UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2013~~2014

Commission file number 333-189686

HOMEOWNERS OF AMERICA HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		57-1219329
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1333 Corporate Drive, Suite 325, Irving, TX 75038

(Address of principal executive offices) (Zip Code)

(972) 607-4241 ~~(Registrant’s telephone number) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None~~

~~Indicate by~~(Registrant's ~~check~~telephone ~~mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x~~number)

~~Indicate by~~Securities ~~check~~registered ~~mark if the registrant is not required to file reports~~ pursuant to Section ~~13 or Section 15~~12(db) of the ~~Exchange~~ Act~~. Yes~~: ~~¨No x~~None

~~Indicate by~~Securities ~~check~~registered ~~mark~~pursuant ~~whether the registrant (1) has filed all reports required~~ to ~~be filed by~~ Section ~~13 or 15~~12(dg) 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 ¨ None

Indicate by check mark ~~whether~~if the registrant ~~has~~is ~~submitted~~a ~~electronically~~well-known ~~and~~seasoned ~~posted on its corporate Web site~~issuer, ifas ~~any,~~defined ~~every~~in ~~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~~ 12Securities ~~months (or for such shorter period that the registrant was required to submit and post such files)~~Act. Yes x No ¨

Indicate by check mark if ~~disclosure~~the ~~of delinquent~~registrant ~~filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)~~ is not ~~contained~~required ~~herein,~~to ~~and~~file ~~will not~~reports bepursuant ~~contained,~~ to ~~the~~Section 13 ~~best of registrant’s knowledge, in definitive proxy~~ or ~~information~~Section 15(d) ~~statements incorporated by reference in Part III~~ of ~~this~~the ~~Form~~Exchange ~~10-K or any amendment to this Form 10-K~~Act. Yes ¨No 

Indicate by check mark whether the registrant is a(1) has ~~large~~filed ~~accelerated~~all ~~filer,~~reports anrequired ~~accelerated~~to ~~filer,~~be afiled ~~non-accelerated~~by ~~filer,~~Section 13 or a15(d) ~~smaller~~of ~~reporting~~the ~~company.~~Securities ~~See~~Exchange ~~the~~Act ~~definitions~~ of ~~“large~~1934 ~~accelerated~~during ~~filer”,~~the ~~“accelerated~~preceding ~~filer”~~12 ~~and~~months ~~“smaller~~(or ~~reporting~~for ~~company”~~such inshorter ~~Rule 12b-~~period that the registrant was required to file such reports), and (2) has ofbeen subject to such filing requirements for the ~~Exchange~~past ~~Act~~90 days. Yes No 

~~Large~~Indicate ~~accelerated~~by ~~filer~~check £mark ~~Accelerated~~whether ~~filer~~the £registrant ~~Non~~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-~~accelerated~~T ~~filer~~(§232.405 £of ~~Smaller~~this ~~Reporting~~chapter) ~~Company~~during xthe preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No 

Indicate by check mark ~~whether~~if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's isknowledge, ain ~~shell~~definitive ~~company~~proxy ~~(as~~or ~~defined~~information statements incorporated by reference in ~~Rule~~Part ~~12b-2~~III of ~~the~~this ~~Exchange~~Form ~~Act). Yes~~10-K ~~¨ No~~or xany amendment to this Form 10-K. 

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether the ~~voting stock held by non-affiliates of the~~ registrant ~~based~~is ona ~~the~~large ~~closing~~accelerated ~~sales price~~filer, oran ~~the~~accelerated ~~average bid and asked price on such stock~~filer, asa ofnon-accelerated ~~June 30~~filer, ~~2013,~~or ~~the~~a ~~last~~smaller ~~business~~reporting ~~day~~company. ofSee the ~~registrant’s~~definitions ~~most~~of ~~recently~~"large ~~completed~~accelerated ~~second quarter~~filer", ~~was~~"accelerated ~~$0.00.~~filer" ~~Shares of the registrant’s common stock held by each executive officer~~ and ~~director~~"smaller ~~and~~reporting bycompany" ~~each entity or person that, to the registrant’s knowledge, owned 10% or more of registrant’s outstanding common stock as of June 30, 2013 have been excluded~~ in ~~that~~Rule ~~such~~12b-2 ~~persons may be deemed to be affiliates~~ of the ~~registrant.~~Exchange ~~This determination of affiliate status is not necessarily a conclusive determination for other purposes~~Act.

AsLarge ofaccelerated ~~March~~filer ~~28,~~ ~~2014,~~Accelerated ~~16,119,602~~filer ~~shares~~ ~~of common~~Non-accelerated ~~stock,~~filer ~~par~~ ~~value~~Smaller ~~$0.0001~~Reporting ~~per~~Company ~~share, were outstanding.~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sales price, or the average bid and asked price on such stock, as of June 30, 2014, the last business day of the registrant's most recently completed second quarter, was $0.00. Shares of the registrant's common stock held by each executive officer and director and by each entity or person that, to the registrant's knowledge, owned 10% or more of registrant's outstanding common stock as of June 30, 2014 have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 26, 2015, 16,397,125 shares of common stock, par value $0.0001 per share, were outstanding.

Documents Incorporated by Reference: None

INDEX

		Page No.
Forward-Looking Statements		1
Part I.
Item 1.	Business	2
Item 1A.	Risk Factors	1312
Item 1B.	Unresolved Staff Comments	2524
Item 2.	Properties	2524
Item 3.	Legal Proceedings	2524
Item 4.	Mine Safety Disclosures	2524
Part II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2625
Item 6.	Selected Financial ~~Information~~Data	2625
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2726
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	3634
Item 8.	Financial Statements and Supplementary Data	3635
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	5953
Item 9A.	Controls and Procedures	6053
Item 9B.	Other Information	6054
Part III.
Item 10.	Directors, Executive Officers and Corporate Governance	6155
Item 11.	Executive Compensation	6456
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6657
Item 13.	Certain Relationships and Related Transactions, and Director Independence	6859
Item 14.	Principal ~~Accountant~~Accounting Fees and Services	6960
Part IV.
Item 15.	Exhibits, ~~and~~ Financial Statement Schedules	7061
Exhibit Index		7262
Signatures		7563

FORWARD-LOOKING STATEMENTS

This Form 10-K includes forward-looking statements. These forward looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, and results of operations, strategies or prospects. All statements other than statements of historical fact included in this Form 10-K, including statements regarding our future activities, events or developments, including such things as future revenues, product development, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking statements. The words “"believe,”" “"expect,”" “"intend,”" “"anticipates,” " or “"propose,”" and other similar words and phrases, are intended to identify forward-looking statements. The forward-looking statements made in this Form 10-K are based on certain historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. These statements relate only to events as of the date on which the statements are made and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking statements made in this Form 10-K are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially. Risks and uncertainties, the occurrence of which could adversely affect our business, include the risks identified in this Form 10-K under Item 1A, Risk Factors.

PART I

Item 1. Business

INTRODUCTION

General

Homeowners of America Holding Corporation (or “"HAHC”") is a property and casualty insurance holding company incorporated in Delaware in 2005. References to “"we”", “"our”", “"us”", “"the Company”", or “"HAHC”" in this Form 10-K refer to Homeowners of America Holding Corporation and its subsidiaries, unless otherwise indicated.

In May of 2006, we began selling property and casualty insurance products in Texas and beginning April, 2014, we began offering property and casualty insurance products in Arizona through our subsidiary, Homeowners of America Insurance Company (or “ "HAIC”"). ~~We currently offer products in Texas only.~~ Our products are sold to the public through independent insurance agents. At present we offer homeowners, dwelling fire and extended coverage, tenant and condominium owner’'s policies.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and will continue to be an emerging growth company until: (i) the last day of our fiscal year following the fifth anniversary of our Registration Statement on Form S-1 filed August 8, 2013, (ii) the date on which we become a large accelerated filer, or (iii) the date on which we have issued an aggregate of $1 billion in non-convertible debt during the preceding 3 years. As an emerging growth company, we are entitled to rely on certain scaled disclosure requirements and other exemptions, including an exemption from the requirement to provide an auditor attestation to management’'s assessment of its internal controls as required by Section 404(b) of the Sarbanes-Oxley Act of 2002. We may at any time voluntarily elect to cease to avail ourselves of the scaled disclosure and other exemptions available to us as an emerging growth company, and have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. See the risk factor entitled “"We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act which allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.”" As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates.

The JOBS Act is intended to reduce the regulatory burden on emerging growth companies. As long as we qualify as an emerging growth company, we will also, among other things:

· be exempt from the “"say on pay”" provisions (requiring a non-binding vote to approve compensation of certain executive officers) and the “"say on golden parachute”" provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;

· be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended and instead provide a reduced level of disclosure concerning executive compensation; and

· be exempt from any rules that may be adopted by the Public Company Oversight Board, or PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report on the consolidated financial statements.

Although we are still evaluating the JOBS Act, we currently intend to take advantage of all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an emerging growth company.

Property and Casualty Insurance Business

We offer products with competitive prices in segments of the business that have proven long-term profitability. We are heavily invested in automated underwriting tools and use a variety of underwriting methods to select risks. Efficiency is achieved through automation. All business is sourced and processed through internet-enabled applications. Our user-friendly agent portal enables agents to rapidly quote and issue policies. We believe automation, a highly responsive and experienced underwriting and customer service staff, and local knowledge of the market all give us a competitive advantage.

As of December 31, ~~2013~~ 2014 we had 6074,~~873~~698 ~~Texas~~ residential policyholders, total assets of $7388,~~196~~082,~~020~~589 and stockholders’' equity of $810,~~276~~680,~~577~~528.

In 2010, we formed a managing general agency, Homeowners of America MGA, Inc. (or “"HAMGA”"). HAMGA provides underwriting, policy administration and claims services to our insurance company.

WeThe ~~had,~~Company's ~~until recently, offered~~ private passenger automobile ~~policies~~book toof business, written in support of its homeowners program in Texas, was terminated with our last policy expiring in October, 2013. The Texas private passenger automobile program was discontinued ~~because~~ as we were unable to capture a sufficient portion of the market at pricing which we deemed adequate to cover our expenses and provide a margin for profits. ~~The last auto policy expired in October, 2013.~~

Our Market and Opportunity

HAIC’'s market share for Texas homeowners business was estimated by SNL Financial at .6676% at the end of December 31, ~~2013~~2014, of an estimated $7.28 billion market, expressed in terms of premiums. SNL ranked HAIC as the ~~20th~~18th largest Texas homeowners company in terms of Texas premiums.

The Texas residential property market is dominated by large, national insurance companies that market through captive agents. However, the Texas market is large enough, at $7.28 billion, to accommodate a smaller company providing local knowledge and service, able to focus its attention on the more profitable segments of the Texas market and the needs of Texas independent agents.

Further, as a consequence of the catastrophic losses in Texas over the last several years, a large part of the Texas residential property market is experiencing a degree of dysfunction, which creates an opportunity for a smaller company to select business in profitable segments.

InCompetitive recent years Texas has experienced numerous catastrophic severe convective thunderstorms, among other catastrophes. This has created a hard market in North Texas (where many of these storms have occurred) for residential property insurance as companies begin to withdraw, restrict sales, and increase prices.Strengths

~~The~~All ~~Texas~~of ~~Gulf~~our ~~Coast continues~~business is sourced through internet-enabled applications. Our agents use the internet to bequote aand ~~hard~~issue ~~market~~policies, asconduct ~~well~~other ~~for~~transactions, ~~residential~~and ~~property~~look ~~products~~up ~~for~~policyholder ~~similar~~information. ~~reasons~~The agent portal or interface, ~~but~~and ~~related~~the ~~more~~actions required by the agents, are designed to ~~anticipated~~be ~~hurricane losses~~simple asand ~~well~~rapid asto ~~losses~~use. ~~sustained~~Our ~~during~~commitment ~~hurricane~~to ~~Ike~~technology has enabled us to grow rapidly without a loss in efficiency, while providing our agents with a highly satisfactory transactional experience.

~~Competitive~~Although ~~Strengths~~automated underwriting tools are used extensively to qualify and price policies, some polices cannot be automatically underwritten, as they are outside the acceptable "underwriting box". To support our agents and our policyholders, we have local, experienced, and responsive underwriting and customer service personnel. Our timely responsiveness to our agents and the underwriting support we give them is an important component of our business philosophy. We consider our relationships with our agents to be excellent as a result.

~~All~~Our ofmanagement ~~our~~team ~~business is~~has ~~sourced~~many ~~through~~years ~~internet-enabled~~of ~~applications~~insurance experience in Texas. Our ~~agents~~knowledge ~~use~~of the ~~internet~~Texas tomarket ~~quote~~helps ~~and~~us ~~issue~~to ~~policies,~~better ~~conduct~~identify ~~other~~those ~~transactions, and~~market ~~look~~segments upknown ~~policyholder~~by ~~information.~~us ~~The~~to ~~agent~~produce ~~portal~~superior orprofit ~~interface~~opportunities, and ~~the~~to ~~actions~~avoid ~~required~~those bythat ~~the~~do ~~agents,~~not. ~~are~~Our ~~designed~~pricing philosophy is to ~~be simple~~maximize ~~and~~profit ~~rapid~~margins towithin ~~use.~~credible ~~Our~~segments ~~commitment~~of tothe ~~technology~~market ~~has~~while ~~enabled~~avoiding ussegments toof ~~grow~~the ~~rapidly~~market ~~without~~where aopportunities ~~loss~~for inprofit ~~efficiency,~~are ~~while~~limited. ~~providing our~~This ~~agents~~allows ~~with~~us ato ~~highly~~set ~~satisfactory~~prices ~~transactional~~competitively ~~experience~~within self-selected (based on price) market segments.

Although automated underwriting tools are used extensively to qualify and price policies, some polices cannot be automatically underwritten, as they are outside the acceptable “underwriting box”. To support our agents and our policyholders, we have local, experienced, and responsive underwriting and customer service personnel. Our timely responsiveness to our agents and the underwriting support we give them is an important component of our business philosophy. We consider our relationships with our agents to be excellent as a result.3

~~Our~~We ~~management~~have ~~team has~~long-standing ~~many~~relationships ~~years~~with ofa ~~insurance~~large ~~experience~~number ~~in Texas. Our knowledge~~ of ~~the~~successful ~~Texas market helps us to better identify those market segments known by us to produce superior profit opportunities,~~ and toproductive ~~avoid~~independent ~~those~~agents ~~that~~in ~~do not~~Texas. Our pricing philosophy is to maximize profit margins within credible segments of the market while avoiding segments of the market where opportunities for profit are limited. This allows us to set prices competitively within self-selected (based on price) market segments.

3We are a Texas-based company focusing on residential property business. As such, we can spend virtually all of our time researching and developing ways to improve our core business. This specialization, our use of technology, and our relatively small size, allow us to swiftly identify and react to opportunities and changes in the Texas market. If and when we expand into additional significant markets, we will staff the Company with personnel who are intimately familiar with each new market.

WeCompetitive ~~have long-standing relationships with a large number of successful and productive independent agents in Texas. Many of these relationships predate the founding of our company.~~Weaknesses

We are a ~~Texas-based~~ new company ~~focusing~~competing onagainst ~~residential~~larger, ~~property~~well-established ~~business~~companies. AsMost ~~such,~~of weour ~~can~~competitors ~~spend~~and ~~virtually~~ all of ~~our~~the ~~time~~large ~~researching~~competitors ~~and~~that ~~developing ways~~dominate tothe ~~improve~~personal ~~our~~lines ~~core~~insurance ~~business.~~market ~~This~~in ~~specialization,~~Texas ~~our~~and ~~use~~elsewhere ofare ~~technology,~~well-recognized and ~~our~~respected ~~relatively~~brands, ~~small~~such ~~size,~~as ~~allow~~State usFarm, toAllstate, ~~swiftly identify~~Farmers, ~~and~~Nationwide, ~~react~~Travelers, toUSAA, ~~opportunities~~Liberty Mutual, and ~~changes~~others. inThese ~~the~~companies ~~Texas~~are ~~market.~~known Ifto ~~and~~independent ~~when~~agents weand ~~expand~~consumers ~~into~~alike. ~~additional~~These ~~significant~~brands ~~markets, we~~continue ~~will~~to ~~staff~~advertise ~~the~~heavily ~~Company~~on ~~with~~television ~~personnel~~and ~~who~~through ~~are~~other ~~intimately~~media, ~~familiar~~while ~~with~~we ~~each~~do ~~new market~~not.

~~Competitive~~Most ~~Weaknesses~~of our competitors, again all the large, well-known brands, have a satisfactory financial stability rating from A.M. Best of B+ or higher, whereas we are not rated by A.M. Best and must rely on our Demotech, Inc. rating to compete. This puts us in an inferior competitive position as A.M. Best is better known and more highly regarded among independent agents, lenders, and consumers. A Demotech, Inc. rated company is generally acceptable to lenders throughout the United States, but Demotech tends to be unknown to independent agents in many parts of the United States, especially those who market insurance products away from the Gulf and Atlantic coasts.

WeUnlike ~~are~~our ~~a new company competing against larger, well-~~established ~~companies. Most of our~~ competitors ~~and~~we ~~all~~must ofrely ~~the~~heavily ~~large~~on ~~competitors~~reinsurers ~~that~~for ~~dominate~~financial ~~the personal~~support ~~lines insurance market~~ in ~~Texas~~order ~~and~~to ~~elsewhere~~achieve ~~are~~our ~~well-recognized~~revenue ~~and respected brands, such as State Farm, Allstate, Farmers, Nationwide, Travelers, USAA, Liberty Mutual, and others~~objectives. ~~These~~This ~~companies~~reliance ~~are~~may ~~known~~adversely toaffect ~~independent~~our ~~agents~~ability ~~and consumers alike. These brands continue~~ to ~~advertise~~compete ~~heavily~~price-wise, onshould ~~television~~our ~~and~~reinsurance ~~through~~costs ~~other~~significantly ~~media, while we do not~~increase.

~~Most~~Our oflarger ~~our~~ competitors~~, again~~ ~~all~~have the ~~large,~~advantage ~~well-known brands, have a satisfactory financial stability rating from A.B. Best~~ of B+spreading ortheir ~~higher,~~risks ~~whereas we~~over ~~are~~a ~~not~~more ~~rated~~diverse byinsurance ~~A.M.~~product ~~Best~~offering and ~~must~~broader ~~rely~~geographical onmarkets ~~our~~than ~~Demotech,~~we ~~Inc~~can. ~~rating to compete.~~ This ~~puts~~can usgive inthem ana ~~inferior~~ competitive ~~position as~~advantage ~~A.M.~~through ~~Best~~efficient isallocation ~~better~~of ~~known~~risks and ~~more~~costs ~~highly~~as ~~regarded~~well ~~among~~as ~~independent~~reduced ~~agents,~~operating ~~lenders,~~costs ~~and~~through ~~consumers.~~economies ~~A Demotech, Inc. rated company is generally acceptable to lenders throughout the United States, but Demotech tends to be unknown to independent agents in many parts~~ of ~~the United States, especially those who market insurance products away from the Gulf and Atlantic coasts~~scale.

~~Unlike~~Further, the ability of our ~~established~~ main competitors weto ~~must~~be ~~rely~~able ~~heavily~~to onoffer ~~reinsurers~~a ~~for~~number of consumer focused insurance products including private passenger automobile, personal liability umbrellas and even life, health as well as various commercial coverages and other financial ~~support~~services inproducts ~~order~~while towe ~~achieve~~offer ~~our~~only ~~revenue~~residential ~~objectives.~~property ~~This~~coverage, ~~reliance may~~appeals ~~adversely~~to ~~affect~~consumers ~~our~~who ~~ability~~prefer to ~~compete~~consolidate ~~price-wise,~~their ~~should~~insurance solutions with a single supplier. Broader product offerings also make our ~~reinsurance~~competitors ~~costs~~more ~~significantly~~appealing ~~increase~~to independent agents.

~~Our~~Importance ~~larger competitors have the advantage~~ of ~~spreading~~Rating their risks over a more diverse insurance product offering and broader geographical markets than we can. This can give them a competitive advantage through efficient allocation of risks and costs as well as reduced operating costs through economies of scale.Agencies

~~Further,~~The ~~the~~financial ~~ability of~~strength ~~our~~and ~~main~~stability ~~competitors~~of toinsurance becompanies ~~able~~are torated ~~offer~~by a ~~number~~variety of ~~consumer~~rating ~~focused~~agencies. ~~insurance~~The ~~products~~two ~~including~~most ~~private~~prominent ~~passenger~~in ~~automobile, personal~~the ~~liability~~insurance ~~umbrellas~~industry ~~and~~are ~~even~~A.M. ~~life,~~Best ~~health~~Company asand ~~well~~Demotech, asInc. ~~various~~The ~~commercial~~ratings ~~coverages~~assigned by these and other ~~financial~~rating ~~services~~agencies ~~products while~~are weused ~~offer~~by ~~only~~lenders ~~residential~~to ~~property~~help ~~coverage,~~determine ~~appeals~~whether toan ~~consumers~~insurer ~~who~~is ~~prefer~~a satisfactory provider of homeowners insurance; by agents to ~~consolidate~~help ~~their~~determine which insurance ~~solutions~~companies are the most reliable to do business with a; ~~single~~and ~~supplier.~~by ~~Broader~~consumers ~~product~~and ~~offerings~~others ~~also~~to ~~make~~judge ~~our~~the ~~competitors~~ability ~~more~~of ~~appealing~~an insurance company to ~~independent~~meet ~~agents~~its obligations.

~~Importance~~We are not rated by A.M. Best, although we are rated A, Exceptional by Demotech, Inc. We have never been reviewed by A.M. Best and do not intend to seek a rating from A.M. Best until we believe we can secure a minimum rating of ~~Rating~~B+, ~~Agencies~~that being the minimum accepted by most lenders as well as independent agents. Our analysis, applying known A.M. Best rating criteria, shows that we will need additional capital before we can qualify for an acceptable A.M. Best rating. Unlike Demotech, A.M. Best tends to penalize companies that are highly leveraged, i.e. that utilize reinsurance to support premium writings. HAIC has a gross premium to capital ratio of nearly 6-to-1, although our net premium to capital ratio is less than 1-to-1. We would need to reduce our gross ratio to approximately 2-to-1, either by increasing capital (the denominator) or decreasing premium writings (the numerator). Capital is expected to grow over time, but in order to achieve our premium revenue objective and size efficiency, we must continue to rely on reinsurers to ameliorate risks and provide financial support. In summary, we do not plan to give up revenues or efficiency of size as a means to qualify for an acceptable A.M. Best rating. Our Demotech rating has proved satisfactory to date in attracting an acceptable amount of business from independent agents and satisfies lenders as to our financial stability.

The financial strength and stability of insurance companies are rated by a variety of rating agencies. The two most prominent in the insurance industry are A.M. Best Company and Demotech, Inc. The ratings assigned by these and other rating agencies are used by lenders to help determine whether an insurer is a satisfactory provider of homeowners insurance; by agents to help determine which insurance companies are the most reliable to do business with; and by consumers and others to judge the ability of an insurance company to meet its obligations.4

WeA ~~are~~rating ~~not rated~~ by A.M. Best, ~~although~~is wemore ~~are~~widely ~~rated~~accepted A,than ~~Exceptional~~a by Demotech, ~~Inc~~rating. ~~We have never been reviewed by~~ A.M. Best ~~and~~has dobeen ~~not~~the ~~intend to seek a~~ rating ~~from~~standard ~~A.M.~~relied ~~Best~~upon ~~until~~to werate ~~believe~~insurance wecompanies ~~can~~in ~~secure~~the aUnited ~~minimum~~States ~~rating~~for ofmany ~~B+,~~years. ~~that~~The ~~being~~Demotech ~~the~~rating ~~minimum~~alone ~~accepted~~may bynot ~~most~~be ~~lenders as~~sufficient ~~well~~to asallow ~~independent~~us ~~agents.~~to ~~Our~~expand ~~analysis,~~into ~~applying~~parts ~~known~~of ~~A.M.~~the ~~Best~~United ~~rating~~States ~~criteria,~~where ~~shows~~it ~~that~~is wenot ~~will~~as ~~need~~well ~~additional~~known ~~capital before~~or weas ~~can~~widely ~~qualify~~used. ~~for~~However, anit ~~acceptable~~has ~~A.M.~~been ~~Best~~sufficient ~~rating.~~in ~~Unlike~~Texas ~~Demotech,~~and ~~A.M.~~we ~~Best~~expect ~~tends~~it to ~~penalize~~be ~~companies~~sufficient ~~that~~in ~~are~~expansion ~~highly leveraged,~~states ~~i.e.~~ that ~~utilize~~the ~~reinsurance~~company tohas ~~support~~under ~~premium writings~~study. ~~HAIC~~Demotech has aeight ~~gross~~Financial ~~premium~~Stability toRatings: ~~capital~~A" ~~ratio~~(Unsurpassed), ofA' ~~nearly~~(also ~~6.5-to-1~~Unsurpassed), ~~although~~ ~~our~~A ~~net~~(Exceptional), ~~premium~~S to(Substantial), ~~capital~~M ~~ratio~~(Moderate), isL ~~less than 1-to-1. We would need to reduce our gross ratio to approximately 2-to-1~~(Licensed), ~~either~~ byNR ~~increasing capital~~ (~~the~~Not ~~denominator~~Rated), orand ~~decreasing~~I ~~premium writings~~ (~~the numerator~~Ineligible). ~~Capital~~This rating is ~~expected~~subject to ~~grow~~review ~~over time,~~by ~~but~~Demotech inat ~~order~~least toannually. ~~achieve~~Demotech ~~our~~is ~~premium~~provided ~~revenue~~financial ~~objective~~information ~~and~~as ~~size~~well ~~efficiency,~~as werequested ~~must~~information ~~continue~~ to ~~rely~~assist onthem ~~reinsurers~~in totheir ~~ameliorate risks~~evaluation. ~~and~~The ~~provide~~absence ~~financial~~of ~~support.~~a Insufficient ~~summary,~~minimum werating doof ~~not~~less ~~plan~~than toA ~~give~~from upDemotech, ~~revenues~~in orthe ~~efficiency~~absence of ~~size as~~ a ~~means~~rating toof ~~qualify for~~B+ anor ~~acceptable~~better from A.M. Best, ~~rating.~~would ~~Our~~have ~~Demotech~~a ~~rating~~significant ~~has~~negative ~~proved~~affect ~~satisfactory~~on toHAIC's ~~date~~sales, ~~in attracting an acceptable amount of~~ business ~~from~~retention, ~~independent agents~~ and ~~satisfies~~ability ~~lenders as~~ to ~~our~~appoint ~~financial~~or ~~stability~~retain agents.

