

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Notes Payable Level 4 (Details) (USD $)			9 Months Ended			12 Months Ended
	Sep. 30, 2012 Covenant Rate	Dec. 31, 2011 Rate	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Maximum [Member]	Sep. 30, 2012 Long-term Debt [Member]	Dec. 31, 2011 Bankers Life of Louisiana [Member] Minimum [Member]	Dec. 31, 2011 Southern Financial Life Insurance Company [Member] Minimum [Member]	Dec. 31, 2011 Insurance Company of the South [Member] Minimum [Member]	Dec. 31, 2011 Lyndon Southern Insurance Company [Member] Minimum [Member]	Dec. 31, 2011 Life of the South Insurance Company [Member] Minimum [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Initiation Date					Aug. 02, 2012
Maximum balance allowed on revolving credit facility	$ 125,000,000	$ 85,000,000			$ 125,000,000
Line of Credit Facility, Revolving Credit Conversion to Term Loan, Description					50.0
Line of Credit Facility, Current Borrowing Capacity					75,000,000
Line of Credit Facility, Expiration Date					Aug. 02, 2017
Line of credit, incremental amount available					50,000,000
Write off of Deferred Debt Issuance Cost					700,000
Covenant Requirement, total leverage ratio				3.50
Covenant Requirement, fixed charge coverage atio			2
Covenant Requirement, reinsurance ratio			50.00%
Covenant Requirement, RBC ratio						250.00%	250.00%	250.00%	250.00%	250.00%
SunTrust Bank, N.A. - revolving credit facility, maturing June 2013	71,168,000	73,000,000
Interest rate on note payable at the end of the respective periods:	3.59%	4.59%
2012 (remaining three months)	1,250,000
2013	5,000,000
2014	5,000,000
2015	5,000,000
2016	5,000,000
Thereafter	49,918,000
Total	$ 71,168,000
Total Leverage Ratio - Well Fargo Bank, credit facility	2.40
Fixed Charge Coverage Ratio-Wells Fargo, credit facility	3.86
Reinsurance Ratio-Wells Fargo Bank, credit facility	75.00%
RBC Ratio - Bankers Life of Louisiana	507.00%
RBC Ratio - Southern Financial Life Insurance Company	2039.00%
RBC Ratio - Insurance Company of the South	495.00%
RBC Ratio - Lyndon Southern Insurance Company	339.00%
RBC Ratio - Life of the South Insurance Company	352.00%

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Subsequent Event

In late October 2012, the named storm, Sandy made landfall in the United States.  Given its recent occurrence and the limited information available at this time, we cannot estimate the amount of any possible losses associated with this event. The impact, which we do not believe will be material, will be reflected in the Company's results for the three months ending December 31, 2012.

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Fair Value of Financial Instruments Level 4 Rollforward of Level 3 Assets measured at Fair Value (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Fair Value Disclosures [Abstract]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value	$ 1,204	$ 1,425
Included in net income	0	372
Included in other comprehensive (loss) income	-19	-148
Sales	(47)	(607)
Transfers into (out of) Level 3	(7)	45
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value	$ 1,131	$ 1,087

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Notes Payable Level 3 (Tables)

9 Months Ended

Sep. 30, 2012

Payables and Accruals [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

The Company's Note Payable consisted of the following at:	September 30, 2012			December 31, 2011
Wells Fargo Bank, N.A.- credit facility, maturing August 2017	$	71,168		$	—
Maximum balance allowed on Wells Fargo Bank, N.A credit facility	$	125,000		$	—
SunTrust Bank, N.A. - revolving credit facility, maturing June 2013	$	—		$	73,000
Maximum balance allowed on SunTrust Bank, N.A revolving credit facility	$	—		$	85,000
Interest rate on the respective note payable at the end of the respective periods:	3.59		%	4.59		%

Schedule of Maturities of Long-term Debt [Table Text Block]

2012 (remaining three months)	$	1,250
2013	5,000
2014	5,000
2015	5,000
2016	5,000
Thereafter	49,918
Total	$	71,168

Line of Credit Covenant Requirements [Table Text Block]

The following is a summary of the Company's more significant financial covenants related to the Wells Fargo Bank, N.A. facility calculated at September 30, 2012, except for RBC Ratios, which under the Credit Agreement are to reflect the ratios calculated as of the most recent fiscal year end, in this case December 31, 2011.