4Our Strategies

AOur ~~rating~~long-term bystrategy ~~A.M.~~in ~~Best is more widely accepted than a Demotech rating. A.M. Best has been~~ the ~~rating~~Houston ~~standard~~metropolitan ~~relied~~area ~~upon~~is to ~~rate~~increase ~~insurance companies in~~ the ~~United~~proportion ~~States for many years. The Demotech rating alone may not be sufficient to allow us to expand into parts~~ of ~~the~~business ~~United States~~we ~~where~~write ~~it is not as well known or as widely used~~there. ~~However,~~We itbelieve ~~has~~that ~~been~~hard-market ~~sufficient~~conditions in ~~Texas and we expect it to be sufficient in expansion states~~ that ~~the~~area ~~company~~present ~~has~~an ~~under~~unusual ~~study.~~opportunity Demotech has eight Financial Stability Ratings: A” (Unsurpassed), A’ (also Unsurpassed), A (Exceptional), S (Substantial), M (Moderate), L (Licensed), NR (Not Rated), and I (Ineligible). This rating is subject to ~~review~~write bybusiness ~~Demotech~~with ata ~~least~~greater ~~annually.~~profit ~~Demotech is provided financial information as well as requested information to assist them in their evaluation~~potential. ~~The~~At ~~absence~~the ofsame atime ~~sufficient~~we ~~minimum~~are ~~rating~~limiting ofgrowth ~~less than A from Demotech,~~ in ~~the absence~~areas ofwith agreater ~~rating~~exposure ~~of B+ or better from A.M. Best, would have a significant negative affect on HAIC’s sales, business retention, and ability~~ to ~~appoint~~severe orconvective ~~retain agents~~thunderstorms.

~~Our~~We ~~Strategies~~will continue to manage our business through automated and non-automated selective underwriting processes and through creative pricing and product design. This allows us to attract and select the most potentially profitable segments of the market.

~~Our~~We ~~long-term~~will ~~strategy in~~continue ~~the~~to ~~Houston~~take ~~metropolitan~~advantage ~~area~~of istechnological tochanges. ~~increase~~As an example, with the ~~proportion~~help of ~~business~~our wetechnology ~~write~~provider, ~~there~~Silvervine, Inc. We(formerly ~~believe~~known ~~that~~as ~~hard-market~~IDMI, ~~conditions in~~Inc.), ~~that~~we ~~area~~are ~~present~~developing ana ~~unusual~~"direct ~~opportunity~~business" toportal, ~~write~~which ~~business~~would ~~with~~allow aus ~~greater~~to ~~profit~~quote prices to potential. Atcustomers shopping the ~~same~~internet. ~~time~~In Texas our intent is to use this means to drive new business to our agents. If and when we ~~are~~expand ~~limiting growth~~beyond inTexas, ~~areas~~we ~~with~~may ~~greater~~also ~~exposure~~use this portal to ~~severe~~do ~~convective~~business ~~thunderstorms~~directly with policyholders.

WeOur ~~will~~long-term ~~continue~~growth ~~to manage~~strategy includes continued growth of our ~~business~~Texas ~~through~~residential ~~automated~~property business and ~~non-automated~~expansion ~~selective~~of ~~underwriting~~our ~~processes~~residential ~~and~~property ~~through~~business ~~creative~~into other states, but within the constraints imposed by our pricing philosophy, our competitors, and ~~product design~~our capital resources. ~~This~~We ~~allows~~have usapplied for licenses to ~~attract~~write ~~and~~business ~~select~~in ~~the~~thirty-two ~~most~~additional ~~potentially~~states. To ~~profitable~~date, ~~segments~~we have received certificates of ~~the~~authority ~~market~~from twenty-five including, Alabama, Arkansas, Colorado, Delaware, Georgia, Indiana, Illinois, Iowa, Kentucky, Louisiana, Michigan, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Oregon, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington and Wyoming to offer homeowners, dwelling fire and extended coverage, tenant and condominium policies.

We ~~will~~began ~~continue~~selling ~~to take~~homeowners ~~advantage~~coverage ofin ~~technological~~Arizona ~~changes.~~in As2014 anand ~~example,~~plan ~~with~~to ~~the~~begin ~~help~~selling ofhomeowners ~~our~~products ~~technology~~in ~~provider,~~South ~~IDMI,~~Carolina ~~Inc.,~~and weVirginia ~~are~~during ~~developing a~~2015. We ~~“direct~~are ~~business”~~researching ~~portal,~~additional ~~which~~states ~~would~~for ~~allow~~future usexpansion, towhich ~~quote~~aren't ~~prices~~planned tofor ~~potential~~entry ~~customers~~until ~~shopping~~2016 ~~the~~or ~~internet~~later. Dwelling ~~In Texas~~fire ~~our~~and ~~intent~~extended iscoverage, totenant ~~use~~and ~~this~~condominium ~~means~~owner's topolicies ~~drive~~will ~~new~~be ~~business~~added to ~~our~~these ~~agents.~~expansion Ifstates, ~~and~~including ~~when we expand beyond Texas~~Arizona, wein ~~may~~the ~~also~~latter ~~use this~~half ~~portal~~of ~~to do business directly with policyholders~~2015.

Our long-term growth strategy includes continued growth of our Texas residential property business and expansion of our residential property business into other states, but within the constraints imposed by our pricing philosophy, our competitors, and our capital resources. We have applied for licenses to write business in thirty states and plan to begin writing business in Arizona in the second quarter of 2014. The application process is often lengthy and the process involved in setting up new markets is lengthy as well. We do not anticipate writing in more than one or two new states in 2014 out of the thirty states that we have applied in.Underwriting

~~Underwriting~~General

~~General~~We limit the business we write within geographical areas in order to avoid undue concentration of risk and to reduce the uncertainty inherent in weather-related risks. For example, many coastal zip codes are closed to new business either to avoid undue concentration of homes to catastrophic loss, or because the proximity to the coastline.

WeAutomated ~~limit~~underwriting ~~the~~tools ~~business we~~are ~~write~~used ~~within~~to ~~geographical~~select ~~areas~~and inprice ~~order~~business. toThe ~~avoid~~automated ~~undue~~tools ~~concentration~~include ofinsurance ~~risk~~scores ~~and~~derived tofrom ~~reduce~~ the ~~uncertainty~~applicant's ~~inherent~~financial inhistory; ~~weather-related risks.~~the ~~For~~applicant's ~~example,~~prior ~~many~~loss ~~coastal~~history; ~~zip~~exposure ~~codes~~of ~~are~~the ~~closed~~property to ~~new~~tidal ~~business~~surge; ~~either~~and tounderwriting ~~avoid~~questionnaires. ~~undue~~Third-party ~~concentration~~property ofinspections ~~homes~~and ~~to catastrophic loss~~other, ornon-automated ~~because~~underwriting ~~the~~tools ~~proximity~~are also used to ~~the~~verify ~~coastline~~underwriting information and to select business.

~~Automated~~An ~~underwriting tools~~experienced, ~~are~~local ~~used~~underwriting tostaff ~~select~~of ~~and~~sufficient ~~price~~size, ~~business.~~supervision ~~The~~and ~~automated~~quality ~~tools~~is ~~include~~maintained ~~insurance~~in ~~scores~~order ~~derived~~to ~~from~~properly ~~the~~select ~~applicant’s~~risks ~~financial history;~~and ~~the applicant’s prior loss history; exposure of the property~~ to ~~tidal~~provide ~~surge;~~a ~~and~~rapid ~~underwriting questionnaires. Third-party property inspections~~ and ~~other,~~knowledgeable ~~non-automated~~response ~~underwriting tools are also used~~ to ~~verify~~agents ~~underwriting information~~ and ~~to select business~~policyholders.

AnAll ~~experienced, local~~ underwriting ~~staff~~functions ofare ~~sufficient~~performed ~~size,~~by ~~supervision~~our ~~and~~employees. ~~quality~~As isof ~~maintained~~December in31, ~~order~~2014, toour ~~properly~~underwriting ~~select~~department ~~risks~~had ~~and~~9 tostaff ~~provide a rapid and knowledgeable response to agents and policyholders~~members.

~~All underwriting functions are performed by our employees. As of December 31, 2013, our underwriting department had 8 staff members.~~5

5Use of Computer Models to Assess Catastrophic Loss Risk

~~Use~~Property ofand ~~Computer Models~~casualty insurance companies writing business in areas subject to ~~Assess~~catastrophic ~~Catastrophic~~losses ~~Loss~~routinely use highly sophisticated computer simulation models to assess the probabilities of catastrophic losses. These models are generally licensed by providers who specialize in the development and maintenance of these models. The two most prominent providers of models affecting property insurers in the United States are AIR Worldwide ("AIR") and Risk Management Solutions, Inc. ("RMS"). HAIC relies on the AIR hurricane model results, applied quarterly to HAIC's active policies, to help determine how much catastrophe reinsurance to purchase, how to properly price business that is subject to significant hurricane losses, and how to most economically and prudently allocate business geographically. HAIC does not license any models, but relies on its reinsurance broker to provide this service, which is customary for smaller companies who cannot economically license and operate these models.

~~Property~~Claims and casualty insurance companies writing business in areas subject to catastrophic losses routinely use highly sophisticated computer simulation models to assess the probabilities of catastrophic losses. These models are generally licensed by providers who specialize in the development and maintenance of these models. The two most prominent providers of models affecting property insurers in the United States are AIR Worldwide (“AIR”) and Risk Management Solutions, Inc. (“RMS”). HAIC relies on the AIR hurricane model results, applied quarterly to HAIC’s active policies, to help determine how much catastrophe reinsurance to purchase, how to properly price business that is subject to significant hurricane losses, and how to most economically and prudently allocate business geographically. HAIC does not license any models, but relies on its reinsurance broker to provide this service, which is customary for smaller companies who cannot economically license and operate these models.Administration

~~Claims~~The ~~Administration~~Texas Department of Insurance regulates the minimum content and timeliness of various claims notices and transactions. We strive to exceed those requirements and to adjust claims fairly.

~~The~~A ~~Texas~~variety ~~Department~~ of ~~Insurance~~independent, ~~regulates~~licensed ~~the~~third-party ~~minimum~~field ~~content~~adjusters ~~and~~are ~~timeliness~~used ofto ~~various~~physically examine and evaluate claims ~~notices~~on-site, and ~~transactions~~to provide estimates of damages or loss. We ~~strive~~hired two field adjusters as employees to ~~exceed~~assist ~~those requirements~~in ~~and~~heavily-populated areas. HAMGA has relationships with a number of large, independent claims adjusting firms who are committed to ~~adjust~~provide field adjusters in the event of a large-scare catastrophic event. Claims are processed internally by our employees, who are experienced, local claims ~~fairly~~personnel. All decisions regarding payment or non-payment of claims are made by HAIC.

APolicy variety of independent, licensed third-party field adjusters are used to physically examine and evaluate claims on-site, and to provide estimates of damages or loss. We hired two field adjusters as employees to assist in heavily-populated areas. HAMGA has relationships with a number of large, independent claims adjusting firms who are committed to provide field adjusters in the event of a large-scare catastrophic event. Claims are processed internally by our employees, who are experienced, local claims personnel. All decisions regarding payment or non-payment of claims are made by HAIC.Administration

~~Policy~~The ~~Administration~~Texas Department of Insurance regulates the minimum content and timeliness of various policyholder notices and transactions, including the issuance of policies, cancellations, and renewals. We strive to exceed those requirements and to treat all customers fairly.

~~The~~Policies ~~Texas~~are ~~Department of~~maintained ~~Insurance~~by ~~regulates~~ the ~~minimum~~Policy ~~content~~Transaction ~~and~~System, ~~timeliness~~or ofPTS, ~~various~~licensed ~~policyholder~~by ~~notices~~a ~~and~~third party, Silvervine, Inc., or Silvervine (formerly known as IDMI, Inc.). Most policyholder transactions are automated, including ~~the~~policyholder billing, policy issuance of, ~~policies~~cancellation, ~~cancellations~~expiration and renewal notices, and ~~renewals~~late payment notices. WeEndorsements ~~strive~~or policy changes are made by agents or underwriting personnel utilizing PTS. Our employees perform all customary company policy administration functions, with the exception of the mailing of policy documents to ~~exceed~~new ~~those~~and ~~requirements~~renewal policyholders. The printing and tomailing ~~treat~~of ~~all~~these ~~customers~~documents ~~fairly~~is conducted by a third party, Primoris Services LLC of Warner-Robbins, GA.

Policies are maintained by the Policy Transaction System, or PTS, licensed by a third party, IDMI, Inc., or IDMI. Most policyholder transactions are automated, including policyholder billing, policy issuance, cancellation, expiration and renewal notices, and late payment notices. Endorsements or policy changes are made by agents or underwriting personnel utilizing PTS. Our employees perform all customary company policy administration functions, with the exception of the mailing of policy documents to new and renewal policyholders. The printing and mailing of these documents is conducted by a third party, Primoris Services LLC of Warner-Robbins, GA.Technology

~~Technology~~Policy processing and administration is conducted using the PTS. PTS enables agents, our employees and other users to input and complete transactions, review policy information, and otherwise perform customary duties by accessing PTS through the internet. Policy quoting and issuing, policy billing and administration, claims processing and payment, agent commission maintenance and payment, and various other tasks are initiated and completed using PTS.

~~Policy~~PTS ~~processing and administration~~ is ~~conducted~~licensed ~~using~~by ~~the~~HAIC, ~~PTS.~~but ~~PTS~~is ~~enables~~owned ~~agents,~~by ~~our~~an ~~employees~~outside ~~and~~vendor ~~other~~Silvervine, ~~users~~Inc. toor ~~input~~Silvervine ~~and~~(formerly ~~complete~~known ~~transactions, review~~as ~~policy information~~IDMI, ~~and~~Inc.). ~~otherwise~~Silvervine ~~perform~~specializes ~~customary~~in ~~duties~~providing bysoftware ~~accessing~~to ~~PTS~~insurance ~~through~~companies throughout the ~~internet~~United States. ~~Policy~~HAIC ~~quoting~~pays ~~and~~Silvervine ~~issuing, policy~~a ~~billing~~monthly ~~and~~fee ~~administration,~~to ~~claims~~maintain ~~processing~~PTS and ~~payment,~~pays ~~agent~~fees ~~commission~~to ~~maintenance~~Silvervine ~~and~~for ~~payment,~~custom ~~and~~system ~~various~~modifications, ~~other tasks~~based ~~are~~on ~~initiated~~estimated ~~and~~man ~~completed using PTS~~hours.

Silvervine hosts PTS ison ~~licensed~~its byservers ~~HAIC~~located in Warner Robbins, ~~but~~ isGA, ~~owned~~with bya anmirror ~~outside~~processor ~~vendor~~hosting ~~IDMI.~~both ~~IDMI~~system ~~specializes~~and policy records in ~~providing~~Atlanta, ~~software~~GA. toThrough ~~insurance~~this ~~companies~~"mirror ~~throughout~~processing environment" the ~~United~~Company ~~States. HAIC~~has ~~pays~~established ~~IDMI~~ a ~~monthly~~data ~~fee~~security toprotocol ~~maintain~~which ~~PTS~~provides instant "off-site" back-up of both its operating software and ~~pays~~data. ~~fees~~In toaddition, ~~IDMI~~the ~~for~~Company ~~custom~~has ~~system~~offsite ~~modifications~~storage of the Silvervine operating software with Iron Mountain Intellectual Property Management, ~~based~~Inc. onand ~~estimated~~offsite ~~man~~cloud ~~hours~~storage of its data.

Primoris Services L.L.C., an affiliate of IDMI, hosts PTS on its servers located in Warner Robbins, GA, with a mirror processor hosting both system and policy records in Atlanta, GA. Through this “mirror processing environment” the Company has establish a data security protocol which provides instant “off-site” back-up of both its operating software and data. In addition, the Company has offsite storage of the IDMI operating software with Iron Mountain Intellectual Property Management, Inc. and offsite cloud storage of its data.6

6Reserves for Loss and Loss Adjustment Expenses

~~Reserves~~We establish reserves for the estimated total unpaid costs of losses, including loss adjustment expenses ("LAE"). Unless otherwise specified below, the term "loss reserves" shall encompass reserves for both losses and LAE. Unpaid losses and LAE are based on claim adjusters' estimates of the cost of settlement, plus an estimate for losses incurred but not yet reported ("IBNR") based upon historical experience, industry loss experience, and management's estimates. Loss reserves reflect our best estimate of the total cost of (i) claims that have been incurred, but not yet paid, and (ii) claims that have been incurred, but not yet reported (IBNR). Loss ~~Adjustment Expenses~~reserves established by us are not an exact calculation of our liability, but rather loss reserves represent management's best estimate of our company's liability based on application of actuarial techniques and other projection methodology, taking into consideration other facts and circumstances known at the balance sheet date. The process of setting reserves is complex and necessarily imprecise. The impact of both internal and external variables on ultimate loss and LAE costs is difficult to estimate. To arrive at its best estimate for losses we use damage estimating software developed and owned by acknowledged industry leader, Insurance Service Office. Reserve factors for IBNR are reviewed at least quarterly by an independent actuarial consultant. In addition, our appointed independent actuary attests to the adequacy of our unpaid claim reserve, including IBNR at calendar year end.

WeLosses establish reserves for the estimated total unpaid costs of losses, including loss adjustment expenses (“LAE”). Unless otherwise specified below, the term "loss reserves" shall encompass reserves for both losses and LAE. Unpaid losses and LAE are based on claim adjusters’ estimates of the cost of settlement, plus an estimate for losses incurred but not yet reported (“IBNR”) based upon historical experience, industry loss experience, and management’s estimates. Loss ~~reserves~~Adjustment reflect our best estimate of the total cost of (i) claims that have been incurred, but not yet paid, and (ii) claims that have been incurred, but not yet reported (IBNR). Loss reserves established by us are not an exact calculation of our liability, but rather loss reserves represent management's best estimate of our company's liability based on application of actuarial techniques and other projection methodology, taking into consideration other facts and circumstances known at the balance sheet date. The process of setting reserves is complex and necessarily imprecise. The impact of both internal and external variables on ultimate loss and LAE costs is difficult to estimate. To arrive at its best estimate for losses we use damage estimating software developed and owned by acknowledged industry leader, Insurance Service Office. Reserve factors for IBNR are reviewed at least quarterly by an independent actuarial consultant. In addition, our appointed independent actuary attests to the adequacy of our unpaid claim reserve, including IBNR at calendar year end.Expenses

~~Losses~~The following table provides a reconciliation of the beginning and ~~Loss~~ending ~~Adjustment~~reserve ~~Expenses~~balances for losses and LAE, gross of reinsurance for 2014, 2013, and 2012:

The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE, gross of reinsurance for 2013, 2012, and 2011:

	2014			2013			2012
Reserve for losses and LAE, beginning of year	$	15,884,062		$	11,641,296		$	9,308,974
Reinsurance recoverables on losses and LAE		(15,090,175	)		(10,618,032	)		(8,469,000	)
Reserve for losses and LAE, net of reinsurance recoverables at beginning of year		793,887			1,023,264			839,974

Add provision for claims and LAE occurring in:
Current year		2,882,295			2,015,107			3,904,000
Prior years		48,000			244,000			160,000

Net incurred losses and LAE during the current year		2,930,295			2,259,107			4,064,000

Deduct payments for claims and LAE occurring in:
Current year		2,111,930			1,927,482			3,057,000
Prior years		598,146			561,002			823,710

Net claim and LAE payments during the current year		2,710,076			2,488,484			3,880,710

Reserve for losses and LAE, net of reinsurance recoverables, at end of year		1,014,106			793,887			1,023,264

Reinsurance recoverables on losses and LAE		13,995,400			15,090,175			10,618,032

Losses and loss adjustment expenses at December 31	$	15,009,506		$	15,884,062		$	11,641,296

	2013			2012			2011
Reserve for losses and LAE, beginning of year	$	11,641,296		$	9,308,974		$	6,924,564
Reinsurance recoverables on losses and LAE		(10,618,032	)		(8,469,000	)		(6,151,000	)
Reserve for losses and LAE, net of reinsurance recoverables at beginning of year		1,023,264			839,974			773,564
Add provision for claims and LAE occurring in:
Current year		2,015,107			3,904,000			3,337,276
Prior years		244,000			160,000			87,000
Net incurred losses and LAE during the current year		2,259,107			4,064,000			3,424,276
Deduct payments for claims and LAE occurring in:
Current year		1,927,482			3,057,000			2,794,866
Prior years		561,002			823,710			563,000
Net claim and LAE payments during the current year		2,488,484			3,880,710			3,357,866
Reserve for losses and LAE, net of reinsurance recoverables, at end of year		793,887			1,023,264			839,974
Reinsurance recoverables on losses and LAE		15,090,175			10,618,032			8,469,000
Losses and loss adjustment expenses at December 31	$	15,884,062		$	11,641,296		$	9,308,974

Loss Reserve Development

Our losses and LAE represent estimated costs ultimately required to settle all claims for a given period. The following table illustrates development of the estimated liability for losses and LAE for the years 2006 (inception) through ~~2013~~2014 (dollars in thousands):

	2006	2007	2008	2009	2010	2011	2012	2013	2014
Reserves for Claims & Loss Adjustment Expenses	241	686	2,517	2,723	6,000	7,339	9,362	4,258	8,511

Cumulative paid claims and claim expenses

One year later	132	364	2,390	3,391	4,528	7,784	10,704	3,883
Two years later	132	453	2,791	3,502	4,946	8,425	30,200
Three years later	132	522	3,135	3,564	4,935	8,770
Four years later	132	523	3,643	3,580	4,936
Five years later	132	523	3,748	3,580
Six years later	132	523	3,748
Seven years later	132	523
Eight years later	132

Reserves re-estimated
One year later	-	-	580	652	972	1,519	11,135	1,420
Two years later	-	10	272	135	345	460	4,981
Three years later	-	-	863	15	19	98
Four years later	-	-	398	-	-
Five years later	-	-	-	-
Six years later	-	-	-
Seven years later	-	-
Eight years later	-

Deficiency (redundancy)	(109)	(173)	833	842	(1,083)	1,333	15,857	(1,795)

	2006			2007			2008		2009		2010			2011		2012			2013
Reserves for Claims & Loss Adjustment Expenses		241			686			2,517		2,723		6,000			7,339		9,362			4,258
Cumulative paid claims and claim expenses
One year later		132			364			2,390		3,391		4,528			7,784		10,704
Two years later		132			453			2,791		3,502		4,946			8,425
Three years later		132			522			3,135		3,564		4,935
Four years later		132			523			3,643		3,580
Five years later		132			523			3,748
Six years later		132			523
Seven years later		132
Reserves re-estimated
One year later		-			-			580		652		972			1,519		11,135
Two years later		-			10			272		135		345			460
Three years later		-			-			863		15		19
Four years later		-			-			398		-
Five years later		-			-			-
Six years later		-			-
Seven years later		-
Deficiency (redundancy)		(109	)		(173	)		833		842		(1,084	)		626		(9,793	)

Reinsurance

~~Reinsurance~~Our insurance company uses a number of reinsurers to minimize or avoid the risk of adverse loss results, particularly weather-related losses. By utilizing reinsurance an insurance company can "cede" a portion of its potential claims and claims expense to another insurance company specializing in "assuming" insurance risks from "primary" companies. "Quota share" and "excess of loss" reinsurance programs are used, more fully described below. When selecting reinsurance coverage, HAIC considers the financial strength and stability of the providers, their history of responding to claims, and their overall reputation. HAIC requires that all reinsurers have an A.M. Best rating of A- (Excellent), or better, or an S&P rating of AA- or better. HAIC continually monitors the financial condition of its reinsurers through the aid of AON Benfield, its reinsurance broker.

Our insurance company uses a number of reinsurers to minimize or avoid the risk of adverse loss results, particularly weather-related losses. By utilizing reinsurance an insurance company can “cede” a portion of its potential claims and claims expense to another insurance company specializing in “assuming” insurance risks from “primary” companies. “Quota share” and “excess” reinsurance programs are used, more fully described below. When selecting reinsurance coverage, HAIC considers the financial strength and stability of the providers, their history of responding to claims, and their overall reputation. HAIC requires that all reinsurers have an A.M. Best rating of A- (Excellent), or better, or an S&P rating of AA- or better. HAIC continually monitors the financial condition of its reinsurers with the aid of its reinsurance brokers, AON, and Guy Carpenter.8

The following table shows the A.M. Best and S&P ratings of each of our reinsurers at December 31, ~~2013~~2014.

Reinsurer	A.M. Best Rating	S&P or S&P Lloyds Rating
American Standard Insurance Company of Wisconsin	A	NR
Caitlin Re Switzerland Limited	A	A
Everest Reinsurance Company	A+	A+
Hannover Re (Bermuda) Ltd.	A+	AA-
Hannover Rueck SE	A+	AA-
Houston Casualty Company (UK Branch)	A+	AA
Lloyds Syndicate No. 0510 RJ Kiln & Company	A	A+
Lloyds Syndicate No. 2001 Amlin Underwriting Limited (AML)	A	A+
Lloyds Syndicate No. 2014 Acappella (ACA)	A	A+
Mapfre Re, Compania de Reaseguros, S.A.	A	A
Montpelier Reinsurance Ltd.	A	A-
Odyssey Reinsurance Company	A	A-
Q-Re LLC	A	A
R+V Versicherung AG	NR	AA-
SCOR Reinsurance Company	A	A+
Shelter Mutual Insurance Company	A	NR
Sirius International Insurance Group	A	A-
Swiss Reinsurance America Corporation	A+	AA-
Taiping Reinsurance Co. Ltd.	A	A
Tokio Millennium Re AG	A++	AA-

	A.M. Best	S&P or S&P
Reinsurer	Rating	Lloyds Rating
Arch Reinsurance Company	A+	A+
Endurance Reinsurance Corporation of America	A	A
Everest Reinsurance Company	A+	A+
SCOR Reinsurance Company	A	A+
Hannover Rueckversicherung-Aktiengesellschaft	A+	AA-
R+V Versicherung AG	NR-5	AA-
Sirius International Insurance Group	A	A-
Odyssey Reinsurance Company	A	A-
Lloyds Syndicate No. 1274 Antares (AUL)	A	A+
Lloyds Syndicate No. 2001 Amlin Underwriting Limited (AML)	A	A+
Lloyds Syndicate No. 2791 MAP Underwriting (MAP)	A	A+
Lloyds Syndicate No. 2987 BRIT (BRIT)	A	A+
Lloyds Syndicate No. 0510 RJ Kiln & Company	A	A+
Lloyds Syndicate No. 4000 Pembroke	A	A+
Houston Casualty Company (UK Branch)	A+	AA
NGM Insurance Company	A	A
Taiping Reinsurance Co. Ltd.	A-	A-
American Standard Insurance Company of Wisconsin	A	NR

Best's Financial Strength Ratings (FSR) represents the rating agency's assessment of an insurer's ability to meet its obligations to policy holders. The rating process involves quantitative and qualitative reviews of company's balance sheet, operating performance and business profile, including comparisons to peers and industry standards and assessment of insurers operating plans, philosophy and management.

~~Best’s Financial Strength Ratings (FSR) represents the rating agency’s assessment of an insurer’s ability to meet its obligations to policy holders.~~ The ~~rating~~ratings ~~process~~scale ~~involves~~includes ~~quantitative~~six ~~and~~"Secure" qualitative reviews of company’s balance sheet, operating performance and business profile, including comparisons to peers and industry standards and assessment of insurers operating plans, philosophy and management.ratings:

~~The~~A++, ~~ratings~~A+ ~~scale includes six “Secure” ratings:~~(Superior)

A++, A+- (~~Superior~~Excellent)

AB++, A-B+ (~~Excellent~~Good)

~~B++,~~The B+scale ~~(Good)~~also includes ten ratings for companies deemed "Vulnerable"

~~The~~B, ~~scale~~B- ~~also includes ten ratings for companies deemed “Vulnerable”~~(Fair)

BC++, B-C+ (~~Fair~~Marginal)

C++, C+- (~~Marginal~~Weak)

C,D C- (~~Weak~~Poor)

DE (~~Poor~~under regulatory supervision)

EF (~~under~~in ~~regulatory supervision~~liquidation)

FS (inrating ~~liquidation~~suspended)

SStandard & Poor's (S&P) credit ratings are forward looking opinions about credit risk. The rating ~~suspended)~~represents the rating agency opinion about the ability and willingness of an insurer to meet its financial obligations in full and on time.

~~Standard~~The ~~& Poors (S&P) credit~~ ratings ~~are~~ ~~forward~~scale ~~looking~~is ~~opinions~~as ~~about credit risk. The rating represents the rating agency opinion about the ability and willingness of an insurer to meet its financial obligations in full and on time.~~follows:

~~The~~AAA ~~ratings~~– ~~scale~~Extremely ~~is as~~strong ~~follows:~~capacity to meet financial commitments

~~AAA~~AA – ~~Extremely~~Very strong capacity to meet financial commitments

AAA – ~~Very~~Strong ~~strong~~ capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances

ABBB – ~~Strong~~Adequate capacity to meet financial commitments, but ~~somewhat~~more ~~susceptible~~subject to adverse economic conditions ~~and changes in circumstances~~

BBB- –- ~~Adequate~~Considered ~~capacity~~lowest toinvestment ~~meet~~grade ~~financial commitments,~~by ~~but~~market ~~more subject to adverse economic conditions~~participants

~~BBB-~~Additional -ratings ~~Considered~~complete ~~lowest~~the scale, but all are considered below investment grade by ~~market~~and ~~participants~~have not been shown.

~~Additional~~Quota ~~ratings~~Share ~~complete~~Reinsurance. HAIC uses "quota share" reinsurance to share the ~~scale~~risk of loss on its residential property with unaffiliated companies. Quota share or "proportional" reinsurance programs provide that the reinsurer share a proportional percentage of the insurance company's claims and claim expenses. For its residential property program, ~~but all~~80% ~~are~~of ~~considered~~HAIC's ~~below~~quota ~~investment~~share ~~grade~~reinsurance program has an "occurrence cap" limiting a gross reinsured loss (claims and ~~have~~claims ~~not~~expenses ~~been~~before ~~shown~~reinsurance recoveries) to the lesser of $110 million or 175% of the premiums earned during the contract year, while 10% of its quota share program has an occurrence cap of $4 million. This limits the amount that can be recovered for a single catastrophe or occurrence. The reinsurer receives a proportional percentage of the insurance company's collected premiums, less a "ceding commission" to cover the insurance company's expenses. The ceding commission on 80% of HAIC's quota share program is subject to adjustment, with a stipulated minimum, depending on the insurance company's claims level in relation to its earned premiums (loss ratio).

~~Quota Share Reinsurance.~~ HAIC also uses “quota share” reinsurance toas ~~share~~a ~~the~~means ~~risk~~to ofwrite ~~loss~~more ~~for~~business than its ~~residential~~capital ~~property with~~resources ~~unaffiliated~~might ~~companies~~otherwise allow. ~~Quota~~The ~~share~~State orof ~~“proportional”~~Texas ~~reinsurance~~limits ~~programs provide that~~ the ~~reinsurer~~amount ~~share a proportional percentage~~ of ~~the~~"net ~~insurance~~written ~~company’s~~premiums" ~~claims~~written ~~and~~by ~~claim~~a ~~expenses. For residential~~ property an ~~“occurrence~~and ~~cap”~~casualty ~~limiting~~insurance acompany ~~gross~~to ~~reinsured~~300% ~~loss~~of ~~(claims~~its capital and ~~claims~~surplus. ~~expenses~~Net ~~before~~written ~~reinsurance~~premiums ~~recoveries) to~~are ~~the~~determined ~~lesser~~by ofdeducting ~~$80,000,000~~premiums orpaid ~~150%~~to ofreinsurers ~~the~~from premiums ~~earned~~received ~~during~~from ~~the~~policyholders. ~~contract~~Thus, ~~year.~~an ~~This~~insurance ~~limits~~company ~~the~~with ~~amount~~limited ~~that~~capital can ~~be recovered~~expand ~~for~~its abusiness ~~single~~activity ~~catastrophe~~beyond orwhat ~~occurrence.~~otherwise ~~The~~might ~~reinsurer~~be ~~receives~~achieved aby ~~proportional~~reinsuring ~~percentage of the insurance company’s collected premiums, less~~ a ~~“ceding~~portion ~~commission”~~of toits ~~cover~~business. ~~the~~As ~~insurance~~of ~~company’s~~December ~~expenses. The~~31, ~~ceding~~2014, ~~commission~~HAIC isreinsured ~~subject~~90% toof ~~adjustment,~~its ~~with~~risk aunder ~~stipulated~~property ~~minimum,~~coverage ~~depending~~and onapproximately ~~the~~64% ~~insurance~~of ~~company’s~~its ~~claims level~~risk inunder ~~relation~~casualty tocoverage ~~its~~through ~~earned~~quota ~~premiums~~share ~~(loss~~reinsurance ~~ratio)~~programs.

~~HAIC~~For ~~also~~residential ~~uses~~property, ~~quota share~~the ~~reinsurance~~following astable ashows ~~means~~the toproportion ~~write~~or ~~more~~share ~~business than its capital resources might otherwise allow. The State~~ of ~~Texas limits the amount of “net written~~ premiums” ~~written by a property~~ and ~~casualty~~losses ~~insurance~~assumed ~~company to 300% of its capital and surplus. Net written premiums are determined~~ by ~~deducting~~each ~~premiums paid to reinsurers from premiums received from policyholders~~reinsurer. Thus, an insurance company with limited capital can expand its business activity beyond what otherwise might be achieved by reinsuring a portion of its business. As of December 31, 2013, HAIC reinsured 90% of its residential property business through quota share reinsurance programs.

For residential property, the following table shows the proportion or share of premiums and losses assumed by each reinsurer.

Reinsurer		Reinsurer's Share
Catlin Insurance Company Ltd.		10.00 %
Everest Reinsurance Company		20.05 %
Montpelier Reinsurance Ltd.		5.00 %
Odyssey Reinsurance Company		5.00 %
Q-RE LLC*		12.95 %
R+V Versicherung AG*		13.00 %
SCOR Reinsurance Company		10.00 %
Swiss Reinsurance American Corporation		10.00 %
Taiping Reinsurance Co. Ltd.		4.00 %

	Reinsurer's
Reinsurer	Share
Arch Reinsurance Company		24	%
Endurance Reinsurance Corporation of America		10	%
Everest Reinsurance Company		20	%
SCOR Reinsurance Company		10	%
R+V Versicherung AG*		13	%
Odyssey Reinsurance Company		10	%
Taiping Reinsurance Co. Ltd.		3	%

*these reinsurers do not assume the personal liability risks associated with residential property policies.

*thisHAIC's ~~reinsurer~~residential ~~does~~property ~~not~~quota ~~assume the~~share ~~personal~~contracts ~~liability~~are ~~risks~~reviewed ~~associated~~annually, ~~with~~on ~~residential~~April ~~property~~1, ~~policies~~and are subject to termination as to new business or renegotiation as to terms.

AExcess ~~total~~ of ~~90%~~Loss Reinsurance. HAIC also uses "excess of ~~the insurance~~loss" ~~company’s~~reinsurance for its residential property line of business. isThis type of reinsurance covers losses, consisting of claims and claim expenses, above a certain retained amount per occurrence, subject to ~~the~~a ~~quota~~maximum ~~share program~~limit.

Currently, HAIC’s has two excess programs that limit residential property ~~quota~~losses. ~~share~~One ~~contracts~~of ~~are~~the ~~reviewed~~programs ~~annually,~~protects onthe ~~April~~insurance 1,company ~~and~~against ~~are~~large ~~subject~~numbers toof ~~termination~~individual aslosses tooriginating ~~new~~from ~~business~~single loss events – weather or ~~renegotiation as~~other catastrophes. The second program provides coverage for individual risks, generally limited to ~~terms~~losses from fire or other non-weather perils.

~~Excess~~Under the largest of ~~Loss~~the ~~Reinsurance.~~ per event programs, HAIC ~~also~~purchases ~~uses~~reinsurance ~~“excess~~covering ofan occurrence or catastrophe with a gross loss” (claims and claims expenses before reinsurance ~~for~~recoveries) ~~its~~in ~~residential~~excess ~~property~~of ~~line~~$4 million with a maximum gross loss of ~~business~~$110 million. This ~~type~~reinsurance applies to 20% of ~~reinsurance covers~~HAIC's ~~losses~~property business, ~~consisting~~but does not apply to the losses assumed by the quota share reinsurers with per event limits of ~~claims~~the ~~and~~lesser ~~claim~~of ~~expenses~~$110 million or 175% earned premium. Thus, ~~above~~under athis ~~certain~~program, ~~retained~~HAIC ~~amount~~limits its maximum net loss under this program to $400,000 (10% of $4 million) per occurrence, unless the gross loss exceeds $110 million, in which occurrence HAIC may be subject to aall ~~maximum~~losses above the $110 million limit. This excess loss coverage is purchased in layers, as shown in the table below.

Currently, HAIC has two excess programs that limit residential property losses. One of the programs protect the insurance company against large numbers of individual losses originating from single loss events – weather or other catastrophes. The second program provides coverage for individual risks, generally limited to losses from fire.10

~~Under~~The ~~the~~reinsurers ~~largest~~who ~~of the~~participate ~~per event programs, HAIC purchases reinsurance covering an occurrence or catastrophe with a gross loss (claims and claims expenses before reinsurance recoveries)~~ in ~~excess~~this ofprogram ~~$3,000,000~~as ~~($4,000,000 effective April 1, 2013) with a maximum gross loss~~ of ~~$60,000,000~~December ~~($80~~31,~~000,000~~ ~~effective~~2014 ~~April 1, 2013). This reinsurance applies to HAIC 10% retained share of the business~~ and ~~does~~ ~~not apply to the losses assumed by the quota share reinsurers, although the quota share reinsurers may elect to purchase excess reinsurance on~~ their ~~own.~~percentages ~~Thus,~~of ~~under~~participation ~~this~~as ~~program,~~it ~~the~~relates ~~insurance company limits its maximum net loss under this program~~ to ~~$300,000~~HAIC's ~~(10~~20% of ~~$3,000,000) per occurrence ($400,000 (10% of $4,000,000 effective April 1, 2013)), unless the~~ gross ~~loss~~retained ~~exceeds $60,000.000 ($80,000,000 effective April 1, 2013), in which occurrence HAIC may be subject to all~~ losses ~~above~~are ~~the $60,000,000 ($80,000,000 of effective April 1, 2013) limit. This excel loss coverage is purchased in layers,~~ as ~~shown in the table below.~~follows:

Layer/Reinsurer	Participation
$6,000,000 excess of $4,000,000
R+V Versicherung AG		100.0	%

$10,000,000 excess of $10,000,000
Everest Reinsurance Company		15.0	%
Shelter Mutual Insurance Co.		12.5	%
Sirius International Insurance		25.0	%
Lloyds Syndicate No. 0510 R.J. Kiln & Company Ltd.		25.0	%
Lloyds Syndicate No. 2001 Amlin Underwriting Limited (AML)		10.0	%
Lloyds Syndicate No. 2014 Acappella (ACA)		12.5	%

$20,000,000 excess of $20,000,000
American Standard Insurance Company of Wisconsin		10.0	%
Everest Reinsurance Company		15.0	%
Shelter Mutual Insurance Co.		5.0	%
Hannover Re (Bermuda) Ltd.		10.0	%
Mapfre Re, Compania de Reaseguros, S.A.		10.0	%
Sirius International Insurance		20.0	%
Lloyds Syndicate No. 0510 R.J. Kiln & Company Ltd.		20.0	%
Lloyds Syndicate No. 2014 Acappella (ACA)		10.0	%

$70,000,000 excess of $40,000,000
American Standard Insurance Company of Wisconsin		12.5	%
Everest Reinsurance Company		15.0	%
Shelter Mutual Insurance Co.		5.0	%
Hannover Re (Bermuda) Ltd.		10.0	%
Mapfre Re, Compania de Reaseguros, S.A.		10.0	%
Sirius International Insurance		23.75	%
Houston Casualty Company, UK Branch		11.88	%
Lloyds Syndicate No. 2014 Acappella (ACA)		11.88	%

$30,000,000 excess of $110,000,000⁽¹⁾
American Standard Insurance Company of Wisconsin		10.00	%
Everest Reinsurance Company		47.50	%
Shelter Mutual Insurance Co.		2.50	%
Hannover Re (Bermuda) Ltd.		5.00	%
Hamilton Re, Ltd		7.50	%
Sirius International Insurance		4.50	%
XL Re Ltd		10.00	%
Fubon Insurance Company Ltd		6.00	%
Taiping		5.00	%
Lloyds Syndicate 1729		2.00	%

~~The~~(1)Commencing ~~reinsurers~~August ~~who~~1, ~~participate in~~2014 ~~this~~and ~~program~~ending asNovember of30, ~~December 31~~2014, ~~2013~~the ~~and~~Company ~~their~~purchased ~~percentages~~a fifth layer of ~~participation~~property ascatastrophe itreinsurance ~~relates~~with third party reinsurers to ~~HAIC’~~cover its potential maximum loss during the 2014 hurricane season. The layer extended the Company's ~~10%~~coverage to $140 million, excess of ~~gross~~$4 ~~retained losses~~million ~~are~~of asultimate ~~follows:~~net loss arising out of each occurrence. When this coverage was in force, the Company's net retention on each loss occurrence remained at $400,000.

Layer/Reinsurer	Participation
$6,000,000 excess of $4,000,000
R+V Versicherung AG		100.0	%
$20,000,000 excess of $10,000,000
Sirius International Corporation		10.0	%
Lloyds Syndicate No. 0510 RJ Kiln & Company		15.0	%
Lloyds Syndicate No. 2001 Amlin Underwriting Limited (AML) (4UZ)		10.0	%
Lloyds Syndicate No. 2791 MAP Underwriting (MAP) (4LF)		7.5	%
Lloyds Syndicate No. 2791 MAP Underwriting (MAP) (4NZ)		17.5	%
Lloyds Syndicate No. 2987 BRIT (BRIT) (4MK)		20.0	%
Lloyds Syndicate No. 4000 Pembroke		20.0	%
$20,000,000 excess of $30,000,000
R+V		30.0	%
Sirius International Corporation		15.0	%
Houston Casualty Company (UK Branch)		5.0	%
Lloyds Syndicate No. 1274 Antares (AU) (4OZ)		10.0	%
Lloyds Syndicate No. 2001 Amlin Underwriting Limited (AML) (4UZ)		5.0	%
Lloyds Syndicate No. 2987 BRIT (BRIT) (4MK)		2.0	%
Lloyds Syndicate No. 4000 Pembroke		10.0	%
Lloyds Syndicate No. 0510 RJ Kiln		5.0	%
$30,000,000 excess of $50,000,000
American Standard Insurance Company of Wisconsin		25.0	%
R+V Versicherung AG		20.0	%
Sirius International Corporation		15.0	%
Houston Casualty Company (UK Branch)		10.0	%
Lloyds Syndicate No. 2987 (BRIT)		20.0	%
Lloyds Syndicate No. 4000 Pembroke		10.0	%

This larger excess of loss program is purchased annually with an April 1^st anniversary.

~~This~~The ~~larger~~amount of excess of loss ~~program~~reinsurance purchased is ~~purchased~~largely ~~annually~~determined ~~with~~by ansubjecting ~~April~~HAIC's ~~1st~~book ~~anniversary~~of business to a computer model which runs numerous simulations of various severities of catastrophic events and arrives at levels of Probable Maximum Loss, or PML, based on levels of probability. The model used by HAIC to estimate PML's to assist in its decision to purchase catastrophe excess of loss reinsurance is the AIR Worldwide Hurricane Historical model. The background of models is described more fully in the Underwriting section on page 5.

~~The~~HAIC's ~~catastrophe~~business is modeled quarterly, and the amount of reinsurance purchased is ~~largely~~selected ~~determined~~so bythat ~~subjecting~~a ~~HAIC’s~~sufficient ~~business~~amount of reinsurance is in place to, at minimum, cover a ~~computer~~PML ~~model~~that ~~which~~equates ~~runs~~to ~~numerous~~a ~~simulations~~hurricane ~~and~~that ~~arrives at~~might ~~levels~~be expected to occur in any given year approximately 1% of ~~Probable~~the ~~Maximum~~time ~~Loss~~or less. While the initial decision on the level of reinsurance to purchase is made annually, orfor ~~PML~~inception at each April 1st,, ~~based~~the onCompany's ~~levels~~quarterly review of ~~probability~~loss models can lead to additional purchases throughout the year. The ~~model~~amount ~~used~~purchased byis ~~HAIC~~meant to ~~estimate~~exceed ~~PML’s~~the ~~to assist~~amount ~~catastrophe~~calculated ~~reinsurance~~so ~~purchase~~that ~~decisions~~it will allow for business growth in hurricane-exposed areas, and the cost of handling claims. HAIC also estimates and includes an amount that is likely to be assessed by the ~~AIR~~Texas ~~Worldwide~~Windstorm ~~Hurricane~~Insurance ~~Historical~~Association, ~~model~~or TWIA, for a similar storm. The ~~background~~latter ofis ~~models~~included ~~is described~~because ~~more~~a ~~fully~~storm effecting HAIC would likely affect TWIA, both having business in many of the ~~Underwriting~~same ~~section~~geographical onareas. ~~page~~TWIA 5is more fully described below.

HAIC’s ~~business is~~also ~~modeled~~purchases ~~quarterly,~~residential ~~and~~property ~~the~~excess ~~amount~~ of ~~reinsurance~~loss ~~purchased~~coverage ison ~~selected so that~~ a ~~sufficient~~"per ~~amount~~risk" ~~of insurance is in place to~~basis, atreinsuring ~~minimum,~~large ~~cover~~losses ~~a PML~~ that ~~equates~~may ~~to a hurricane that might be expected to~~ occur inon ~~any~~individual ~~given~~residential ~~year approximately 1% of the time or less~~properties. ~~This~~The ~~decision~~perils iscovered ~~made~~are ~~annually,~~other ~~for~~than ~~inception~~weather-related ~~at each April 1st~~losses. The ~~amount~~coverage ~~purchased~~which isHAIC ~~meant~~has ~~to exceed~~in ~~the~~place ~~amount~~covers ~~calculated~~losses soin ~~that~~excess itof ~~will~~$500,000 ~~allow~~ for ~~business~~each ~~growth in hurricane-exposed areas~~risk, ~~and~~with ~~the~~an ~~cost~~occurrence limit of ~~handling~~$3,337,500 ~~claims. HAIC also estimates~~ and ~~includes~~ an ~~amount~~annual ~~that~~limit isof ~~likely to be assessed by the Texas Windstorm Insurance Association~~$12, ~~or TWIA~~237, ~~for a similar storm~~500. The ~~latter~~reinsurers isparticipating ~~included because a storm effecting HAIC would likely affect TWIA, both having business~~ in ~~many of~~this ~~the~~program ~~same~~are ~~geographical~~shown ~~areas.~~below ~~TWIA~~and isare ~~more~~rated ~~fully~~A- ~~described~~or ~~below~~better.

Reinsurer	Participation
Hannover Rueckversicherung-Aktiengesellschaft		20.0 %
Everest Reinsurance Company		80.0 %

~~HAIC also purchases residential property excess of loss coverage on a “per risk” basis, reinsuring large losses that may occur on individual residential properties.~~ The ~~perils covered are other than weather-related losses. Thus, this coverage is principally meant to cover losses from fire on more expensive homes. Losses are covered in excess of $500,000~~ per ~~occurrence per insured property. In addition, HAIC has in place a property per~~ risk excess of loss ~~reinsurance~~program ~~contract~~is ~~covering~~purchased ~~losses~~annually ~~in excess of $500,000 for each risk,~~ with an ~~occurrence~~April ~~limit~~1st ~~of $3,337,500 and an annual limit of $6,675,000~~anniversary. ~~All catastrophe reinsurers are rated A- or better.~~

~~The~~As ~~reinsurers~~HAIC ~~who~~relies ~~participate in~~heavily ~~this~~on ~~program~~quota share and ~~their~~catastrophe ~~percentages~~reinsurance to support its growth and continued operations and to protect it from adverse risk, the unavailability, limited availability, or increased cost of ~~participations~~reinsurance ~~are~~could ~~shown~~have ~~below:~~a material adverse effect on our business, results of operations and financial condition.

Reinsurer	Participation
Hannover Rueckversicherung-Aktiengesellschaft		20.0	%
Everest Reinsurance Company		80.0	%

The Texas Windstorm Insurance Association or TWIA

~~The~~ HAIC, ~~per~~as ~~risk~~a ~~excess~~company writing residential property insurance in Texas is a member of ~~loss~~ ~~program~~and is ~~purchased~~subject ~~annually~~to ~~with~~assessments anby ~~April~~TWIA. ~~1st~~TWIA ~~anniversary~~is a so-called "residual market", providing coverage for windstorm, hurricane, hail, and other weather-related perils in the Texas counties that face the Gulf of Mexico. The principal purpose of TWIA is to provide insurance protection from tropical cyclones to residential and commercial property owners along the Gulf of Mexico who would otherwise find it difficult or impossible to secure coverage from private companies.