		Actual At
Covenant	Covenant Requirement	September 30, 2012
Total leverage ratio	not more than 3.50	2.40
Fixed charge coverage ratio	not less than 2.00	3.86
Reinsurance ratio	not less than 50%	75.0%
RBC Ratio's		Actual at December 31, 2011
RBC Ratio - Bankers Life of Louisiana	not less than 250%	507.0%
RBC Ratio - Southern Financial Life Insurance Company	not less than 250%	2,039.0%
RBC Ratio - Insurance Company of the South	not less than 250%	495.0%
RBC Ratio - Lyndon Southern Insurance Company	not less than 250%	339.0%
RBC Ratio - Life of the South Insurance Company	not less than 250%	352.0%

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Derivative Financial Instruments - Interest Rate Swap

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Financial Instruments - Interest Rate Swap

Cash Flow Hedge

The Company uses interest rate swaps as part of its risk management strategy to manage interest rate risk and cash flow risk that may arise in connection with the variable interest rate provision of the Company's preferred trust securities. The Company accounts for its derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, which requires all derivative instruments to be carried at fair value on the balance sheet.

Changes in fair value associated with the effective portion of a derivative instrument designated as a qualifying cash flow hedge are recognized initially in other comprehensive income (loss). When the cash flows for which the derivative is hedging materialize and are recorded in income or expense, the associated gain or (loss) from the hedging derivative previously recorded in accumulated other comprehensive income (loss) is recognized in earnings. If a cash flow hedge is de-designated because it is no longer highly effective, or if the hedge relationship is terminated, the cumulative gain or loss on the hedging derivative to that date will continue to be reported in accumulated other comprehensive income (loss) unless the hedged forecasted transaction is no longer expected to occur, at which time the cumulative gain or loss is recorded into earnings.

The Company records the fair value of the derivative instrument in other assets or other liabilities. To the extent a derivative is an effective hedge of the cash flow risk of the hedged debt obligation, any change in the derivative's fair value is recorded in accumulated other comprehensive income ("AOCI"), net of income tax. To the extent the derivative is an ineffective hedge, that portion of the change in fair value is recorded in other operating expenses or interest expense as appropriate. The Company is not a party to leveraged derivatives and does not enter into derivative financial instruments for trading or speculative purposes.

The Company has a single interest rate swap (the "Swap"), designated as a cash flow hedge, with Wells Fargo Bank, N.A., pursuant to which the Company swapped the floating rate portion of its outstanding preferred trust securities to a fixed rate. The Swap commenced in June 2012 and expires in June 2017. The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of derivative instruments and indicates where within the Consolidated Balance Sheets each is reported:

		At
	Balance Sheet Location	September 30, 2012			December 31, 2011
Derivatives designated as cash flow hedging instruments:
Interest rate swap - notional value		$	35,000		$	35,000
Fair value of the Swap	Other Liabilities	$	(4,599	)	$	(3,601	)
Unrealized loss, net of tax, on the fair value of the Swap	AOCI	$	(2,989	)	$	(2,340	)
Variable rate of the interest rate swap (1)		0.39		%	—		%
Fixed rate of the interest rate swap (1)		3.47		%	—		%

^{(1) -} The swap took effect in June 2012.

The following table summarizes the pretax impact of the interest rate swap designated as a cash flow hedge on the Consolidated Financial Statements for the following periods:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
(Loss) recognized in AOCI on the derivative-effective portion	$	(159	)	$	(2,030	)	$	(915	)	$	(3,300	)
(Loss) reclassified from AOCI into income-effective portion	$	39		$	—		$	83		$	—
Gain (loss) recognized in income on the derivative-ineffective portion	$	—		$	—		$	—		$	—

The table below shows the estimated amount to be reclassified to earnings from AOCI during the next 12 months. These net losses reclassified into earnings are expected to primarily increase net interest expense related to the respective hedged item.

	At
	September 30, 2012
Estimated loss to be reclassified to earnings from AOCI during the next 12 months	$	1,105