~~HAIC~~Assessments ~~relies~~are ~~heavily~~determined based on ~~quota~~ a formula largely determined by the market share ~~and~~of ~~catastrophe~~the ~~reinsurance~~member tocompany ~~support~~in ~~its~~the ~~growth~~property ~~and~~lines ~~continued~~covered ~~operations~~by ~~and~~TWIA. toPotential ~~protect~~assessments itmay ~~from~~be ~~adverse~~offset ~~risk~~by windstorm business voluntarily written in the affected areas by the member company. ~~The unavailability,~~HAIC ~~limited~~has ~~availability,~~written orinsurance ~~increased~~within ~~cost~~the offirst ~~reinsurance~~tier ~~could~~including ~~have~~wind acoverage, however not in amounts material ~~adverse~~enough ~~effect~~to onoffset ~~our~~exposure ~~business,~~to ~~results of~~assessments. ~~operations~~HAIC's ~~and~~assessment ~~financial~~percentage ~~condition~~for the loss year 2014 was 0.75% of assessable losses.

Losses incurred by TWIA are funded in a number of ways, of which assessments are a part. The ~~Texas~~first ~~Windstorm~~$400M ~~Insurance~~of ~~Association or~~losses are expected to be funded by premiums charged Coastal consumers and accumulated in a Premium and Catastrophe Reserve Fund. The next $500M in losses is to be funded by a Bond Anticipation Note/Class 1 Public Securities, repaid by future premiums collected by TWIA from Coastal residents.

~~HAIC,~~The asnext a$1B ~~company~~in ~~writing residential~~losses ~~property~~is ~~insurance~~to be funded by Class 2 Post-Event Bonds. Policyholders in ~~Texas~~the iscatastrophe aarea ~~member~~are to repay 70% of ~~and~~the isamount ~~subject~~funded tothrough ~~assessments~~surcharges byon ~~TWIA~~future premiums. ~~TWIA~~Member iscompanies aare ~~so-called~~to ~~“residual market”,~~repay ~~providing~~30% ~~coverage~~of ~~for~~the ~~windstorm,~~amount ~~hurricane,~~funded ~~hail,~~through ~~and~~member ~~other~~assessments. ~~weather-related~~Of ~~perils~~the next $1.45B, $400M in ~~the~~losses ~~Texas~~is ~~counties~~to ~~that face~~be funded by catastrophe bonds to be sold to the ~~Gulf~~public ofand ~~Mexico~~$1.05B ~~The~~of ~~principal~~losses ~~purpose~~are covered out of ~~TWIA~~traditional isreinsurance. toThe ~~provide~~next ~~insurance~~$500 ~~protection~~million ~~from~~in ~~tropical~~losses ~~cyclones~~are to ~~residential and~~be ~~commercial~~paid ~~property~~by ~~owners~~Class ~~along~~3 ~~the~~Post ~~Gulf~~Event ofbonds, ~~Mexico~~which ~~who~~are ~~would~~100% ~~otherwise~~funded ~~find~~through itmember ~~difficult~~assessments. Thus, orTWIA ~~impossible~~member companies are subject to ~~secure~~a ~~coverage from~~potential ~~private~~assessment ~~companies~~of their portion of $800M (30% of $1B + 100% of $500M).

~~Assessments~~HAIC's ~~are~~property ~~determined based~~reinsurance onprograms aall ~~formula~~include ~~largely~~these ~~determined~~potential ~~by the market share of the member company in the property lines covered by TWIA. Potential~~ assessments ~~may be offset by windstorm business voluntarily written~~ in the ~~affected~~definition ~~areas~~of bya ~~the~~covered member company. HAIC has written insurance within the first tier including wind coverage, however not in amounts material enough to offset exposure to assessments. HAIC’s assessment percentage for the loss ~~year 2013 was 0~~.~~75% of assessable losses.~~

~~Losses~~The ~~incurred~~funding bymechanisms available to TWIA ~~are~~ ~~funded~~do innot aaddress ~~number~~losses ofin ~~ways,~~excess of ~~which~~the ~~assessments are a part~~$3.85B ~~The~~outlined ~~first~~above, ~~$300M~~whether ofcaused ~~losses~~by ~~are~~a ~~expected~~single toevent beor ~~funded~~multiple byevents. ~~premiums charged~~The ~~Coastal~~funding ~~consumers~~of ~~and~~TWIA ~~accumulated~~is ingoverned aby ~~Premium~~Texas ~~and Catastrophe Reserve Fund~~law. ~~The~~It ~~next $500M in losses~~ is tounknown beif ~~funded by~~the aState ~~Bond~~of ~~Anticipation~~Texas ~~Note/Class~~would, 1through ~~Public~~legislation ~~Securities~~or otherwise, ~~repaid~~provide byadditional ~~future~~funding ~~premiums~~or ~~collected~~what byfunding ~~TWIA~~methods ~~from~~would ~~Coastal~~be ~~residents~~used.

~~The~~Recent next $1B in losses is to be funded by Class 2 Post-Event Bonds. Policyholders in the catastrophe area are to repay 70% of the amount funded through surcharges on future premiums. Member companies are to repay 30% of the amount funded through member assessments. The next $500M in losses is to be funded by member assessments. If losses exceed the $2.3B provided for by the aforementioned means, TWIA has purchased an additional $850M of insurance from private sector reinsurers. Thus, TWIA member companies are subject to a potential assessment of their portion of $800M (30% of $1B + $500M).Developments

~~HAIC’s~~A ~~property reinsurance~~number ~~programs~~of ~~all~~our ~~include~~directors ~~these~~are ~~potential~~among ~~assessments~~the beneficial owners of Inter-Atlantic Management, Inc. or "Inter-Atlantic". Per the terms of the Advisory Agreement dated August 1, 2013, Inter-Atlantic will be issued annually on February 1st , a grant of the Company's common stock which in aggregate will have a fair market value of $150,000 at the ~~definition~~time of grant. On February 2, 2015, the Company issued 227,273 shares of common stock at $0.66 a ~~covered~~share, ~~loss~~to Inter-Atlantic.

~~The~~On ~~funding~~February ~~mechanisms available~~16, to2015, ~~TWIA~~the doCompany ~~not~~completed ~~address~~placement ~~losses in excess~~ of ~~the~~its ~~$3.15B~~new ~~outlined~~2015 ~~above,~~catastrophe ~~whether~~reinsurance ~~caused~~program bywith a ~~single~~panel ~~event or multiple events. The funding~~ of third ~~TWIA~~party isreinsurers, ~~governed~~effective byApril ~~Texas~~1, ~~law~~2015. ItCoverage iswas ~~unknown~~extended ifto ~~the~~$150 ~~State~~million ofin ~~Texas~~excess ~~would,~~of ~~through~~$5 ~~legislation~~million orin ~~otherwise,~~the ~~provide additional~~new ~~funding~~treaty ~~or what funding methods would be used~~year.

~~Recent~~On ~~Developments~~February 16, 2015, the Company completed placement of its new 2015 quota share reinsurance program with a panel of third party reinsurers, effective April 1, 2015. The quota share ratio remains the same (90%) as the current program. Certain participants on the program will change from the 2014 program.

OnCorporate March 14, 2014, the Company completed placement of its 2014-2015 catastrophe reinsurance program with third party reinsurers, effective April 1, 2014. Coverage was extended to $110 million in excess of $4 million in the new treaty year.Information

OnOur ~~March~~principal 3,executive ~~2014,~~offices ~~Inter-Atlantic Fund,~~are ~~L.P.,~~located aat ~~beneficial~~1333 ~~owner~~Corporate ofDrive, ~~more~~Suite ~~than~~325, 5%Irving, ofTX ~~our~~75038 ~~outstanding~~and ~~shares~~our oftelephone ~~common~~number ~~stock,~~is ~~distributed~~(972) ~~11,512,301 shares, $~~607-4241.~~0001 par~~ ~~value~~Our ~~per~~website ~~share,~~address tois ~~the~~www.hoaic.com. ~~limited~~Information ~~partners~~contained ofon ~~Inter-Atlantic~~our ~~Fund,~~website ~~L.P.~~or inthat ~~accordance~~can ~~with~~be ~~Inter-Atlantic~~accessed ~~Fund,~~through ~~L.P.’s partnership~~our ~~agreement.~~website ~~See~~does ~~Part~~not ~~III,~~constitute ~~Item~~a 12part inof this Form 10-K ~~for~~and ~~further~~is ~~details~~not incorporated herein by reference.

On February 1, 2014, the Company issued 288,462 shares of common stock at $0.52 a share, as determined by an independent valuation expert who valued the Company as of December 31, 2013, to Inter-Atlantic Management, Inc., a beneficial owner of more than 5% of our outstanding shares of common stock. Per the terms of the Advisory Agreement dated August 1, 2013, Inter-Atlantic Management, Inc. will be issued annually on February 1st , a grant of the Company’s common stock which in aggregate will have a fair market value of $150,000 at the time of grant.Employees

12As of December 31, 2014 we had 43 employees, all but one of whom are full time employees, including six executive officers. We are not a party to any collective bargaining agreement and have not experienced any work stoppages or strikes as a result of labor disputes. We consider relations with our employees to be satisfactory.

OnAvailable January 31, 2014, the Company executed a new lease agreement to expand its corporate office approximately 2,802 feet, effective April 1, 2014 and to extend the expiration date to May 31, 2017. Base rent will increase April 1, 2014 to $11,597 per month through May 31, 2016 and will increase to $12,720 per month through May 31, 2017.Information

OnWe ~~January~~are ~~24,~~subject ~~2014,~~ to the ~~Company~~information ~~completed~~requirements ~~placement~~ of ~~its~~the ~~2014-2015~~Exchange ~~quota~~Act ~~share~~and ~~reinsurance~~file ~~program~~annual, quarterly and current reports, and other information with ~~third~~the ~~party~~SEC. ~~reinsurers~~You may read and copy these reports on our website, ~~effective~~www.hoaic.com ~~April 1~~under the Investor Relations section and at the SEC's Public Reference Room at 100 F Street NE, ~~2014~~Washington, D.C. ~~The~~20549. ~~quota~~Information ~~share~~on ~~ratio~~the ~~remains~~operation of the ~~same~~Public ~~(90%)~~Reference asRoom is available by calling the ~~current~~SEC ~~program~~at 1-800-SEC-0330. ~~Certain~~You ~~participants~~may onalso access this information at the ~~program~~SEC's ~~will~~website ~~change from~~(www.sec.gov). This site contains reports, proxy and information statements and other information regarding issuers that file electronically with the ~~2013~~SEC. ~~program~~In addition, we make available, without charge, through our website (www.hoaic.com), electronic copies of our SEC filings, as soon as reasonably practicable after we electronically file such reports or amendments with, or furnish information to, the SEC.

On August 31, 2013, the Company entered into a Stock Purchase Agreement with Mr. Spencer Tucker and Mr. Richard Backus pursuant to which the Company purchased 480,000 and 60,000 shares of the Company’s common stock from Mr. Tucker and Mr. Backus, respectively, for an aggregate consideration of $5,400. Mr. Tucker is the President and Chief Executive Officer of the Company. Mr. Backus was the Secretary of the Company at the time of the transaction.11

OnITEM ~~August 31, 2013, the Company effected a 2~~1A.5 ~~for~~Risk 1 forward stock split (the “Stock Split”) of all of its issued and outstanding shares of common stock. All holders of the Company’s Series A and Series B preferred shares converted their preferred shares to common stock prior to the effectiveness of the stock split.Factors

~~Corporate~~Our ~~Information~~business is subject to a number of risks, including those described below, which could have a material effect on our results of operations, financial condition or liquidity and, additionally, could cause our operating results to vary significantly from period to period.

~~Our~~Risks ~~principal~~Related ~~executive offices~~to ~~are located at 1333 Corporate Drive, Suite 325, Irving, TX 75038 and our telephone number is (972) 607-4241.~~ Our website address is www.hoaic.com. Information contained on our website or that can be accessed through our website does not constitute a part of this Form 10-K and is not incorporated herein by reference.Business

~~Employees~~Because our insurance subsidiary currently conducts a significant portion of its business in only one state, any single catastrophic event or other condition affecting losses in that particular state could adversely affect our insurance subsidiary's business, financial condition, and results of operations.

AsOur insurance subsidiary conducts a significant portion of ~~December~~its 31business in only one state, ~~2013 we~~the ~~had~~State 39of ~~employees~~Texas. While our insurance subsidiary actively manages its exposure to catastrophic events through its underwriting process and the purchase of reinsurance, ~~all~~a ~~but~~single ~~one~~catastrophic event, destructive weather pattern, general economic trend, regulatory development or other condition specifically affecting the State of ~~whom~~Texas ~~are~~could ~~full~~have ~~time~~a ~~employees~~disproportionately adverse impact on our insurance subsidiary's business, ~~including~~financial ~~five~~condition, ~~executive~~and ~~officers~~results of operations. WeIn ~~are~~addition, ~~not~~the afact ~~party~~that our insurance subsidiary's business is concentrated in the State of Texas subjects it to ~~any collective~~increased ~~bargaining~~exposure ~~agreement~~to certain catastrophic events and ~~have~~destructive ~~not~~weather ~~experienced~~patterns ~~any~~such ~~work~~as ~~stoppages~~severe orthunderstorms, ~~strikes~~hurricanes, astropical astorms, ~~result~~and floods. Changes in the prevailing regulatory, legal, economic, political, demographic, competitive, and other conditions in the State of ~~labor~~Texas ~~disputes.~~could Wealso ~~consider relations~~make ~~with~~it less attractive for our ~~employees~~insurance subsidiary to bedo ~~satisfactory~~business in the State of Texas and would have a more pronounced effect on our insurance subsidiary than it would on other insurance companies that are more geographically diversified. Because our insurance subsidiary's business is concentrated in this manner, the occurrence of one or more catastrophic events or other conditions affecting losses in the State of Texas could have an adverse effect on its business, financial condition, and results of operations.

~~Available~~Our ~~Information~~results may fluctuate based on many factors including cyclical changes in the insurance industry.

~~We are~~The ~~subject~~insurance tobusiness ~~the~~historically ~~information~~has ~~requirements~~been ofa ~~the~~cyclical ~~Exchange~~industry ~~Act~~characterized ~~and~~by ~~file~~periods ~~annual,~~of ~~quarterly~~intense ~~and~~price ~~current~~competition ~~reports~~due to excessive underwriting capacity, ~~and~~as ~~other~~well ~~information with~~as ~~the~~periods ~~SEC.~~when ~~You~~shortages ~~may~~of ~~read~~capacity ~~and~~permitted ~~copy~~an ~~these~~increase ~~reports~~in onpricing ~~our~~and, ~~website~~thus, ~~www~~more favorable underwriting profits.~~hoaic.com under~~ ~~the~~An ~~Investor~~increase ~~Relations~~in ~~section~~premium ~~and~~levels atis ~~the~~often ~~SEC’s~~over ~~Public~~time ~~Reference~~offset ~~Room~~by atan ~~100~~increasing Fsupply ~~Street~~of ~~NE,~~insurance ~~Washington~~capacity, ~~D.C.~~either ~~20549. Information~~by oncapital ~~the~~provided ~~operation~~by ofnew ~~the~~entrants ~~Public~~or ~~Reference~~by ~~Room~~the iscommitment ~~available~~of additional capital by ~~calling~~existing ~~the~~insurers, ~~SEC~~which atmay ~~1-800-SEC-0330~~cause prices to decrease. ~~You~~Any ~~may~~of ~~also~~these ~~access this~~factors ~~information~~could atlead ~~the~~to ~~SEC’s~~a ~~website~~significant ~~(www.sec.gov).~~reduction ~~This site~~in ~~contains~~premium ~~reports~~rates, ~~proxy~~less ~~and~~favorable ~~information~~policy ~~statements~~terms and ~~other~~fewer ~~information~~opportunities ~~regarding~~to ~~issuers~~underwrite ~~that~~insurance ~~file~~risks, ~~electronically~~which ~~with the~~could ~~SEC~~have a material adverse effect on our results of operations and cash flows. In addition, weto ~~make~~these ~~available~~considerations, ~~without~~changes ~~charge,~~in ~~through~~the ~~our~~frequency ~~website~~and ~~(www.hoaic.com), electronic~~severity ~~copies~~ of ~~our~~losses ~~SEC~~suffered ~~filings,~~by asinsureds ~~soon~~and asinsurers ~~reasonably~~may ~~practicable~~affect ~~after~~the wecycles ~~electronically~~of ~~file~~the ~~such~~insurance ~~reports~~business orsignificantly. ~~amendments with,~~These ormay ~~furnish~~also ~~information~~be ~~to,~~factors in the ~~SEC~~market's pricing of our common stock.

~~ITEM~~We 1Arely heavily on quota share and catastrophe reinsurance to support our growth and continued operations and to protect us from adverse risk. ~~Risk~~The ~~Factors~~unavailability, limited availability, or increased cost of reinsurance could have a material adverse effect on our business, results of operations and financial condition.

~~Our~~We ~~business~~cannot ispredict ~~subject to~~whether ainsurance ~~number~~market ofconditions ~~risks~~will improve, ~~including~~remain ~~those~~constant ~~described~~or ~~below,~~deteriorate. ~~which~~Negative ~~could~~insurance ~~have~~market aconditions ~~material~~may ~~effect~~impair on our ~~results~~ability ofto ~~operations,~~write ~~financial condition~~insurance at rates that we consider appropriate relative to the risk assumed. If we cannot write insurance at appropriate rates or ~~liquidity~~obtain ~~and,~~sufficient ~~additionally,~~reinsurance ~~could~~at ~~cause~~appropriate rates, our ~~operating~~ability ~~results~~ to ~~vary~~obtain ~~significantly~~business ~~from~~would ~~period~~be tomaterially ~~period~~and adversely affected.

13Increased competition, competitive pressures, industry developments and market conditions could affect the growth of our business and adversely impact our financial results.

~~Risks~~The ~~Related~~property toand casualty insurance industry is cyclical and, during times of increased capacity, highly competitive. We compete not only with other stock companies but also with mutual companies, other underwriting organizations and alternative risk sharing mechanisms. Our ~~Business~~principal competitors cannot be easily classified. Our principal lines of business are written by numerous other insurance companies. Competition for any one account may come from very large, well-established national companies, smaller regional companies, other specialty insurers in our field, and other companies that write insurance only in Texas. Many of these competitors have greater financial resources, larger agency networks and greater name recognition than our company. We compete for business not only on the basis of price, but also on the basis of financial strength, types of coverages offered, and availability of coverage desired by customers, commission structure and quality of service. We may have difficulty continuing to compete successfully on any of these bases in the future. Competitive pressures coupled with market conditions may affect our rate of premium growth and financial results.

~~Because~~Our ~~our~~ability to compete in the property and casualty insurance ~~subsidiary~~industry ~~currently conducts~~and our ability to expand our business inmay ~~only~~be ~~one~~negatively ~~state~~affected by the fact that we are not rated by A.M. Best. We are rated by Demotech, ~~any~~Inc. ~~single~~Mortgage ~~catastrophic~~companies ~~event~~and orindependent ~~other~~agents ~~condition~~operating ~~affecting~~in ~~losses~~the state of Texas generally accept a Demotech rating. However, in ~~that~~some ~~particular~~states, ~~state could~~mortgage ~~adversely~~companies ~~affect~~require ~~our~~homeowners to obtain property insurance ~~subsidiary’s~~from an insurance company with a certain minimum A.M. Best rating. Further, some independent agents are reluctant to do business with a company that is not rated by A.M. Best. As a result, ~~financial~~the ~~condition~~minimum A.M. Best rating requirement may prevent us from expanding our business into other states or into certain independent agencies, which may in turn limit our ability to compete with large, national insurance companies and ~~results~~certain ofregional ~~operations~~insurance companies.

Our insurance subsidiary conducts business in only one state, the State of Texas. While our insurance subsidiary actively manages its exposure to catastrophic events through its underwriting process and the purchase of reinsurance, a single catastrophic event, destructive weather pattern, general economic trend, regulatory development or other condition specifically affecting the State of Texas could have a disproportionately adverse impact on our insurance subsidiary’s business, financial condition, and results of operations. In addition, the fact that our insurance subsidiary’s business is concentrated in the State of Texas subjects it to increased exposure to certain catastrophic events and destructive weather patterns such as severe thunderstorms, hurricanes, tropical storms, and floods. Changes in the prevailing regulatory, legal, economic, political, demographic, competitive, and other conditions in the State of Texas could also make it less attractive for our insurance subsidiary to do business in the State of Texas and would have a more pronounced effect on our insurance subsidiary than it would on other insurance companies that are more geographically diversified. Because our insurance subsidiary’s business is concentrated in this manner, the occurrence of one or more catastrophic events or other conditions affecting losses in the State of Texas could have an adverse effect on its business, financial condition, and results of operations.12

~~Our~~In ~~results~~addition, ~~may~~industry ~~fluctuate~~developments ~~based~~could onfurther ~~many factors~~increase ~~including~~competition ~~cyclical changes~~ in ~~the~~our ~~insurance~~ industry. These developments could include:

~~The~~ insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity, as well as periods when shortages of capacity permitted an ~~increase~~influx ~~in pricing and, thus, more favorable underwriting profits. An increase in premium levels is often over time offset by an increasing supply~~ of ~~insurance~~new ~~capacity, either by~~ capital ~~provided~~ byin ~~new entrants or by~~ the ~~commitment~~marketplace ofas ~~additional capital by~~ existing ~~insurers,~~companies ~~which~~attempt ~~may cause prices~~ to ~~decrease. Any~~expand oftheir ~~these~~businesses ~~factors could lead to a significant reduction in premium rates, less favorable policy terms~~ and ~~fewer~~new ~~opportunities to~~companies ~~underwrite~~attempt ~~insurance risks, which could have a material adverse effect on our results of operations and cash flows. In addition~~ to ~~these~~enter ~~considerations, changes in~~ the ~~frequency and severity of losses suffered by insureds and insurers may affect the cycles of the~~ insurance business ~~significantly.~~as ~~These~~a ~~may~~result ~~also~~of bebetter ~~factors in the market’s~~ pricing ofand/or ~~our common stock.~~terms;

We ~~cannot~~programs ~~predict whether~~in ~~insurance~~which ~~market~~state-sponsored ~~conditions~~entities ~~will~~provide ~~improve,~~property ~~remain constant or deteriorate. Negative~~ insurance ~~market~~in ~~conditions~~catastrophe-prone ~~may~~areas ~~impair our~~or ~~ability~~other toalternative ~~write~~market ~~insurance~~types atof ~~rates that we consider appropriate relative to the risk assumed. If we cannot write insurance at appropriate rates, our ability to obtain business would be materially and adversely affected.~~coverage;

~~Increased~~ ~~competition,~~changing ~~competitive~~practices ~~pressures, industry~~caused ~~developments~~by ~~and market conditions could affect~~ the ~~growth~~Internet, ofwhich ~~our~~has ~~business~~led ~~and~~to ~~adversely~~greater ~~impact~~competition ~~our~~in ~~financial~~the ~~results.~~insurance business;

~~The~~ ~~property~~changes and casualty insurance industry is cyclical and, during times of increased capacity, highly competitive. We compete not only with other stock companies but also with mutual companies, other underwriting organizations and alternative risk sharing mechanisms. Our principal competitors cannot be easily classified. Our principal lines of business are written by numerous other insurance companies. Competition for any one account may come from very large, well-established national companies, smaller regional companies, other specialty insurers in ~~our field, and other companies that write insurance only in~~ Texas.' ~~Many~~regulatory ofclimate; ~~these competitors have greater financial resources, larger agency networks~~ and greater name recognition than our company. We compete for business not only on the basis of price, but also on the basis of financial strength, types of coverages offered, and availability of coverage desired by customers, commission structure and quality of service. We may have difficulty continuing to compete successfully on any of these bases in the future. Competitive pressures coupled with market conditions may affect our rate of premium growth and financial results.

~~Our~~ ~~ability to compete in~~ the ~~property~~passage and casualty insurance industry and our ability to expand our business may be negatively affected by the fact that we are not rated by A.M. Best. We are rated by Demotech, Inc. Mortgage companies and independent agents operating in the state of ~~Texas~~federal ~~generally~~proposals ~~accept~~for ~~a Demotech rating. However, in some states, mortgage companies require homeowners to obtain property insurance from~~ an ~~insurance~~optional ~~company~~federal ~~with~~charter athat ~~certain~~would ~~minimum~~allow ~~A.M. Best rating. Further,~~ some ~~independent~~competing ~~agents~~insurers ~~are reluctant~~ to do ~~business~~operate ~~with~~under aregulations ~~company~~different ~~that is not rated by A.M. Best. As a result, the minimum A.M. Best rating requirement may prevent us from expanding our business into other states~~ or ~~into~~less ~~certain~~stringent ~~independent~~than ~~agencies,~~those ~~which~~applicable ~~may~~to ~~in turn limit~~ our ~~ability to compete with large, national~~ insurance ~~companies and certain regional insurance companies~~subsidiary.

InThese ~~addition, industry~~ developments and others could ~~further~~make ~~increase~~the ~~competition~~property inand ~~our~~casualty ~~industry.~~insurance ~~These~~marketplace ~~developments~~more ~~could~~competitive ~~include:~~by increasing the supply of insurance available.

·If ancompetition ~~influx~~limits ofour ~~new~~ability ~~capital in the marketplace as existing companies attempt~~ to ~~expand~~write ~~their businesses and~~ new ~~companies~~business ~~attempt~~at toadequate ~~enter~~rates, ~~the~~our ~~insurance~~future ~~business~~results ~~as a result~~ of ~~better~~operations ~~pricing~~would ~~and/or~~be ~~terms;~~adversely affected.

14If our actual losses from insured claims exceed our loss reserves, our financial results would be adversely affected.

·We ~~programs~~record inreserves ~~which~~for ~~state-sponsored~~specific ~~entities~~claims ~~provide~~incurred ~~property~~and ~~insurance~~reported inand ~~catastrophe-prone~~reserves ~~areas~~for claims incurred but not reported. The estimates of losses for reported claims are established judgmentally on an individual case basis. Such estimates are based on our particular experience with the type of risk involved and our knowledge of the circumstances surrounding each individual claim. Reserves for reported claims consider our estimate of the ultimate cost to settle the claim, including investigation and defense of the claim, and may be adjusted for differences between costs originally estimated and costs re-estimated or incurred. Reserves for incurred but not reported claims are based on the estimated ultimate cost of settling claims, including the effects of inflation and other ~~alternative~~social ~~market~~and ~~types~~economic factors, using past experience adjusted for current trends and any other factors that would modify past experience. We use a variety of ~~coverage;~~statistical and actuarial techniques to analyze current claim costs, frequency and severity data, and prevailing economic, social and legal factors. While management believes that amounts included in the consolidated financial statements are adequate and our independent actuary opined to this amount, there can be no assurance that future changes in loss development, favorable or unfavorable, will not occur. The estimates are periodically reviewed and any changes are reflected in current operations.

·Our ~~changing~~objective ~~practices~~is ~~caused~~to byset reserves that are adequate and represent management's best estimate; that is, the ~~Internet~~amounts originally recorded as reserves should at least equal the ultimate cost to investigate and settle claims. However, ~~which~~the ~~has~~process ~~led~~of establishing adequate reserves is inherently uncertain, and the ultimate cost of a claim may vary materially from the amounts reserved. We regularly monitor and evaluate loss and loss adjustment expense reserve development to ~~greater~~verify ~~competition~~reserve adequacy. Any adjustment to reserves is reflected in underwriting results for the ~~insurance~~accounting ~~business;~~period in which the adjustment is made.

·Due ~~changes~~to inthe ~~Texas’~~uncertainties ~~regulatory~~discussed ~~climate;~~above, the ultimate losses may vary materially from current loss reserves which could have a material adverse effect on our future financial condition, results of operations and cash flows. To date, loss reserves have been adequate to cover losses incurred, including losses incurred but not reported. We have had no difficulty in establishing and maintaining adequate reserves for losses.

·The ~~the~~effects ~~passage~~ of ~~federal~~emerging ~~proposals~~claim ~~for~~and ancoverage ~~optional~~issues ~~federal~~on ~~charter that would allow some competing insurers to operate under regulations different or less stringent than those applicable to~~ our ~~insurance~~business ~~subsidiary~~are uncertain.

~~These~~As ~~developments~~ industry practices and ~~others~~legal, ~~could~~judicial, ~~make~~social ~~the~~and ~~property~~other environmental conditions change, unexpected and ~~casualty~~unintended ~~insurance~~issues ~~marketplace~~related ~~more~~to ~~competitive~~claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the ~~supply~~number or size of claims. In some instances, these changes may not become apparent until sometime after we have issued insurance ~~available~~contracts that are affected by the changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued and renewed, and our financial position and results of operations may be adversely affected.

~~If competition limits our ability to write new business at adequate rates, our future results of operations would be adversely affected.~~13

If ~~our~~we ~~actual~~are ~~losses~~unable ~~from~~to ~~insured~~expand ~~claims exceed~~our business because our ~~loss~~capital ~~reserves~~must be used to pay greater than anticipated claims, our financial results ~~would~~may ~~be adversely affected~~suffer.

WeOur ~~record~~future ~~reserves for~~growth ~~specific~~will ~~claims~~depend ~~incurred and reported and reserves for claims incurred but not reported. The estimates of losses for reported claims are established judgmentally~~ on ~~an individual case basis. Such estimates are based on~~ our ~~particular~~ability ~~experience~~to ~~with~~expand the ~~type~~ ofnumber ~~risk involved and our knowledge~~ of ~~the~~insurance ~~circumstances~~policies ~~surrounding~~we ~~each~~write ~~individual~~in ~~claim.~~Texas, ~~Reserves~~to ~~for~~expand ~~reported~~the ~~claims~~kinds ~~consider our estimate~~ of ~~the~~insurance ~~ultimate~~products ~~cost~~we ~~to settle the claim~~offer, ~~including investigation~~ and ~~defense~~to ofexpand the ~~claim,~~geographic ~~and~~markets ~~may~~in bewhich ~~adjusted~~we ~~for differences~~do ~~between~~business, ~~costs~~all ~~originally~~balanced ~~estimated~~by ~~and costs re-estimated or incurred. Reserves for incurred but not reported claims are based on~~ the ~~estimated~~business ~~ultimate~~risks ~~cost~~we ofchoose ~~settling~~to ~~claims,~~assume ~~including the effects of inflation~~ and ~~other social and economic factors, using past experience adjusted for current trends and any other factors that would modify past experience~~cede. WeUnexpected ~~use~~catastrophic aevents ~~variety of~~in ~~statistical~~our ~~and~~market ~~actuarial~~areas, ~~techniques~~such toas ~~analyze~~the ~~current~~severe ~~claim~~thunderstorms ~~costs,~~experienced ~~frequency~~in ~~and~~Texas ~~severity~~in ~~data,~~recent ~~and prevailing economic~~years, ~~social~~ ~~and~~may ~~legal~~result ~~factors. While management believes that amounts included~~ in ~~the~~greater ~~consolidated~~claims ~~financial~~losses ~~statements~~than ~~are adequate~~anticipated, ~~there~~ ~~can~~which becould norequire ~~assurance~~us ~~that~~to ~~future~~limit ~~changes~~or inhalt ~~loss~~our ~~development,~~growth ~~favorable~~while orwe ~~unfavorable,~~redeploy ~~will~~our ~~not~~capital ~~occur.~~to ~~The~~pay ~~estimates~~these ~~are periodically~~unanticipated ~~reviewed~~claims ~~and~~unless ~~any~~we ~~changes~~ are ~~reflected~~able into ~~current~~raise ~~operations~~additional capital.

~~Our~~We ~~objective~~may isrequire ~~to set~~additional ~~reserves~~capital ~~that~~in ~~are adequate and represent management’s best estimate; that is,~~ the ~~amounts~~future ~~originally~~which ~~recorded~~may asnot ~~reserves should~~be atavailable ~~least~~or ~~equal the ultimate cost to investigate and settle claims. However, the process of establishing adequate reserves is inherently uncertain, and the ultimate cost of a claim~~ may ~~vary~~only ~~materially~~be ~~from~~available ~~the~~on ~~amounts~~unfavorable ~~reserved~~terms. We regularly monitor and evaluate loss and loss adjustment expense reserve development to verify reserve adequacy. Any adjustment to reserves is reflected in underwriting results for the accounting period in which the adjustment is made.

~~Due~~Our tofuture ~~the~~capital ~~uncertainties discussed~~requirements ~~above~~depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. To the ~~ultimate~~extent that our present capital is insufficient to meet future operating requirements or to cover losses, we may ~~vary~~need ~~materially~~to ~~from~~raise additional funds through financings or curtail our growth. Based on our current ~~loss~~operating ~~reserves~~plan, ~~which~~we believe current capital together with our anticipated retained earnings will support our operations without the need to raise additional capital. However, we cannot provide any assurance in that regard, since many factors will affect our capital needs and their amount and timing, including our growth, profitability, and the availability of reinsurance, as well as possible acquisition opportunities, market disruptions and other unforeseeable developments. If we had to raise additional capital, equity or debt financing may not be available at all or may be available only on terms that are not favorable to us. In the case of equity financings, dilution to our stockholders could result, and in any case such securities may have arights, ~~material~~preferences ~~adverse~~and ~~effect~~ privileges that are senior to those of existing stockholders. If we cannot obtain adequate capital on favorable terms or at all, our ~~future~~business, financial condition, or results of operations ~~and~~could ~~cash~~be ~~flows.~~materially Toadversely ~~date,~~affected. ~~loss~~At ~~reserves~~present we have ~~been~~ adequate capital to ~~cover~~meet ~~losses incurred,~~current ~~including~~levels ~~losses~~of ~~incurred~~new ~~but~~business ~~not~~production ~~reported~~and anticipated growth within the markets we serve and the products we offer. WeHowever, ~~have~~additional ~~had~~capital nomay ~~difficulty~~be inneeded ~~establishing~~if through our expansion into additional states we significantly increase our premium production or if we decide to immediately and ~~maintaining~~significantly ~~adequate~~reduce ~~reserves~~ our need for ~~losses~~and reliance on reinsurance.

~~The~~Our ~~effects~~financial results may be negatively affected by the fact that a portion of ~~emerging~~our ~~claim~~income ~~and~~is ~~coverage issues~~generated onby the investment of our ~~business~~company's ~~are~~capital ~~uncertain~~and surplus, premiums and loss reserves.

AsA ~~industry~~portion ~~practices and~~of ~~legal,~~our ~~judicial~~income is, ~~social~~ and ~~other~~likely ~~environmental~~will ~~conditions~~continue ~~change~~to be, ~~unexpected~~generated ~~and~~by ~~unintended~~the ~~issues~~investment ~~related~~of toour ~~claims~~company's capital and ~~coverage~~ ~~may~~surplus, ~~emerge.~~premiums ~~These~~and ~~issues~~loss ~~may~~reserves. ~~adversely~~The ~~affect~~amount ~~our~~of ~~business~~income byso ~~either~~generated ~~extending~~is ~~coverage~~a ~~beyond~~function of our ~~underwriting~~investment ~~intent or~~policy, byavailable ~~increasing~~investment ~~the~~opportunities, ~~number~~and orthe ~~size~~amount of ~~claims~~capital and surplus, premium and loss reserves invested. InAs ~~some~~we ~~instances~~continue to grow and to deploy our capital, ~~these~~the ~~changes~~proportion ~~may~~of ~~not~~income ~~become~~invested ~~apparent~~will ~~until~~decrease, ~~sometime~~and ~~after~~investment ~~we have~~income ~~issued~~will ~~insurance~~make ~~contracts~~up ~~that~~a ~~are~~smaller ~~affected~~percentage byof ~~the~~our ~~changes~~net revenue. As aof ~~result~~December 31, ~~the~~2014, ~~full~~approximately ~~extent~~24% of ~~liability~~our ~~under~~available ~~our~~cash ~~insurance contracts~~and ~~may~~invested ~~not~~assets bewere ~~known~~invested ~~for~~in ~~many~~fixed-maturity ~~years~~securities ~~after~~with athe ~~contract~~balance isinvested ~~issued~~in ~~and~~money ~~renewed~~market mutual funds or in bank deposits (i.e., ~~and~~certificates ~~our~~of ~~financial~~deposit) ~~position~~that mature in no more than eighteen months. Fluctuating interest rates and ~~results~~other economic factors make it impossible to estimate accurately the amount of ~~operations may~~investment income that will be ~~adversely~~realized. ~~affected~~In fact, we may realize losses on our investments.

IfWe wehave ~~are~~exposure ~~unable~~ to ~~expand~~unpredictable ~~our~~catastrophes, ~~business because~~which ~~our~~can ~~capital~~materially ~~must~~and beadversely ~~used~~affect ~~to pay greater than anticipated claims,~~ our financial results ~~may suffer~~.

~~Our~~We ~~future~~write ~~growth will~~insurance ~~depend~~policies onthat ~~our~~cover ~~ability~~homeowners, tocondominium ~~expand~~owners, ~~the~~and ~~number~~tenants offor ~~insurance~~losses ~~policies~~that weresult ~~write~~from, inamong ~~Texas~~other things, catastrophes. We are therefore subject to ~~expand~~claims ~~the~~arising ~~kinds~~out of ~~insurance~~catastrophes ~~products we~~that ~~offer~~may have a significant effect on our business, results of operations, and/or tofinancial ~~expand~~condition. ~~the~~Catastrophes ~~geographic~~can ~~markets~~be incaused ~~which~~by wevarious doevents, ~~business~~including hurricanes, ~~all~~tropical ~~balanced~~storms, tornadoes, windstorms, earthquakes, hailstorms, explosions, power outages, fires and by ~~the~~man-made ~~business~~events, ~~risks~~such weas ~~choose~~terrorist toattacks. ~~assume~~ The Company does not insure damages caused by earthquakes and ~~cede~~floods. ~~Unexpected~~The ~~catastrophic~~incidence ~~events~~and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in ~~our~~the ~~market~~area ~~areas~~affected by the event, ~~such~~the astype of catastrophe and the ~~severe~~severity ~~thunderstorms~~of ~~experienced~~the event. Our policyholders are currently concentrated in Texas, inwhich ~~recent years~~is especially subject to adverse weather conditions such as severe thunderstorms, ~~may~~hurricanes ~~result~~and intropical ~~greater~~storms. ~~claims~~Insurance ~~losses~~companies ~~than~~are ~~anticipated~~not permitted to reserve for catastrophes until such event takes place. Therefore, ~~which~~although ~~could~~we ~~require~~attempt usto manage our exposure to ~~limit~~catastrophes through our underwriting process and the purchase of reinsurance protection, an especially severe catastrophe or ~~halt~~series of catastrophes could exceed our ~~growth~~reinsurance ~~while~~protection and may have a material adverse impact on our results of operations and financial condition. See the risk factor below entitled "Although we ~~redeploy~~ follow the industry practice of reinsuring a portion of our ~~capital~~risks, toour ~~pay~~costs ~~these~~of ~~unanticipated~~obtaining ~~claims~~reinsurance ~~unless~~may increase and we ~~are~~may not be able to ~~raise~~successfully ~~additional~~alleviate ~~capital~~risk through reinsurance arrangements" for a discussion of our reinsurance coverage.

1514

WeIndustry ~~may~~trends, ~~require~~such ~~additional~~as ~~capital~~increased inlitigation against the ~~future~~ ~~which~~insurance ~~may~~industry ~~not~~and beindividual ~~available~~insurers, orthe willingness of courts to expand covered causes of loss, rising jury awards, and the escalation of loss severity may ~~only~~contribute beto ~~available~~increased oncosts ~~unfavorable~~and ~~terms~~to the deterioration of the reserves of our insurance subsidiary.

~~Our~~Litigation ~~future~~against ~~capital requirements~~property ~~depend on many factors, including our ability to write new business successfully~~ and tocasualty ~~establish~~insurance ~~premium~~insurers ~~rates~~in ~~and reserves~~Texas athas ~~levels~~increased ~~sufficient~~in torecent ~~cover losses~~years. ToThe ~~the~~propensity ~~extent~~of ~~that~~policyholders ~~our~~and ~~present~~third ~~capital~~party isclaimants ~~insufficient~~ to ~~meet~~litigate future operating requirements or to cover losses, we may need to raise additional funds through financings or curtail our growth. Based on our current operating plan, we believe current capital together with our anticipated retained earnings will support our operations without the need to raise additional capital. However, we cannot provide any assurance in that regard, since many factors will affect our capital needs and ~~their amount and timing, including our growth, profitability, and~~ the ~~availability~~willingness of ~~reinsurance, as~~courts ~~well~~to asexpand ~~possible~~causes ~~acquisition~~of ~~opportunities,~~loss ~~market disruptions~~ and ~~other unforeseeable developments. If we had to raise additional capital, equity or debt financing may not be available at all or may be available only on terms that are not favorable to us. In~~ the ~~case~~size of ~~equity~~awards ~~financings, dilution to our stockholders could result, and in any case such securities~~ may ~~have~~render ~~rights, preferences~~the ~~and~~loss ~~privileges~~reserves ~~that are senior to those~~ of ~~existing stockholders. If we cannot obtain adequate capital on favorable terms or at all,~~ our ~~business,~~insurance ~~financial~~subsidiary ~~condition~~inadequate orfor ~~results of operations could be materially adversely affected. At present we have adequate capital to meet~~ current ~~levels of new business production~~ and ~~anticipated~~future ~~growth within the markets we serve and the products we offer~~losses. However, additional capital may be needed if through our expansion into additional states we significantly increase our premium production or if we decide to immediately and significantly reduce our need for and reliance on reinsurance.

~~Our~~Although ~~financial~~we ~~results~~follow ~~may~~the beindustry ~~negatively affected~~practice byof ~~the~~reinsuring ~~fact that~~ a portion of our ~~income~~risks iswe ~~generated~~may bynot ~~the~~be ~~investment~~able ofto ~~our~~successfully ~~company’s~~alleviate ~~capital~~risk ~~and~~through ~~surplus,~~reinsurance ~~premiums and loss reserves~~arrangements.

AReinsurance ~~portion~~is the practice of ~~our~~transferring ~~income is,~~part of an insurance company's liability and ~~likely~~premium ~~will~~under ~~continue~~an insurance policy to ~~be,~~another ~~generated~~insurance bycompany. We use reinsurance arrangements to limit and manage the ~~investment~~amount of risk we retain, to stabilize our ~~company’s~~underwriting ~~capital~~results and ~~surplus,~~to ~~premiums~~increase our underwriting capacity. Our reinsurance structure is comprised of numerous reinsurance companies with varying levels of participation providing coverage for loss and loss ~~reserves~~ adjustment expense, or LAE, at pre-established minimum and maximum amounts. ~~The~~In accordance with our minimum requirements, our amount of ~~income~~reinsurance socoverage ~~generated~~ is determined by subjecting our homeowner exposures to statistical forecasting models that are designed to quantify a ~~function~~catastrophic event in terms of the amount of our ~~investment~~probable ~~policy,~~maximum ~~available~~loss ~~investment~~from ~~opportunities,~~a ~~and~~storm ~~the~~ of severity that occurs once in every 100 years or greater. Our amount of ~~capital~~losses retained (our deductible) in connection with a catastrophic event is determined by market capacity, pricing conditions and surplus, ~~premium~~preservation. Losses incurred in connection with a catastrophic event below the minimum and ~~loss~~above ~~reserves~~the ~~invested~~maximum are the responsibility of our insurance subsidiary. AsFor the 2013-2014 treaty period, we ~~continue~~retain toan ~~grow~~aggregate of $400,000 in loss and LAE for each of the first two catastrophic events. We have purchased reinsurance treaties to ~~deploy~~insure our ~~capital,~~insurance subsidiary to the ~~proportion~~ standard which consists of ~~income~~first ~~invested~~and ~~will~~second ~~decrease~~event coverage greater than the 1- in -100 year level, ~~and~~as ~~investment~~required ~~income~~by ~~will~~us. ~~make~~We uppurchased acoverage ~~smaller~~totaling ~~percentage~~$80 million of ~~our~~aggregate ~~net~~loss ~~revenue~~and LAE. ~~Currently,~~Single ~~all~~catastrophe of losses and LAE exceeding $80 million are our ~~capital~~responsibility. isFor ~~invested~~the in2014 ~~money~~– ~~market~~2015 ~~funds~~treaty orperiod, which began on April 1, 2014, we retain an aggregate of $400,000 in ~~bank~~loss ~~deposits~~and (iLAE for each of the first two catastrophic events.~~e.,~~ ~~certificates~~We have purchased reinsurance treaties to insure our insurance subsidiary to the standard which consists of ~~deposit)~~first ~~that~~and ~~mature~~second inevent nocoverage ~~more~~greater than ~~eighteen~~ ~~months~~1-in 100 year level, as required by us. ~~Fluctuating~~The ~~interest~~treaties ~~rates~~cover ~~and~~80% ~~other~~of ~~economic~~its ~~factors~~risk ~~make~~under itproperty ~~impossible~~coverage on any one loss occurrence not to ~~estimate~~exceed ~~accurately~~$110 ~~the~~million ~~amount~~and 20% of ~~investment~~ ~~income~~its ~~that~~risk ~~will~~under beproperty ~~realized.~~coverage Inon ~~fact~~any one loss occurrence in excess of $4 million, wenot ~~may~~to ~~realize~~exceed $110 million. Single catastrophe losses onand LAE exceeding $110 million are our ~~investments~~responsibility. During the period from August 1, 2014 through November 30, 2014 this limit was increased to $140 million, to provide the Company with additional coverage during the 2014 hurricane season.

WeAlthough ~~have~~we ~~exposure~~follow the industry practice of reinsuring a portion of our risk through various types of reinsurance programs, including quota share, excess of loss and catastrophe excess of loss, we may not be able to ~~unpredictable~~successfully ~~catastrophes~~alleviate risk through such reinsurance arrangements. The pricing for these types of reinsurance is based on both on the experience of HAIC's book of business as well as the overall experience of the global property and casualty insurance industry. The cost of the quota share reinsurance is reflected in the amount of the ceding commission allowance reinsurers pay HAIC of the production of the business. Should the allowance offered to HAIC by reinsurers not reflect the actual cost of producing the business, this would create a risk to the current business model and adversely affect the business. Both types of excess of loss reinsurance used by HAIC allows the sharing of losses on both a per risk and per occurrence basis, allowing HAIC to underwrite larger amounts of business than it would be able to, without this coverage. Reinsurers charge for this type of coverage by taking a percentage of the premium earned on each policy included in the program. The rising cost of this type of coverage, which ~~can~~could ~~materially~~limit HAIC's ability to obtain adequate levels of coverage could limit HAIC's ability to write policies with certain risk limits and or limit its ability to take on additional business over concerns of risk concentration. Both instances would mean a reduction in business volume and would adversely affect ~~our~~the ~~financial~~operating results of the company.

We ~~write~~face insurance policies that cover homeowners, condominium owners, and tenants for losses that result from, among other things, catastrophes. We are therefore subject to claims arising out of catastrophes that may have a ~~significant~~risk ~~effect on our business, results~~ of ~~operations,~~ and/or financial condition. Catastrophes can be caused by various events, including hurricanes, tropical storms, tornadoes, windstorms, earthquakes, hailstorms, explosions, power outages, fires and by mannon-~~made~~availability ~~events, such as terrorist attacks. The incidence and severity~~ of ~~catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event~~reinsurance, ~~the type of catastrophe and the severity of the event. Our policyholders are currently concentrated in Texas,~~ which iscould ~~especially~~materially ~~subject to adverse weather conditions such as severe thunderstorms, hurricanes~~ and ~~tropical~~adversely ~~storms.~~affect ~~Insurance companies are not permitted to reserve for catastrophes until such event takes place. Therefore, although we attempt to manage~~ our ~~exposure~~ability to ~~catastrophes~~write ~~through~~business ~~our underwriting process~~ and ~~the purchase of reinsurance protection, an especially severe catastrophe or series of catastrophes could exceed~~ our ~~reinsurance protection and may have a material adverse impact on our~~ results of operations and financial condition. See the risk factor below entitled “Although we follow the industry practice of reinsuring a portion of our risks, our costs of obtaining reinsurance may increase and we may not be able to successfully alleviate risk through reinsurance arrangements” for a discussion of our reinsurance coverage.

~~Industry~~Market ~~trends~~conditions beyond our control, such as ~~increased~~the ~~litigation against~~amount of capital in the ~~insurance~~reinsurance ~~industry~~market and ~~individual~~natural ~~insurers~~and man-made catastrophes, determine the ~~willingness~~availability and cost of ~~courts~~the toreinsurance ~~expand~~protection ~~covered~~we ~~causes~~purchase. ofWe ~~loss,~~cannot ~~rising~~be ~~jury awards,~~assured that reinsurance will remain continuously available to the same extent and on the ~~escalation~~same terms and rates as are currently available. If we are unable to maintain our current level of ~~loss~~reinsurance ~~severity~~or purchase new reinsurance protection in amounts that are considered sufficient, we may ~~contribute~~have to ~~increased~~accept ~~costs~~an increase in our net exposures and we may have to ~~the~~reduce ~~deterioration~~our ofinsurance ~~the~~writings. ~~reserves~~Either of these potential developments could have a material adverse effect on our ~~insurance~~ ~~subsidiary~~financial position, results of operations and cash flows.

Litigation against property and casualty insurance insurers in Texas has increased in recent years. The propensity of policyholders and third party claimants to litigate and the willingness of courts to expand causes of loss and the size of awards may render the loss reserves of our insurance subsidiary inadequate for current and future losses.15

16We face a risk of non-collectability of reinsurance, which could materially and adversely affect our business, results of operations and/or financial condition.

~~Although~~As weis ~~follow~~common practice within the insurance industry, ~~practice~~ we transfer a portion of ~~reinsuring~~the risks insured under our policies to other companies through the purchase of reinsurance. This reinsurance is maintained to protect our insurance subsidiary against the severity of losses on individual claims, unusually serious occurrences in which a number of claims produce an aggregate extraordinary loss and catastrophic events. Although reinsurance does not discharge our insurance subsidiary from its primary obligation to pay for losses insured under the policies it issues, reinsurance does make the assuming reinsurer liable to the insurance subsidiary for the reinsured portion of the risk. A credit exposure exists with respect to ceded losses to the extent that any reinsurer is unable or unwilling to meet the obligations assumed under the reinsurance contracts. The collectability of reinsurance is subject to the solvency of the reinsurers, interpretation of contract language and other factors. We are selective with regard to our ~~risks~~reinsurers, weplacing reinsurance with those reinsurers with strong financial strength ratings from A.M. Best, Standard & Poor's, or a combination thereof, although the financial condition of a reinsurer may change based on market conditions. We perform credit reviews on our reinsurers, focusing on, among other things, financial condition, stability, trends and commitment to the reinsurance business. We may require assets in trust, letters of credit or other acceptable collateral to support balances due from reinsurers not beauthorized ~~able~~to transact business in the applicable jurisdictions. It has not always been standard business practice to ~~successfully~~require ~~alleviate~~security ~~risk~~for ~~through~~balances due; therefore, certain balances are not collateralized. A reinsurer's insolvency or inability to make payments under the terms of a reinsurance ~~arrangements~~contract could have a material adverse effect on our results of operations and financial condition.

~~Reinsurance~~The isfailure ~~the practice~~ of ~~transferring part of an insurance company’s liability and premium under an insurance policy to another insurance company. We use reinsurance arrangements to limit and manage~~ the ~~amount of~~ risk wemitigation ~~retain,~~strategies to stabilize our underwriting results and to increase our underwriting capacity. Our reinsurance structure is comprised of numerous reinsurance companies with varying levels of participation providing coverage for loss and loss adjustment expense, or LAE, at pre-established minimum and maximum amounts. In accordance with our minimum requirements, our amount of reinsurance coverage is determined by subjecting our homeowner exposures to statistical forecasting models that are designed to quantify a catastrophic event in terms of the amount of our probable maximum loss from a storm of severity that occurs once in every 100 years or greater. Our amount of losses retained (our deductible) in connection with a catastrophic event is determined by market capacity, pricing conditions and surplus preservation. Losses incurred in connection with a catastrophic event below the minimum and above the maximum are the responsibility of our insurance subsidiary. For the 2012-2013 treaty period, we ~~retain~~utilize ancould ~~aggregate of $300,000 in loss and LAE for each of the first two catastrophic events. We~~ have ~~purchased~~a ~~reinsurance~~material ~~treaties~~adverse toeffect insure our insurance subsidiary to the standard which consists of first and second event coverage greater than the 1- in -100 year level, as required by us. We purchased coverage totaling $65 million of aggregate loss and LAE. Single catastrophe losses and LAE exceeding $65 million are our responsibility. For the 2013 – 2014 treaty period, which began on ~~April 1, 2013, we retain an aggregate of $400,000 in loss and LAE for each of the first two catastrophic events. We have purchased reinsurance treaties to insure~~ our ~~insurance~~financial ~~subsidiary~~condition toor ~~the~~results ~~standard which consists~~ of ~~first and second event coverage greater than 1-in 100 year level, as required by us~~operations. ~~We purchased coverage totaling $80 million of aggregate loss and LAE. Single catastrophe losses and LAE exceeding $80 million are our responsibility.~~

~~Although~~We weutilize ~~follow the industry practice of reinsuring~~ a ~~portion~~number of ~~our~~strategies ~~risk through various types of reinsurance programs, including quota share, excess of loss and catastrophe excess of loss, we may not be able~~ to ~~successfully~~mitigate ~~alleviate~~our risk ~~through~~exposure such reinsurance arrangements. The pricing for these types of reinsurance is based on both on the experience of HAIC’s book of business as well as the overall experience of the global property and casualty insurance industry. The cost of the quota share reinsurance is reflected in the amount of the ceding commission allowance reinsurers pay HAIC of the production of the business. Should the allowance offered to HAIC by reinsurers not reflect the actual cost of producing the business, this would create a risk to the current business model and adversely affect the business. Both types of excess of loss reinsurance used by HAIC allows the sharing of losses on both a per risk and per occurrence basis, allowing HAIC to underwrite larger amounts of business than it would be able to, without this coverage. Reinsurers charge for this type of coverage by taking a percentage of the premium earned on each policy included in the program. The rising cost of this type of coverage, which could limit HAIC’s ability to obtain adequate levels of coverage could limit HAIC’s ability to write policies with certain risk limits and or limit its ability to take on additional business over concerns of risk concentration. Both instances would mean a reduction in business volume and would adversely affect the operating results of the company.including:

We engaging ~~face~~in avigorous ~~risk of non-availability of reinsurance, which could materially and adversely affect our ability to write business and our results of operations and financial condition.~~underwriting;

~~Market~~ carefully ~~conditions beyond~~evaluating our control, such as the amount of capital in the reinsurance market and natural and man-made catastrophes, determine the availability and cost of the reinsurance protection we purchase. We cannot be assured that reinsurance will remain continuously available to the same extent and on the same terms and ~~rates~~conditions ~~as are currently available. If we are unable to maintain our current level~~ of ~~reinsurance or purchase new reinsurance protection in amounts that are considered sufficient, we may have to accept an increase in~~ our net exposures and we may have to reduce our insurance writings. Either of these potential developments could have a material adverse effect on our financial position, results of operations and cash flows.policies;

We focusing ~~face~~on aour risk ofaggregations ~~non-collectability~~by ~~of reinsurance~~geographic zones, ~~which~~credit ~~could~~exposure ~~materially~~ and ~~adversely~~other ~~affect~~bases; ~~our business, results of operations~~ and~~/or financial condition.~~

As ceding ~~is common practice within the~~ insurance industry, we transfer a portion of the risks insured under our policies to other companies through the purchase of reinsurance. This reinsurance is maintained to protect our insurance subsidiary against the severity of losses on individual claims, unusually serious occurrences in which a number of claims produce an aggregate extraordinary loss and catastrophic events. Although reinsurance does not discharge our insurance subsidiary from its primary obligation to pay for losses insured under the policies it issues, reinsurance does make the assuming reinsurer liable to the insurance subsidiary for the reinsured portion of the risk. ~~A credit exposure exists with respect~~ to ~~ceded losses to the extent that any reinsurer is unable or unwilling to meet the obligations assumed under the~~ reinsurance ~~contracts~~companies. The collectability of reinsurance is subject to the solvency of the reinsurers, interpretation of contract language and other factors. We are selective with regard to our reinsurers, placing reinsurance with those reinsurers with strong financial strength ratings from A.M. Best, Standard & Poor’s, or a combination thereof, although the financial condition of a reinsurer may change based on market conditions. We perform credit reviews on our reinsurers, focusing on, among other things, financial condition, stability, trends and commitment to the reinsurance business. We may require assets in trust, letters of credit or other acceptable collateral to support balances due from reinsurers not authorized to transact business in the applicable jurisdictions. It has not always been standard business practice to require security for balances due; therefore, certain balances are not collateralized. A reinsurer’s insolvency or inability to make payments under the terms of a reinsurance contract could have a material adverse effect on our results of operations and financial condition.

17However, there are inherent limitations in all of these tactics. No assurance can be given that an event or series of unanticipated events will not result in loss levels which could have a material adverse effect on our financial condition or results of operations.

The failure of any of the ~~risk~~loss ~~mitigation~~limitation ~~strategies~~ methods we ~~utilize~~employ could have a material adverse effect on our financial condition or our results of operations.

WeVarious ~~utilize~~provisions of our policies, such as limitations or exclusions from coverage which have been negotiated to limit our risks, may not be enforceable in the manner we intend. At the present time, we employ a ~~number~~ variety of ~~strategies~~endorsements to ~~mitigate~~ our ~~risk~~policies that limit exposure to known risks, including: but not limited to weather exclusions relating to homes in close proximity to the coast line.

·While ~~engaging~~our insurance product exclusions and limitations reduce the loss exposure to us and help eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or legislation could be enacted modifying or barring the use of such endorsements and limitations in ~~vigorous~~a ~~underwriting;~~way that would adversely affect our loss experience, which could have a material adverse effect on our financial condition or results of operations.

·We ~~carefully~~may ~~evaluating~~be ~~terms~~unable ~~and~~to ~~conditions~~attract ofand ~~our~~retain ~~policies;~~qualified employees.

·We ~~focusing~~depend on our ~~risk~~ability ~~aggregations~~to byattract ~~geographic~~and ~~zones,~~retain ~~credit~~experienced ~~exposure~~underwriting talent and other ~~bases;~~skilled employees who are knowledgeable about our business. If the quality of our underwriters and other personnel decreases, we may be unable to maintain our current competitive position in the specialized markets in which we operate and be unable to expand our operations, which could adversely affect our results.

·Because ~~ceding~~we have relatively few employees, the loss of, or failure to attract, key personnel could also significantly impede the financial plans, growth, marketing and other objectives of our insurance ~~risk~~subsidiary. Our insurance subsidiary's success depends to ~~reinsurance~~a ~~companies~~substantial extent on the ability and experience of the members of its senior management team. Our insurance subsidiary believes that its ability to grow and future success will depend in large part on its ability to attract and retain additional skilled and qualified personnel and to expand, train and manage its employees. Our insurance subsidiary may not be successful in doing so, because the competition for experienced personnel in the insurance industry is intense. We have employment agreements with some but not all key personnel. To date we have had no difficulty attracting qualified personnel to support our operations.

However, there are inherent limitations in all of these tactics. No assurance can be given that an event or series of unanticipated events will not result in loss levels which could have a material adverse effect on our financial condition or results of operations.16

~~The~~Our ~~failure~~information oftechnology ~~any~~systems ofmay ~~the~~fail ~~loss~~or ~~limitation methods~~suffer ~~we employ could have~~ a ~~material~~loss ~~adverse~~of ~~effect~~security onwhich ~~our~~could ~~financial~~adversely ~~condition~~affect or our ~~results of operations~~business.

~~Various~~The ~~provisions~~ Company's insurance subsidiary is highly dependent on the successful and uninterrupted functioning of its computer systems. We rely on these systems to quote and underwrite our ~~policies~~business, ~~such~~bill premium and issue policies to customers as ~~limitations~~well oras ~~exclusions~~provide ~~from~~financial ~~coverage~~data. ~~which~~The ~~have~~failure ~~been~~of ~~negotiated~~the tosystem ~~limit~~through natural disaster and/or power outages could disrupt our ~~risks,~~operations ~~may~~and ~~not~~could beresult ~~enforceable~~ in ~~the~~a ~~manner~~material weadverse ~~intend~~effect on our business. AtThe ~~the~~Company ~~present~~has ~~time,~~addressed wethis ~~employ~~risk athrough ~~variety~~the establishment of ~~endorsements~~back toup ~~our~~facilities ~~policies~~for ~~that~~data ~~limit~~and ~~exposure~~source code built to ~~known risks~~DOD anti-terrorism force protection codes, ~~including~~at ~~but~~one ~~not~~of ~~limited~~the tomost ~~weather~~physically ~~exclusions~~secure ~~relating~~commercial todata ~~homes~~centers in ~~close~~the ~~proximity~~country. toThe ~~the~~Company ~~coast~~enhanced its backup / data recovery capabilities by bringing on-line the mirror processing systems.

~~While~~A security breach of our ~~insurance product~~computer ~~exclusions~~systems ~~and~~could ~~limitations~~damage ~~reduce~~our ~~the~~reputation ~~loss~~or ~~exposure~~result toin usliability. ~~and~~We ~~help~~retain ~~eliminate~~confidential ~~known~~information ~~exposures~~regarding our business dealings in our computer systems. We may be required to ~~certain~~spend ~~risks,~~significant itcapital isand ~~possible that~~other aresources ~~court~~to protect against security breaches or ~~regulatory~~to ~~authority~~alleviate ~~could~~problems ~~nullify~~caused orby ~~void~~such anbreaches. ~~exclusion~~It oris ~~legislation~~critical ~~could~~that bethese ~~enacted~~facilities ~~modifying~~and orinfrastructure ~~barring~~remain secure. Despite the ~~use~~ implementation of ~~such~~security ~~endorsements~~measures, ~~and~~this ~~limitations~~infrastructure inmay abe ~~way~~vulnerable ~~that~~to ~~would~~physical ~~adversely~~break-ins, ~~effect~~computer ~~our~~viruses, ~~loss~~programming ~~experience~~errors, ~~which~~attacks by third parties or similar disruptive problems. In addition, we could ~~have~~be asubject ~~material adverse~~to ~~effect~~liability onif hackers were able to penetrate our ~~financial~~network ~~condition~~security or ~~results~~otherwise ofmisappropriate ~~operations~~confidential information.

WeIn ~~may~~addition beto ~~unable~~physical security measures employed at the Company's offsite operations center, which is audited annually under SOC 1 (SSAE No.16) standards, the Company's third party operations center uses firewalls, intrusion detection systems, data base field encryption and other "best practices" to ~~attract~~protect access to customer data. Access to the databases is not allowed from outside our network, except for specific IP addresses which the Company has specified and ~~retain qualified~~has ~~employees~~control over. These configurations are reviewed quarterly, to ensure policies and procedures are followed. The Company's third party operations site administration performs annual "ethical hack" tests to identify possible vulnerabilities.

WeThe ~~depend~~development onand expansion of our ~~ability to~~business ~~attract~~is dependent upon the successful development and ~~retain~~implementation ~~experienced~~of ~~underwriting~~advanced ~~talent~~computer and ~~other~~data ~~skilled~~processing ~~employees~~systems. ~~who~~The ~~are~~failure ~~knowledgeable~~of ~~about~~these systems to function as planned could slow our growth and adversely affect our future business volume and results of operations. If We license the ~~quality~~software ofused in our ~~underwriters~~policy ~~and~~administration ~~other~~process ~~personnel~~(PTS) ~~decreases~~from a third party, Silvervine, Inc. (formerly known as IDMI, Inc). Silvervine also maintains PTS. In addition, we ~~may~~outsource bethe ~~unable~~hosting toand ~~maintain~~operating of our ~~current~~policy ~~competitive~~administration ~~position~~system with Silvervine. Silvervine hosts PTS on its servers located in ~~the~~ ~~specialized~~Warner ~~markets~~Robbins, GA, with a mirror processor hosting both system and policy records in Atlanta, GA. Through this "mirror processing environment" the Company has established a data security protocol which weprovides ~~operate~~instant ~~and~~"off-site" beback-up ~~unable~~of toboth ~~expand~~its ~~our~~operating ~~operations~~software and data. In addition, ~~which~~the ~~could~~Company ~~adversely~~has ~~affect~~offsite ~~our~~storage ~~results~~of the Silvervine operating software with Iron Mountain Intellectual Property Management, Inc.

~~Because~~The welicense ~~have~~and ~~relatively few~~maintenance ~~employees,~~agreement ~~the~~with ~~loss~~Silvervine ~~of,~~may orbe ~~failure~~terminated toby ~~attract,~~us ~~key~~with ~~personnel~~45 ~~could~~days ~~also~~written ~~significantly~~notice ~~impede~~or ~~the~~by ~~financial~~Silvervine ~~plans,~~in ~~growth, marketing~~the ~~and~~event ~~other objectives~~ of ~~our insurance subsidiary. Our insurance subsidiary’s success depends to~~ a ~~substantial extent~~material onbreach ~~the ability and experience~~ of the ~~members~~agreement of(such ~~its~~as ~~senior~~non-payment) ~~management~~by ~~team~~us. ~~Our~~If ~~insurance~~termination ~~subsidiary~~of ~~believes~~the ~~that~~Silvervine ~~its ability~~agreement tooccurs, ~~grow~~we ~~and~~may ~~future~~be ~~success~~required ~~will~~to ~~depend~~spend insignificant ~~large~~capital ~~part~~and onother ~~its~~resources ~~ability~~ to ~~attract~~purchase and ~~retain~~implement ~~additional~~PTS ~~skilled~~or ~~and~~a ~~qualified personnel~~replacement ~~and~~software ~~to expand~~system, ~~train~~ and ~~manage~~to ~~its~~staff ~~employees.~~and ~~Our~~support ~~insurance~~the ~~subsidiary~~technologists ~~may~~that ~~not~~would be ~~successful~~needed into ~~doing~~maintain ~~so,~~and ~~because~~operate ~~the competition~~our ~~for~~processing ~~experienced~~system. ~~personnel~~Alternatively, inwe ~~the~~could ~~insurance~~outsource ~~industry~~our ispolicy ~~intense.~~administration Weprocess ~~have~~with ~~employment~~another ~~agreements~~third ~~with~~party, ~~some~~which ~~but~~would ~~not~~also ~~all key~~require ~~personnel~~significant expenditures.

ToThe ~~date~~hosting and operating agreement with Silvervine may be terminated by us with 90 days written notice or by Silvervine in the event of a material breach by us of the agreement. If termination of this agreement occurs, we ~~have~~may ~~had no~~be ~~difficulty~~required ~~attracting~~to ~~qualified~~spend ~~personnel~~significant capital and other resources to purchase and implement the hardware needed to host and operate PTS, and possibly to staff and support the technologists that would be needed to maintain and operate our ~~operations~~processing system. ~~None~~Alternatively, ofwe could outsource our ~~personnel~~PTS ~~have~~hosting ~~indicated~~and ~~that~~operating ~~they~~functions ~~will~~with ~~resign or~~another ~~retire~~third party, which could also require significant expenditures.

~~Our~~Any ~~information~~failure ~~technology~~on ~~systems~~the ~~may fail~~part orof ~~suffer~~ a ~~loss~~third ofparty ~~security~~to ~~which~~properly maintain our policy administration system (PTS), or to host and operate PTS could ~~adversely~~lead to material litigation, undermine our reputation in the marketplace, impair our image and negatively affect our ~~business~~financial results.

~~Our business is highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems.~~ We rely on ~~these~~independent ~~systems to~~agents ~~perform actuarial and other modeling functions necessary for writing business, as well as~~ to ~~handle~~write our ~~policy~~insurance ~~administration process (i.e.~~policies, ~~quoting~~ and ~~issuing~~if ~~our~~we ~~policies,~~are ~~billing~~not ~~and~~able ~~applying~~to ~~payments,~~attract ~~the printing~~ and ~~mailing~~retain ofindependent ~~our policies~~agents, ~~endorsements, renewal notices, etc). The failure of these systems could interrupt~~ our ~~operations.~~revenues ~~This~~would ~~could~~be ~~result~~negatively ~~in a material adverse effect on our business results~~affected.

18We write insurance policies through approximately 650 independent agents in Texas, some of whom write a significant amount of business with us. We rely on these independent agents as the only source for our property insurance policies.

The development and expansion of our business is dependent upon the successful development and implementation of advanced computer and data processing systems. The failure of these systems to function as planned could slow our growth and adversely affect our future business volume and results of operations. We license the software used in our policy administration process (PTS) from a third party, IDMI, Inc. IDMI also maintains PTS. In addition, we outsource the hosting and operating of our policy administration system with another third party, Primoris, Inc. Primoris Services, L.L.C., an affiliate of IDMI, hosts PTS on its servers located in Warner Robbins, GA, with a mirror processor hosting both system and policy records in Atlanta, GA. Through this “mirror processing environment” the Company has established a data security protocol which provides instant “off-site” back-up of both its operating software and data. In addition, the Company has offsite storage of the IDMI operating software with Iron Mountain Intellectual Property Management, Inc.17

~~The~~Many ~~Company’s~~of ~~insurance subsidiary~~our iscompetitors ~~highly~~also ~~dependent~~rely on ~~the~~independent ~~successful~~agents. ~~and~~As ~~uninterrupted~~a ~~functioning~~result, ofwe ~~its~~must ~~computer~~compete ~~systems.~~with Weother ~~rely~~insurers onfor ~~these~~independent ~~systems to~~agents' ~~quote and underwrite our~~ business,. ~~bill~~Our ~~premium~~competitors ~~and~~may ~~issue~~offer ~~policies~~a togreater ~~customers~~variety asof ~~well~~insurance asproducts, ~~provide~~lower ~~financial~~premiums ~~data.~~for ~~The~~insurance ~~failure of~~coverage, ~~the~~or ~~system~~higher ~~through~~commissions ~~natural~~to ~~disaster~~their ~~and~~agents. orIf ~~power outages could disrupt~~ our ~~operations~~products, pricing and ~~could~~commissions ~~result~~do innot aremain ~~material~~competitive, ~~adverse effect~~we onmay ~~our~~find ~~business.~~it ~~The~~more ~~Company~~difficult ~~has~~to ~~addressed~~attract ~~this~~business ~~risk~~from ~~through~~independent ~~the~~agents ~~establishment~~to ofsell ~~back~~our upproducts. ~~facilities~~A ~~for~~material ~~data~~reduction ~~and~~in ~~source code~~the ~~built~~amount toof ~~DOD~~our ~~anti-terrorism~~products ~~force~~that ~~protection~~independent ~~codes,~~agents atsell ~~one~~would ofnegatively ~~the~~affect ~~most~~our ~~physically~~revenues. ~~secure~~To ~~commercial~~date ~~data~~we ~~centers~~have innot ~~the~~experienced ~~country. The~~difficulty ~~Company~~attracting ~~will~~new ~~enhance~~independent ~~its~~agents ~~backup~~to /support ~~data~~our ~~recovery~~new ~~capabilities~~business byand ~~bringing~~growth ~~on-line the mirror processing systems~~objectives.

~~The~~We ~~license~~are ~~and~~only ~~maintenance agreement~~rated ~~with IDMI may be terminated~~ by usDemotech, ~~with~~Inc. 45and ~~days~~do ~~written~~not ~~notice~~have ~~or by IDMI in the event of~~ a ~~material~~rating ~~breach~~from ofA.M. ~~the agreement (such as non-payment) by us~~Best. IfThe ~~termination~~Demotech ofrating ~~the~~alone ~~IDMI agreement occurs, we~~ may not be ~~required~~sufficient to ~~spend~~allow ~~significant~~us ~~capital and other resources~~ to ~~purchase~~expand ~~and~~into ~~implement~~parts ~~PTS~~of ~~or a replacement software system, and to staff and support~~ the ~~technologists~~United ~~that would~~States bewhere ~~needed~~Demotech tois ~~maintain~~not ~~and~~as ~~operate~~well ~~our~~known ~~processing~~or ~~system.~~as ~~Alternatively,~~widely ~~we could outsource our policy administration process with another third party, which would also require significant expenditures~~used.

~~The~~We ~~hosting~~are ~~and~~not ~~operating agreement~~rated ~~with~~by ~~Primoris~~A.M. ~~may~~Best, bealthough ~~terminated~~we are rated "A, Exceptional" by usDemotech, ~~with~~Inc. 90We ~~days~~have ~~written~~never ~~notice~~been orreviewed by ~~Primoris~~A.M. inBest ~~the~~and ~~event~~do ofnot intend to seek a ~~material~~rating ~~breach~~from ~~by us~~A.M. Best until we believe we can secure a minimum rating of B+, that being the ~~agreement~~minimum accepted by most lenders as well as many independent agents. IfOur ~~termination~~analysis, ofapplying ~~this~~known ~~agreement~~A.M. ~~occurs~~Best rating criteria, shows that we ~~may~~will beneed ~~required~~additional capital before we can qualify for an acceptable A.M. Best rating. Unlike Demotech, A.M. Best tends to ~~spend~~penalize ~~significant~~companies ~~capital~~that ~~and~~are ~~other~~highly ~~resources~~ leveraged, i.e. that utilize reinsurance to ~~purchase~~support ~~and~~premium ~~implement~~writings. ~~the~~HAIC ~~hardware~~has ~~needed~~a gross premium to ~~host~~capital ~~and~~ratio ~~operate~~of ~~PTS~~approximately 6-to-1, ~~and~~although ~~possibly~~our net premium to ~~staff~~capital ~~and~~ratio ~~support~~is ~~the~~less ~~technologists~~than ~~that~~ 1-to-1. We would beneed ~~needed~~to reduce our gross ratio to ~~maintain~~approximately ~~and~~2-to-1, ~~operate~~either ~~our~~by ~~processing~~increasing ~~system~~capital (the denominator) or decreasing premium writings (the numerator). ~~Alternatively~~Capital is expected to grow over time, webut ~~could~~in ~~outsource~~order to achieve our ~~PTS~~premium ~~hosting~~revenue objectives and ~~operating functions~~maintain ~~with~~size ~~another~~efficiency, ~~third~~we ~~party~~must continue to rely on reinsurers to ameliorate risks and provide financial support. In summary, ~~which~~we ~~could~~do ~~also~~not ~~require~~plan ~~significant~~to ~~expenditures~~give up revenues or efficiency of size as a means to qualify for an acceptable A.M. Best rating. Our Demotech rating has proved satisfactory to date in attracting an acceptable amount of business from independent agent and satisfies lenders as to our financial stability.

~~Any~~A ~~failure~~rating onby ~~the part~~A.M ofBest is more widely accepted by lenders, independent agents and consumers than a ~~third~~Demotech ~~party~~rating. toA.M. ~~properly~~Best ~~maintain~~has ~~our~~been ~~policy~~the ~~administration~~rating ~~system~~standard ~~(PTS),~~relied orupon to ~~host~~rate ~~and~~insurance ~~operate~~companies ~~PTS~~in ~~could~~the ~~lead~~United States for many years. The Demotech rating alone may not be sufficient to ~~material litigation,~~allow ~~undermine~~us ~~our~~to ~~reputation~~expand ininto parts of the ~~marketplace~~United States where Demotech is not as well known or as widely used. However, ~~impair~~Demotech's ~~our~~rating ~~image~~has been sufficient in Texas and ~~negatively~~we ~~affect~~expect ~~our~~it ~~financial~~to ~~results~~be sufficient in expansion states that the Company has under study.

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

WeThe ~~rely~~results onof ~~independent~~our ~~agents~~operations toand ~~write~~ the financial condition of our insurance ~~policies~~subsidiary depend on our ability to underwrite and set premium rates accurately for a wide variety of risks. Rate adequacy is necessary to generate sufficient premiums to pay losses, LAE and ifunderwriting weexpenses ~~are~~and ~~not~~to ~~able~~earn a profit. In order to ~~attract~~price our products accurately, we must collect and ~~retain~~properly ~~independent~~analyze ~~agents~~a substantial amount of data; develop, ~~our~~test ~~revenues~~and ~~would~~apply beappropriate ~~negatively~~rating ~~affected~~formulas; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. Our ability to undertake these efforts successfully, and as a result price our products accurately, is subject to a number of risks and uncertainties, some of which are outside our control, including:

We ~~write~~the ~~insurance policies~~availability ~~through approximately 650 independent agents in Texas, some~~ of ~~whom~~sufficient ~~write~~reliable adata ~~significant~~and ~~amount~~our ofability ~~business~~to ~~with~~properly ~~us.~~analyze ~~We rely~~available ~~on these independent agents as the only source for our property insurance policies.~~data;

~~Many~~ of our competitors also rely on independent agents. As a result, we must compete with other insurers for independent agents’ business. Our competitors may offer a greater variety of insurance products, lower premiums for insurance coverage, or higher commissions to their agents. If our products, pricing and commissions do not remain competitive, we may find it more difficult to attract business from independent agents to sell our products. A material reduction in the ~~amount~~uncertainties ~~of our products~~ that ~~independent~~inherently ~~agents~~characterize ~~sell would~~estimates ~~negatively affect our revenues. To date we have not experienced difficulty attracting new independent agents to support our new business~~ and ~~growth objectives.~~assumptions;

19 our selection and application of appropriate rating and pricing techniques;

We ~~are~~changes ~~only~~in ~~rated~~legal ~~by Demotech~~standards, ~~Inc.~~claim ~~and do~~settlement ~~not~~practices, ~~have~~and arestoration ~~rating~~costs; ~~from A.M. Best. The Demotech rating alone may not be sufficient to allow us to expand into parts of the United States where Demotech is not as well known or as widely used.~~and

We ~~are~~legislatively ~~not~~imposed ~~rated~~consumer ~~by A~~initiatives.M. Best, although we are rated “A, Exceptional” by Demotech, Inc. We have never been reviewed by A.M. Best and do not intend to seek a rating from A.M. Best until we believe we can secure a minimum rating of B+, that being the minimum accepted by most lenders as well as many independent agents. Our analysis, applying known A.M. Best rating criteria, shows that we will need additional capital before we can qualify for an acceptable A.M. Best rating. Unlike Demotech, A.M. Best tends to penalize companies that are highly leveraged, i.e. that utilize reinsurance to support premium writings. HAIC has a gross premium to capital ratio of approximately 6.5-to-1, although our net premium to capital ratio is less than 1-to-1. We would need to reduce our gross ratio to approximately 2-to-1, either by increasing capital (the denominator) or decreasing premium writings (the numerator). Capital is expected to grow over time, but in order to achieve our premium revenue objectives and maintain size efficiency, we must continue to rely on reinsurers to ameliorate risks and provide financial support. In summary, we do not plan to give up revenues or efficiency of size as a means to qualify for an acceptable A.M. Best rating. Our Demotech rating has proved satisfactory to date in attracting an acceptable amount of business from independent agent and satisfies lenders as to our financial stability.

A ~~rating~~failure byto ~~A.M~~adequately ~~Best is~~price ~~more~~risks ~~widely~~will ~~accepted~~negatively byaffect ~~lenders,~~future ~~independent~~underwriting ~~agents and consumers than a Demotech rating~~profits. ~~A.M.~~We ~~Best~~could ~~has~~also ~~been~~overprice ~~the~~risks, ~~rating~~which ~~standard relied~~could ~~upon~~reduce toour ~~rate~~sales ~~insurance~~volume ~~companies~~and ~~in the United States for many years~~competitiveness. ~~The~~In ~~Demotech~~either ~~rating~~event, ~~alone~~the ~~may~~profitability ~~not be sufficient to allow us to expand into parts~~ of ~~the~~our ~~United~~insurance ~~States~~subsidiary ~~where~~could ~~Demotech~~be ismaterially ~~not as well known or as widely used. However, Demotech’s rating has been sufficient in Texas~~ and weadversely ~~expect it to be sufficient in expansion states that the Company has under study~~affected.

~~Our success depends on our ability to accurately price the risks we underwrite.~~18

~~The~~We ~~results~~incur ofadditional ~~our operations~~costs ~~and~~as ~~the financial condition of our insurance subsidiary depend on our ability to underwrite and set premium rates accurately for~~ a ~~wide~~result ~~variety~~ of ~~risks.~~being ~~Rate adequacy is necessary to generate sufficient premiums to pay losses, LAE and underwriting expenses and to earn~~ a ~~profit.~~public ~~In order to price our products accurately~~company, we must collect and properly analyze a substantial amount of data; develop, test and apply appropriate rating formulas; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. Our ability to undertake these efforts successfully, and as a result price our products accurately, is subject to a number of risks and uncertainties, some of which ~~are~~could ~~outside~~reduce our ~~control, including:~~profits.

·As a relatively new public company, we have and will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the ~~availability~~Securities and Exchange Commission, have required changes in the corporate governance practices of ~~sufficient~~public ~~reliable~~companies, ~~data~~including rules requiring public companies to include a report of management on the company's internal control over financial reporting in their annual reports on Form 10-K. Compliance with these rules and regulations will increase our ~~ability~~legal toand ~~properly~~financial ~~analyze~~compliance ~~available~~costs ~~data;~~and have made some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we may incur in the future or the timing of such costs, which could increase our operating costs and reduce our profits.

·We have elected to use the ~~uncertainties~~extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act which allows us to delay the adoption of new or revised accounting standards that ~~inherently~~have ~~characterize~~different ~~estimates~~effective dates for public and ~~assumptions;~~private companies until those standards apply to private companies.

·We ~~our~~are ~~selection~~an emerging growth company as defined in the JOBS Act, and ~~application~~will continue to be an emerging growth company until: (i) the last day of ~~appropriate~~our ~~rating~~fiscal year following the fifth anniversary of our Registration Statement on Form S-1 filed August 8, 2013, (ii) the date on which we become a large accelerated filer, or (iii) the date on which we have issued an aggregate of $1 billion in non-convertible debt during the preceding 3 years. As an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and ~~pricing~~private ~~techniques;~~companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

·Risks ~~changes~~Related into ~~legal~~Regulation ~~standards,~~of ~~claim~~our ~~settlement~~Insurance ~~practices, and restoration costs; and~~Operations

·As ~~legislatively~~an ~~imposed~~insurance ~~consumer~~holding ~~initiatives~~company, we are currently subject to regulation by the State of Texas and in the future may become subject to regulation by certain other states or a federal regulator.

AAll ~~failure~~states regulate insurance holding company systems. State statutes and administrative rules generally require each insurance company in the holding company group to ~~adequately price~~register ~~risks~~with ~~will~~the ~~negatively~~department of insurance in its state of domicile and to furnish information concerning the operations of the companies within the holding company system which may materially affect ~~future~~the ~~underwriting~~operations, ~~profits~~management or financial condition of the insurers within the group. WeAs ~~could~~part ~~also~~of ~~overprice~~its ~~risks~~registration, ~~which~~each ~~could~~insurance ~~reduce~~company ~~our~~must ~~sales~~identify ~~volume~~ material agreements, relationships and ~~competitiveness.~~transactions Inwith ~~either~~affiliates, ~~event~~including without limitation loans, investments, asset transfers, transactions outside of the ~~profitability~~ordinary course of ~~our~~business, ~~insurance~~certain ~~subsidiary~~management, ~~could~~service, beand ~~materially~~cost sharing agreements, reinsurance transactions, dividends, and ~~adversely~~consolidated ~~affected~~tax allocation agreements.

WeInsurance ~~incur~~holding ~~additional~~company ~~costs~~regulations generally provide that transactions between an insurance company and its affiliates must be fair and equitable, allocated between the parties in accordance with customary accounting practices, and fully disclosed in the records of the respective parties. Many types of transactions between an insurance company and its affiliates, such as atransfers ~~result~~ of ~~being~~assets among such affiliated companies, certain dividend payments from insurance subsidiaries and certain material transactions between companies within the system, may be subject to prior notice to, or prior approval by, state regulatory authorities. If we are unable to obtain the requisite prior approval for a ~~public~~specific ~~company~~transaction, we would be precluded from taking the action which could ~~reduce~~adversely affect our ~~profits~~operations.

AsOur ainsurance ~~relatively~~subsidiary ~~new public~~currently ~~company,~~operates wein ~~have~~the ~~and~~State ~~will~~of ~~incur~~Texas ~~significant~~and ~~legal,~~the ~~accounting~~State ~~and~~of ~~other~~Arizona. ~~expenses~~In ~~that~~the wefuture, ~~did~~our ~~not~~insurance ~~incur~~subsidiary asmay abecome ~~private~~authorized ~~company. The~~to ~~Sarbanes-Oxley~~transact ~~Act~~business ofin ~~2002,~~other asstates ~~well~~and astherefore ~~new~~will ~~rules~~become ~~subsequently~~subject ~~implemented~~to by the ~~Securities~~laws and ~~Exchange~~regulatory ~~Commission,~~requirements ~~have required~~of ~~changes~~those instates. ~~the~~These ~~corporate~~regulations ~~governance~~may ~~practices~~vary offrom ~~public~~state ~~companies~~to state, ~~including~~and ~~rules~~states ~~requiring~~occasionally ~~public~~may ~~companies~~have toconflicting ~~include a~~regulations. ~~report~~Currently, ~~of management on~~ the ~~company’~~federal government's ~~internal~~role ~~control~~in ~~over~~regulating ~~financial~~or ~~reporting~~dictating inthe ~~their~~policies ~~annual~~of ~~reports~~insurance oncompanies ~~Form~~is ~~10-K~~limited. ~~Compliance~~ ~~with~~However, ~~these~~Congress, ~~rules~~from ~~and~~time ~~regulations~~to ~~will~~time, ~~increase~~considers ~~our~~proposals ~~legal~~that ~~and~~would ~~financial~~increase ~~compliance~~the ~~costs~~role ~~and~~of ~~have~~the ~~made~~federal ~~some~~government ~~activities more~~in ~~time-consuming~~insurance ~~and~~regulation, ~~costly.~~either Wein ~~cannot~~addition ~~predict~~to or ~~estimate~~in ~~the~~lieu ~~amount~~ of ~~additional~~state ~~costs~~regulation. weThe ~~may~~impact ~~incur~~of inany ~~the~~ future orfederal ~~the timing~~insurance ofregulation ~~such~~on ~~costs,~~our ~~which~~insurance ~~could~~operations ~~increase~~is ~~our~~unclear ~~operating~~and ~~costs~~may ~~and~~adversely ~~reduce~~impact our ~~profits~~business or competitive position.

2019

WeOur ~~have~~insurance ~~elected~~subsidiary tois ~~use~~subject ~~the~~to ~~extended transition~~extensive ~~period~~regulation ~~for~~which ~~complying~~may ~~with~~reduce ~~new~~our profitability or ~~revised~~inhibit ~~accounting~~our ~~standards~~growth. ~~under~~Moreover, ~~Section~~if ~~102(b)(1)~~we offail ~~the~~to ~~JOBS~~comply ~~Act~~with ~~which~~these ~~allows us~~regulations, towe ~~delay~~may ~~the~~be ~~adoption~~subject ofto ~~new~~penalties, orincluding ~~revised~~fines ~~accounting~~and ~~standards~~suspensions, ~~that~~which ~~have~~may ~~different~~adversely ~~effective~~affect ~~dates~~our ~~for~~financial ~~public~~condition and ~~private~~results ~~companies until~~of ~~those standards apply to private companies~~operations.

WeThe ~~are~~insurance anindustry ~~emerging growth~~is ~~company~~highly asregulated ~~defined~~and insupervised. ~~the~~Our ~~JOBS~~insurance ~~Act,~~subsidiary ~~and~~is ~~will~~subject ~~continue~~ to ~~be an emerging growth company until: (i)~~ the ~~last~~supervision ~~day~~and ofregulation ~~our fiscal year following the fifth anniversary~~ of ~~our Registration Statement on Form S-1 filed August 8, 2013, (ii)~~ the ~~date~~state onin which ~~we become~~it ais ~~large~~domiciled ~~accelerated filer, or~~ (~~iii~~Texas) and the ~~date~~states onin which weit ~~have~~does ~~issued~~business an(currently ~~aggregate~~Texas ofand ~~$1 billion in non-convertible debt during the preceding 3 years~~Arizona). AsSuch ansupervision ~~emerging~~and ~~growth~~regulation ~~company,~~is weprimarily ~~have~~designed ~~elected~~ to ~~use~~protect ~~the~~our ~~extended~~policyholders ~~transition~~rather ~~period~~than ~~for~~our ~~complying with~~stockholders. ~~new~~These orregulations ~~revised~~are ~~accounting~~generally ~~standards~~administered ~~under~~by ~~Section~~a ~~102(b)(1)~~department of ~~the~~insurance ~~JOBS~~in ~~Act.~~each ~~This~~state ~~election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public~~ and ~~private~~relate ~~companies until those standards apply~~ to ~~private companies. As a result of this election~~, ~~our~~among ~~financial~~other ~~statements may not be comparable to companies that comply with public company effective dates.~~things:

~~Risks~~ ~~Related~~the tocontent ~~Regulation~~and timing of ~~our~~required ~~Insurance Operations~~notices and other policyholder information;

As ~~an insurance holding company, we are currently subject to regulation by~~ the ~~State~~amount of ~~Texas~~premiums ~~and in~~ the ~~future~~insurer may ~~become~~write ~~subject~~in relation to ~~regulation~~its ~~by certain other states or a federal regulator.~~surplus;

~~All~~ ~~states regulate insurance holding company systems. State statutes and administrative rules generally require each insurance company in~~ the ~~holding company~~amount ~~group to register with the department of insurance in its state of domicile~~ and tonature ~~furnish information concerning the operations~~ of ~~the~~reinsurance ~~companies~~a ~~within the holding~~ company ~~system~~is ~~which~~required ~~may~~to materially affect the operations, management or financial condition of the insurers within the group. As part of its registration, each insurance company must identify material agreements, relationships and transactions with affiliates, including without limitation loans, investments, asset transfers, transactions outside of the ordinary course of business, certain management, service, and cost sharing agreements, reinsurance transactions, dividends, and consolidated tax allocation agreements.purchase;

~~Insurance~~ ~~holding company~~participation ~~regulations generally provide that transactions between an insurance company and its affiliates must be fair and equitable, allocated between the parties~~ in ~~accordance~~guaranty ~~with~~funds ~~customary accounting practices,~~ and ~~fully~~other ~~disclosed~~statutorily-created inmarkets the records of the respective parties. Many types of transactions between an insurance company and its affiliates, such as transfers of assets among such affiliated companies, certain dividend payments from insurance subsidiaries and certain material transactions between companies within the system, may be subject to prior notice to, or prior approval by, state regulatory authorities. If we are unable to obtain the requisite prior approval for a specific transaction, we would be precluded from taking the action which could adversely affect our operations.organizations;

~~Our~~ ~~insurance subsidiary currently operates only in the State of Texas. In the future, our insurance subsidiary may become authorized to transact~~ business in other states and therefore will become subject to the laws and regulatory requirements of those states. These regulations may vary from state to state, and states occasionally may have conflicting regulations. Currently, the federal government’s role in regulating or dictating the policies of insurance companies is limited. However, Congress, from time to time, considers proposals that would increase the role of the federal government in insurance regulation, either in addition to or in lieu of state regulation. The impact of any future federal insurance regulation on our insurance operations ~~is unclear~~ and ~~may~~claims ~~adversely impact our business or competitive position.~~practices;

~~Our~~ ~~insurance~~approval ~~subsidiary~~of ispolicy ~~subject~~forms ~~to extensive regulation which may reduce our profitability or inhibit our growth. Moreover, if we fail to comply with these regulations, we may be subject to penalties, including fines~~ and ~~suspensions,~~premium ~~which may adversely affect our financial condition and results of operations.~~rates;

~~The~~ ~~insurance~~standards ~~industry is highly regulated and supervised. Our insurance subsidiary is subject to the supervision and regulation~~ of the state in which it is domiciled (Texas) and the state(s) in which it does business (currently only Texas). Such supervision and regulation is primarily designed to protect our policyholders rather than our stockholders. These regulations are generally administered by a department of insurance in each state and relate tosolvency, ~~among~~including ~~other~~risk-based ~~things:~~capital measurements;

· ~~the~~licensing ~~content and timing~~ of ~~required~~insurers ~~notices~~ and ~~other~~their ~~policyholder information~~products;

· ~~the~~restrictions ~~amount~~on ~~of premiums~~ the ~~insurer~~nature, ~~may~~quality ~~write~~and inconcentration ~~relation~~of ~~to its surplus~~investments;

· ~~the~~restrictions ~~amount~~on ~~and~~the ~~nature~~ability of ~~reinsurance~~our ainsurance company issubsidiary ~~required~~to pay dividends to ~~purchase~~us;

· ~~participation~~restrictions inon ~~guaranty~~transactions ~~funds~~between ~~and~~insurance ~~other~~company ~~statutorily-created~~subsidiaries ~~markets~~and ortheir ~~organizations~~affiliates;

· ~~business~~restrictions ~~operations~~on ~~and~~the ~~claims~~size ~~practices~~of risks insurable under a single policy;

· ~~approval~~requiring ofdeposits ~~policy~~for ~~forms~~the ~~and~~benefit ~~premium~~of ~~rates~~policyholders;

· ~~standards~~requiring ofcertain ~~solvency,~~methods ~~including~~of ~~risk-based capital measurements~~accounting;

· ~~licensing~~periodic examinations of ~~insurers~~our operations and ~~their products~~finances;

21 prescribing the form and content of records of financial condition required to be filed; and

· ~~restrictions~~requiring onreserves ~~the~~as ~~nature,~~required ~~quality~~by ~~and~~statutory ~~concentration~~accounting ~~of investments;~~rules.

·The ~~restrictions~~Texas onDepartment of Insurance and regulators in other jurisdictions where our insurance subsidiary may become licensed conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters. These regulatory requirements may adversely affect or inhibit our ability to achieve some or all of our business objectives. These regulatory authorities also conduct periodic examinations into insurers' business practices. These reviews may reveal deficiencies in our insurance ~~company~~operations ~~subsidiary~~or todifferences ~~pay~~between ~~dividends~~our tointerpretations ~~us;~~of regulatory requirements and those of the regulators.

~~· restrictions on transactions between insurance company subsidiaries and their affiliates;~~20

·In ~~restrictions~~addition, regulatory authorities have relatively broad discretion to deny or revoke licenses for various reasons, including the violation of regulations. In some instances, we follow practices based on our interpretations of regulations or practices that we believe may be generally followed by the ~~size~~industry. These practices may turn out to be different from the interpretations of ~~risks~~regulatory ~~insurable~~authorities. ~~under~~If awe ~~single~~do ~~policy;~~not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us. This could adversely affect our ability to operate our business.

·The ~~requiring~~Company's ~~deposits~~insurance ~~for~~subsidiary, ~~the~~HAIC ~~benefit~~is ofnot ~~policyholders;~~currently subject to any regulatory investigations or settlements.

·Finally, ~~requiring~~changes ~~certain~~in ~~methods~~the level of ~~accounting;~~regulation of the insurance industry or changes in laws or regulations themselves or interpretations by regulatory authorities could adversely affect our ability to operate our business.

·Changes ~~periodic~~in ~~examinations~~regulation ofmay reduce our ~~operations~~profitability and ~~finances;~~limit our growth.

·We ~~prescribing~~are subject to extensive regulation in the ~~form~~states in which we conduct business (currently Texas and ~~content~~Arizona). This regulation is generally designed to protect the interests of ~~records~~policyholders, as opposed to stockholders and other investors in the insurance company or its affiliates, and relates to authorization for lines of business, capital and surplus requirements, investment limitations, underwriting limitations, transactions with affiliates, dividend limitations, trade practices and claims practices, participation in guaranty funds and other statutorily-created markets or organizations, changes in control, premium rates and a variety of other financial ~~condition~~and ~~required~~non-financial components of an insurance company's business. The National Association of Insurance Commissioners ("NAIC") and state insurance regulators are constantly reexamining existing laws and regulations, generally focusing on modifications to beholding ~~filed;~~company regulations, interpretations of existing laws and the development of new laws.

·From ~~requiring~~time ~~reserves~~to astime, ~~required~~states byconsider ~~statutory~~and/or ~~accounting~~enact ~~rules~~laws that may alter or increase state authority to regulate insurance companies and insurance holding companies. States also consider and/or enact laws that impact the competitive environment and marketplace for property and casualty insurance. Texas lawmakers may enact legislation that reduces our profitability, limits our growth, or otherwise adversely affects our operations.

~~The~~During ~~Texas~~the ~~Department of~~past ~~Insurance~~several years, various regulatory and ~~regulators~~legislative inbodies ~~other~~have ~~jurisdictions~~adopted ~~where~~or ~~our~~proposed ~~insurance~~new ~~subsidiary~~laws ~~may~~or ~~become~~regulations ~~licensed~~to ~~conduct~~address ~~periodic~~the ~~examinations~~ cyclical nature of the ~~affairs~~insurance ofindustry, catastrophic events and insurance ~~companies~~capacity and ~~require~~pricing. These regulations include (i) the ~~filing~~creation of ~~annual~~"market ~~and~~assistance ~~other~~plans" ~~reports~~under ~~relating~~which insurers are induced to ~~financial~~provide ~~condition~~certain coverages, ~~holding company~~(ii) ~~issues~~restrictions ~~and~~on ~~other~~the ~~matters.~~ability ~~These~~of ~~regulatory~~insurers ~~requirements~~to ~~may~~rescind ~~adversely~~or ~~affect~~otherwise orcancel ~~inhibit~~certain ~~our~~policies ~~ability~~in mid-term or to ~~achieve~~nonrenew ~~some~~policies ~~or all~~at oftheir ~~our~~scheduled ~~business~~expirations, ~~objectives.~~(iii) ~~These~~advance ~~regulatory~~notice ~~authorities~~requirements ~~also~~or ~~conduct~~limitations ~~periodic~~imposed ~~examinations~~for ~~into~~certain ~~insurers’~~policy ~~business practices.~~non-renewals, ~~These~~(iv) ~~reviews~~limitations ~~may~~upon ~~reveal~~or ~~deficiencies~~decreases in ~~our~~rates ~~insurance~~permitted ~~operations~~to orbe ~~differences~~charged, ~~between~~(v) ~~our~~expansion ~~interpretations~~ of ~~regulatory requirements~~governmental involvement in the insurance market, and ~~those~~(vi) increased regulation of ~~the~~insurers' ~~regulators~~policy administration and claims handling practices.

~~In addition~~Currently, ~~regulatory authorities~~the ~~have~~federal ~~relatively~~government ~~broad~~does ~~discretion~~not todirectly ~~deny~~regulate orthe ~~revoke~~insurance ~~licenses~~business. ~~for~~However, ~~various~~in ~~reasons,~~recent ~~including~~years the ~~violation~~state ofinsurance ~~regulations. In~~regulatory ~~some~~framework ~~instances,~~has wecome ~~follow~~under ~~practices~~increased ~~based~~federal onscrutiny. ~~our~~Congress ~~interpretations~~and ofsome ~~regulations~~federal oragencies ~~practices~~from ~~that~~time weto ~~believe~~time ~~may~~investigate ~~be generally followed by~~ the ~~industry.~~current ~~These~~condition ~~practices~~of ~~may~~insurance ~~turn~~regulation ~~out~~in ~~to be different from~~ the ~~interpretations~~United ofStates ~~regulatory~~to ~~authorities.~~determine ~~If we~~whether doto ~~not~~impose ~~have~~federal ~~the~~regulation ~~requisite~~or ~~licenses~~to ~~and~~allow ~~approvals~~an oroptional dofederal ~~not~~charter, ~~comply~~similar ~~with~~to ~~applicable~~banks. ~~regulatory~~In ~~requirements~~addition, ~~insurance~~changes ~~regulatory authorities~~in ~~could~~federal ~~preclude~~legislation orand ~~temporarily~~administrative ~~suspend~~policies usin ~~from~~several ~~carrying~~areas, onincluding ~~some~~changes orin ~~all~~the ofGramm-Leach-Bliley ~~our~~Act, ~~activities~~financial orservices ~~otherwise~~regulation ~~penalize~~and ~~us. This~~federal ~~could~~taxation, ~~adversely~~can ~~affect~~significantly ~~our~~impact ~~ability~~the toinsurance ~~operate~~industry ~~our~~and ~~business~~us.

~~The~~We ~~Company's~~cannot ~~insurance subsidiary~~predict with certainty the effect any enacted, ~~HAIC~~proposed isor ~~not~~future ~~currently~~state ~~subject~~or federal legislation or NAIC initiatives may have on the conduct of our business. Furthermore, there can be no assurance that the regulatory requirements applicable to ~~any~~our business will not become more stringent in the future or result in materially higher costs than current requirements, or that creation of a federal insurance regulatory ~~investigations~~system will not adversely affect our business or ~~settlements~~disproportionately benefit our competitors. Changes in the regulation of our business may reduce our profitability, limit our growth or otherwise adversely affect our operations.

~~Finally,~~Our ~~changes~~insurance ~~in the~~subsidiary ~~level~~is ofsubject ~~regulation~~to ofminimum ~~the~~capital ~~insurance~~and ~~industry~~surplus orrequirements, ~~changes~~and inour ~~laws~~failure orto ~~regulations~~meet ~~themselves~~these orrequirements ~~interpretations by regulatory authorities~~ could ~~adversely~~subject ~~affect~~us ~~our ability~~ to ~~operate~~regulatory ~~our business~~action.

~~Changes~~Our ininsurance ~~regulation~~subsidiary ~~may~~is ~~reduce~~subject ~~our~~to ~~profitability~~ risk-based capital standards and ~~limit~~other minimum capital and surplus requirements imposed under applicable state laws, including the laws of Texas. The risk-based capital standards, based upon the Risk-Based Capital Model Act adopted by the NAIC, require our ~~growth~~insurance subsidiary to report its results of risk-based capital calculations to state departments of insurance and the NAIC. These risk-based capital standards provide for different levels of regulatory attention depending upon the ratio of an insurance company's total adjusted capital, as calculated in accordance with NAIC guidelines, to its authorized control level risk-based capital. Authorized control level risk-based capital is the number determined by applying the NAIC's risk-based capital formula, which measures the minimum amount of capital that an insurance company needs to support its overall business operations.

We are subject to extensive regulation in the state in which we conduct business (currently only Texas). This regulation is generally designed to protect the interests of policyholders, as opposed to stockholders and other investors in the insurance company or its affiliates, and relates to authorization for lines of business, capital and surplus requirements, investment limitations, underwriting limitations, transactions with affiliates, dividend limitations, trade practices and claims practices, participation in guaranty funds and other statutorily-created markets or organizations, changes in control, premium rates and a variety of other financial and non-financial components of an insurance company’s business. The National Association of Insurance Commissioners (“NAIC”) and state insurance regulators are constantly reexamining existing laws and regulations, generally focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws.21

~~From~~Since ~~time~~beginning tooperations ~~time~~in 2006, ~~states~~ ~~consider~~the ~~and/or~~Company ~~enact~~has ~~laws~~been ~~that~~able ~~may~~to ~~alter~~finance orits ~~increase~~operations ~~state~~and ~~authority~~maintain tothe ~~regulate~~statutory ~~insurance~~required ~~companies~~capital ~~and~~of its insurance ~~holding companies.~~subsidiary ~~States~~from ~~also~~its ~~consider~~original organizational financing, results of operations, additional surplus contributions from its parent, and~~/or~~ ~~enact~~the ~~laws~~small ~~that~~amount ~~impact~~of interest income earned on invested assets. In 2013, HAMGA paid a dividend to the ~~competitive~~Company ~~environment~~totaling ~~and~~$400,000. ~~marketplace~~These funds were used for ~~property~~operating ~~and~~expenses ~~casualty insurance~~of the Company. ~~Texas~~In ~~lawmakers~~2013, ~~may~~HAHC ~~enact~~contributed ~~legislation~~$100,000 ~~that~~to ~~reduces~~the ~~our~~Paid ~~profitability~~in Surplus of HAIC. In 2014, ~~limits~~HAMGA ~~our~~paid ~~growth~~a dividend to the Company totaling $325,000. orThese ~~otherwise~~funds ~~adversely~~were ~~affects our~~used ~~operations~~for operating expenses of the Company.

~~During~~In ~~the past several years~~addition, ~~various~~our ~~regulatory~~insurance ~~and~~subsidiary ~~legislative~~is ~~bodies~~required ~~have adopted or proposed new laws or regulations~~ to ~~address~~maintain ~~the~~certain ~~cyclical~~minimum ~~nature of~~capital ~~the~~and ~~insurance~~surplus ~~industry, catastrophic events~~ and ~~insurance~~to ~~capacity~~limit ~~and~~its ~~pricing.~~net ~~These~~written ~~regulations~~premiums ~~include~~ (i)direct ~~the~~premiums ~~creation~~ net of ~~“market~~reinsurance ~~assistance~~premiums) ~~plans” under which insurers are induced~~ to ~~provide~~specified ~~certain~~multiples ~~coverages, (ii) restrictions on the ability~~ of ~~insurers~~its tocapital ~~rescind~~and orsurplus. ~~otherwise~~The ~~cancel~~insurance ~~certain~~subsidiary ~~policies~~could inexceed ~~mid-term~~these orratios toif ~~nonrenew~~its ~~policies~~volume atincreases ~~their~~faster ~~scheduled~~than ~~expirations~~anticipated, ~~(iii)~~ ~~advance~~if ~~notice~~it ~~requirements~~cannot orpurchase ~~limitations~~adequate ~~imposed for certain policy non-renewals~~reinsurance, ~~(iv)~~or ~~limitations~~if ~~upon~~its orsurplus ~~decreases~~declines ~~in rates~~due ~~permitted~~ to becatastrophe ~~charged,~~or ~~(v)~~non-catastrophe ~~expansion~~losses ofor ~~governmental~~excessive ~~involvement~~underwriting ~~in the insurance market,~~ and ~~(vi)~~operational ~~increased regulation of insurers’ policy administration and claims handling practices~~expenses.

~~Currently,~~Any ~~the~~failure ~~federal government~~by ~~does~~our ~~not directly regulate the~~ insurance ~~business.~~subsidiary ~~However,~~to inmeet ~~recent years~~ the ~~state~~applicable ~~insurance~~risk-based ~~regulatory~~capital ~~framework has~~or ~~come~~minimum ~~under~~statutory ~~increased~~capital ~~federal~~requirements ~~scrutiny.~~or ~~Congress~~the ~~and~~writings ~~some~~ratio ~~federal~~limitations ~~agencies~~imposed ~~from~~by ~~time to time investigate~~ the ~~current~~laws ~~condition~~ of ~~insurance~~Texas ~~regulation~~(or inother ~~the~~states ~~United~~where ~~States~~we tomay ~~determine~~eventually ~~whether~~conduct tobusiness) ~~impose~~could ~~federal~~subject ~~regulation~~it or to ~~allow~~further anexamination ~~optional~~or ~~federal charter,~~corrective ~~similar~~action toimposed ~~banks.~~by Instate ~~addition~~regulators, ~~changes in federal legislation and administrative policies in several areas,~~ including ~~changes~~ inlimitations ~~the~~on ~~Gramm-Leach-Bliley~~our ~~Act,~~writing ~~financial~~of ~~services~~additional ~~regulation and federal taxation~~business, ~~can~~state ~~significantly~~supervision ~~impact~~or ~~the insurance industry and us~~liquidation.

22Any changes in existing risk-based capital requirements, minimum statutory capital requirements, or applicable writings ratios may require us to increase our statutory capital levels, which we may be unable to do.

WeOur ~~cannot~~status ~~predict with~~as ~~certainty~~an the effect any enacted, proposed or future state or federal legislation or NAIC initiatives may have on the conduct of our business. Furthermore, there can be no assurance that the regulatory requirements applicable to our business will not become more stringent in the future or result in materially higher costs than current requirements, or that creation of a federal insurance ~~regulatory~~ ~~system~~holding ~~will~~company ~~not~~could adversely affect our ~~business~~ability orto ~~disproportionately~~meet ~~benefit~~ our ~~competitors.~~obligations ~~Changes~~and inpay ~~the regulation of our business may reduce our profitability, limit our growth or otherwise adversely affect our operations~~dividends.

~~Our~~As an insurance ~~subsidiary~~holding iscompany, ~~subject~~we ~~to minimum~~are ~~capital~~in part dependent on dividends and ~~surplus~~other ~~requirements~~permitted payments from our insurance subsidiary to pay any cash dividends to our stockholders, to service debt and for our ~~failure~~operating tocapital. ~~meet~~The ~~these~~ability ~~requirements~~of ~~could~~our ~~subject~~insurance subsidiary to pay dividends to us is subject to certain restrictions imposed under Texas insurance law. Business and regulatory ~~action~~considerations may impact the amount of dividends actually paid, and prior approval of the Texas Department of Insurance of dividend payments may be required.

~~Our~~Risks ~~insurance~~Related ~~subsidiary is subject~~ to risk-based capital standards and other minimum capital and surplus requirements imposed under applicable state laws, including the laws of Texas. The risk-based capital standards, based upon the Risk-Based Capital Model Act adopted by the NAIC, require our insurance subsidiary to report its results of risk-based capital calculations to state departments of insurance and the NAIC. These risk-based capital standards provide for different levels of regulatory attention depending upon the ratio of an ~~insurance~~Investment ~~company’s total adjusted capital, as calculated~~ in ~~accordance~~Our with NAIC guidelines, to its authorized control level risk-based capital. Authorized control level risk-based capital is the number determined by applying the NAIC’s risk-based capital formula, which measures the minimum amount of capital that an insurance company needs to support its overall business operations.Securities

~~Since~~There ~~beginning operations in 2006 the Company~~ has ~~not~~ been ~~dependent~~no onestablished ~~the~~public ~~receipt~~trading ofmarket ~~dividends~~for ~~from~~our ~~its~~securities operating subsidiaries to pay dividends to its stockholders. In 2012, HAMGA paid two dividends to the Company totaling $800,000. These funds were used to increase the capital of the Company’s insurance subsidiary by $500,000 and toyour ~~finance~~investment ~~the~~may ~~expenses~~be ofilliquid ~~the~~for ~~stock~~an ~~registration~~indefinite project. The Company was able to finance its operations and maintain the statutory required capital of its insurance subsidiary from its original organizational financing, additional surplus contributions from its parent, and the small amount of ~~interest income earned on invested assets~~time. ~~In 2013, HAMGA paid a dividend to the Company totaling $400,000. These funds were used for operating expenses of the Company. In 2013, HAHC contributed $100,000 to the Paid in Surplus of HAIC.~~

InThere ~~addition,~~is currently no public market for our ~~insurance subsidiary~~securities. isThe ~~required~~Company's application to ~~maintain~~have ~~certain~~our ~~minimum~~stock ~~capital~~quoted ~~and~~on ~~surplus~~one ~~and~~of tothe ~~limit~~Over-the-Counter ~~its~~exchanges ~~net~~(OTCQB) ~~written~~was ~~premiums~~approved by the Financial Industry Regulatory Authority (~~direct~~"FINRA") ~~premiums net~~on February 25, 2015. With this regulatory approval, the Company is now in the process of ~~reinsurance~~completing ~~premiums)~~required filings with the exchange and its stock transfer agent to ~~specified~~facilitate ~~multiples~~the trading of its ~~capital~~shares. The ~~and~~initial ~~surplus~~market price of the Company's securities is subject to review by FINRA. Subsequent ~~The~~to ~~insurance~~our ~~subsidiary~~listing, the market price of the Company's shares could ~~exceed~~be ~~these~~subject ~~ratios if~~to ~~its~~significant ~~volume~~fluctuation ~~increases~~in ~~faster~~response ~~than~~to ~~anticipated,~~variations ifin itquarterly ~~cannot~~and ~~purchase~~annual ~~adequate~~operating ~~reinsurance~~results, orgeneral iftrends ~~its~~in ~~surplus~~our ~~declines~~company's ~~due~~industry, ~~to catastrophe~~actions ortaken ~~non-catastrophe~~by ~~losses~~competitors, orthe ~~excessive~~overall ~~underwriting~~performance of the stock market, and ~~operational~~other ~~expenses~~factors.

~~Any~~Future ~~failure~~issuances ~~by our insurance subsidiary to meet the applicable risk-based capital~~ or ~~minimum~~sales, ~~statutory capital requirements~~ or the ~~writings~~potential ~~ratio limitations~~for ~~imposed~~future byissuances ~~the~~or ~~laws~~sales, of ~~Texas~~shares ~~(or~~of ~~other~~our ~~states~~common ~~where~~stock we may ~~eventually~~cause ~~conduct~~the ~~business)~~trading ~~could~~price ~~subject~~of itour securities to ~~further examination~~decline orand ~~corrective~~could ~~action~~impair ~~imposed by state regulators, including limitations on~~ our ~~writing~~ability ofto ~~additional~~raise ~~business,~~capital ~~state supervision~~through orsubsequent ~~liquidation~~equity offerings.

~~Any~~Future ~~changes~~sales inof ~~existing risk-based~~shares ~~capital~~of ~~requirements,~~our ~~minimum~~common ~~statutory~~stock ~~capital~~or ~~requirements~~other securities in the public markets, or ~~applicable~~the ~~writings~~perception ~~ratios~~that these sales may ~~require~~occur, uscould cause the market price of our common stock to ~~increase~~ significantly decline, and could materially impair our ~~statutory~~ability to raise capital ~~levels~~through the sale of additional securities. In addition, ~~which~~there weare outstanding options to purchase 2,738,500 shares of our common stock. Actual sales, or the prospect of sales by our present stockholders, may behave ~~unable~~a tonegative doeffect on the market price of our common stock.

~~Our status as an insurance holding company could adversely affect our ability to meet our obligations and pay dividends.~~22

AsIf ~~an insurance holding company, we are in part dependent on dividends and other permitted payments from~~ our ~~insurance~~common ~~subsidiary~~stock ~~to pay any cash dividends to our stockholders, to service debt and for our operating capital. The ability of our insurance subsidiary to pay dividends to us~~ is subject to ~~certain~~the ~~restrictions~~SEC's ~~imposed~~penny ~~under~~stock ~~Texas~~rules, ~~insurance~~broker-dealers ~~law. Business and regulatory considerations~~ may ~~impact~~experience ~~the amount~~difficulty ofin ~~dividends~~completing ~~actually~~customer ~~paid,~~transactions and ~~prior~~trading ~~approval~~activity ofin ~~dividend~~our ~~payments~~securities may be ~~required~~adversely affected.

23Unless our securities are listed on a national securities exchange, or we have net tangible assets of $5.0 million or more and our common stock has a market price per share of $5.00 or more, transactions in our common stock will be subject to the SEC's "penny stock" rules. If our common stock remains subject to the "penny stock" rules promulgated under the Exchange Act, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must: make a special written suitability determination for the purchaser; receive the purchaser's written agreement to the transaction prior to sale; provide the purchaser with risk disclosure documents which identify certain risks associated with investing in "penny stocks" and which describe the market for these "penny stocks" as well as a purchaser's legal remedies; and obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a "penny stock" can be completed. As a result, if our common stock becomes subject to the penny stock rules, the market price of our securities may be depressed, and you may find it more difficult to sell shares of our common stock.

~~Risks~~We ~~Related~~have tonever anpaid ~~Investment~~dividends on our common stock and do not anticipate paying dividends on our common stock for the foreseeable future; therefore, returns on your investment may only be realized by the appreciation in ~~Our Securities~~value of our securities.

~~There~~We ~~has~~have ~~been~~never nopaid ~~established~~any ~~public~~cash ~~trading market~~dividends ~~for~~on our ~~securities~~common stock and ~~your~~do ~~investment~~not anticipate paying any cash dividends on our common stock in the foreseeable future. We plan to retain any future earnings to finance growth. Because of this, investors who purchase common stock may beonly ~~illiquid~~realize ~~for~~a anreturn ~~indefinite~~on ~~amount~~their investment if the value of ~~time~~our common stock appreciates. If we determine that we will pay dividends to the holders of our common stock, there is no assurance or guarantee that such dividends will be paid on a timely basis.

~~There~~In ~~is currently~~addition, ~~no public market for our securities. The application to have our stock quoted on~~ the ~~Over-the-Counter Bulletin~~declaration ~~Board~~and ~~has~~payment ~~been~~of ~~denied~~dividends bywill ~~the Financial Industry Regulatory Authority (“FINRA”). Our application is still considered to~~ be ~~active,~~at ~~however,~~the itdiscretion ~~is in denied status due to concentration~~ of ~~shareholders~~our asBoard ~~well as a limited number~~ of ~~shareholders.~~Directors ~~The~~and ~~Company~~will ~~is actively seeking ways to meet FINRA’s requirements to~~ be ~~quoted.~~dependent ~~However,~~upon ~~there can~~the beprofits noand ~~assurance~~financial ~~that we will meet FINRA's listing~~ requirements. Inof ~~addition,~~our ~~there~~company ~~can~~and beother ~~no assurance that an active~~factors, ~~public trading~~including ~~market~~legal ~~will~~and ~~ever~~regulatory ~~develop~~restrictions ~~even if we are successful registering~~ on athe ~~public~~payment ~~stock exchange. The market price~~ of ~~the securities~~dividends, isgeneral ~~subject~~business toconditions ~~significant fluctuation in response to variations in quarterly~~ and ~~annual~~such ~~operating~~other ~~results,~~factors ~~general trends~~as in our ~~company’s~~Board ~~industry, actions taken by competitors, the overall performance~~ of ~~the~~Directors ~~stock~~deems ~~market, and other factors~~relevant.

~~Future~~Provisions ~~issuances~~in orour ~~sales,~~Amended orand ~~the~~Restated ~~potential for~~Certificate ~~future~~of ~~issuances or sales~~Incorporation, ~~of shares of our common stock~~ may ~~cause~~restrict the ~~trading~~voting ~~price~~rights of our ~~securities~~stock ~~to decline~~ and ~~could impair~~may ~~our~~restrict ~~ability~~the totransferability ~~raise~~of ~~capital~~our ~~through subsequent equity offerings~~stock.

~~Future~~Our ~~sales~~Amended ofand ~~a substantial~~Restated ~~number~~Certificate of ~~shares~~Incorporation, ofgenerally ~~our~~provides ~~common~~that ~~stock~~if orany ~~other~~person ~~securities~~owns, indirectly, ~~the~~indirectly ~~public~~or ~~markets~~by attribution, ormore than 9.9% of the ~~perception~~total ~~that~~combined ~~these~~voting ~~sales may~~power ~~occur,~~of ~~could~~our ~~cause~~stock entitled to vote, the ~~market~~voting ~~price~~rights ofattached ~~our~~to ~~common~~such stock towill ~~decline,~~be ~~and~~reduced ~~could~~so ~~materially~~that ~~impair~~such ~~our~~person ~~ability~~may tonot ~~raise~~exercise ~~capital through~~and ~~the~~is ~~sale~~not attributed more than 9.9% of ~~additional~~the ~~securities~~total combined voting power. In addition, ~~there~~our ~~are~~board ~~outstanding~~of ~~options~~directors tomay ~~purchase~~limit ~~2,708,750~~a ~~shares~~stockholder's exercise of ~~our~~voting ~~common stock.~~rights ~~Actual~~where ~~sales,~~it ordeems ~~the~~it ~~prospect~~necessary ofto ~~sales~~do byso ~~our~~to ~~present~~avoid ~~stockholders~~non-de minimis adverse tax, ~~may~~legal ~~have~~or aregulatory ~~negative~~consequences ~~effect~~to onus, ~~the~~any ~~market~~of ~~price~~our subsidiaries or any of our ~~common~~ ~~stock~~stockholders.

IfUnder our ~~common~~Amended and Restated Certificate of Incorporation, subject to waiver by our board of directors, no transfer of our stock is ~~subject~~permitted if such transfer would result in a stockholder controlling more than 9.9% determined by value or by voting power of our outstanding stock. Our Amended and Restated Certificate of Incorporation, also provide that if our board of directors determines that stock ownership by a person may result in (i) stockholder owning directly, indirectly or by retribution, more than 9.9% of the total combined voting power of our stock entitled to vote, or (ii) any non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our stockholders, then we have the ~~SEC’s~~ ~~penny~~option, but not the obligation, to require that stockholder to sell to us for fair market value the minimum number of shares of stock ~~rules~~held by such person which is necessary so that after such purchase such stockholder will not own more than 9.9% of the total combined voting power, ~~broker~~or is necessary to eliminate the non-~~dealers~~de ~~may~~minimis ~~experience~~adverse ~~difficulty~~tax, inlegal ~~completing~~or ~~customer~~regulatory ~~transactions~~consequences. These provisions may restrict the voting rights and ~~trading~~transferability ~~activity in~~of our ~~securities~~shares, ~~may~~which becould ~~adversely~~also ~~affected~~affect the price that some investors are willing to pay for our common stock.

Unless our securities are listed on a national securities exchange, or we have net tangible assets of $5.0 million or more and our common stock has a market price per share of $5.00 or more, transactions in our common stock will be subject to the SEC’s “penny stock” rules. If our common stock remains subject to the “penny stock” rules promulgated under the Exchange Act, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must: make a special written suitability determination for the purchaser; receive the purchaser’s written agreement to the transaction prior to sale; provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these "penny stocks" as well as a purchaser’s legal remedies; and obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a "penny stock" can be completed. As a result, if our common stock becomes subject to the penny stock rules, the market price of our securities may be depressed, and you may find it more difficult to sell shares of our common stock. 23

WeDelaware ~~have~~law ~~never~~may ~~paid~~discourage ~~dividends~~takeover onattempts ~~our common stock~~ and ~~do not anticipate paying dividends on our common stock for the foreseeable future; therefore, returns on your investment~~ may ~~only~~result ~~be realized by the appreciation~~ in ~~value~~entrenchment of ~~our securities~~management.

WeOur certificate of incorporation, bylaws, and Delaware law contain provisions which could have ~~never~~the ~~paid any~~effect ~~cash~~of ~~dividends~~rendering onmore difficult, delaying, or preventing an acquisition deemed undesirable by our ~~common~~board of directors. Our corporate governance documents include provisions; - authorizing "blank check" preferred stock, which could be issued by our board of directors without stockholder approval and domay ~~not~~contain ~~anticipate~~voting, ~~paying~~liquidation, ~~any~~dividend, ~~cash~~and ~~dividends~~other onrights superior to our common stock; in(i) limiting the ~~foreseeable future.~~liability Weof, ~~plan~~and providing indemnification to, ~~retain~~our ~~any~~directors ~~future~~and ~~earnings~~officers; (ii) limiting the ability of our stockholders to ~~finance~~call ~~growth~~and bring business before special meetings; (iii) controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; and (iv) providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings. ~~Because~~These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are also subject to provisions of ~~this~~Delaware law, ~~investors~~including ~~who~~Section ~~purchase~~203 of the Delaware General Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock ~~may~~from ~~only realize~~engaging ain ~~return~~certain onbusiness ~~their~~combinations ~~investment~~without ifapproval of the ~~value~~holders of substantially all of our outstanding common stock ~~appreciates~~. IfAny weprovision ~~determine~~of our certificate of incorporation, bylaws or Delaware law that wehas ~~will~~the ~~pay~~effect ~~dividends to~~of delaying or deterring a change in control could limit the ~~holders~~opportunity for our stockholders to receive a premium for their shares of our common stock, ~~there~~and iscould noalso ~~assurance~~affect orthe ~~guarantee~~price that ~~such~~some ~~dividends~~investors ~~will~~are bewilling ~~paid~~to onpay afor ~~timely~~our ~~basis~~common stock.

InITEM ~~addition,~~1B. Unresolved ~~the~~Staff declaration and payment of dividends will be at the discretion of our Board of Directors and will be dependent upon the profits and financial requirements of our company and other factors, including legal and regulatory restrictions on the payment of dividends, general business conditions and such other factors as our Board of Directors deems relevant.Comments

~~Provisions in our Amended and Restated Certificate of Incorporation, may restrict the voting rights of our stock and may restrict the transferability of our stock~~None.

~~Our~~ITEM ~~Amended and Restated Certificate of Incorporation, generally provides that if any person owns, directly, indirectly or by attribution, more than 9~~2.9% of the total combined voting power of our stock entitled to vote, the voting rights attached to such stock will be reduced so that such person may not exercise and is not attributed more than 9.9% of the total combined voting power. In addition, our board of directors may limit a stockholder’s exercise of voting rights where it deems it necessary to do so to avoid non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our stockholders. Properties

24As of December 31, 2014, we leased 9,450 square feet of office space in Irving, Texas and the monthly rent for this space was $11,597 payable in equal monthly installments. Rent may be increased each December 31st, with a maximum increase equal to 95% of our pro rata share, based on occupancy, of any increase in the landlord's operating costs. The cost of utilities is charged separately, prorated based on occupancy. The lease for this office space expires on May 31, 2017.

~~Under~~ITEM our Amended and Restated Certificate of Incorporation, subject to waiver by our board of directors, no transfer of our stock is permitted if such transfer would result in a stockholder controlling more than 93.9% Legal determined by value or by voting power of our outstanding stock. Our Amended and Restated Certificate of Incorporation, also provide that if our board of directors determines that stock ownership by a person may result in (i) stockholder owning directly, indirectly or by retribution, more than 9.9% of the total combined voting power of our stock entitled to vote, or (ii) any non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our stockholders, then we have the option, but not the obligation, to require that stockholder to sell to us for fair market value the minimum number of shares of stock held by such person which is necessary so that after such purchase such stockholder will not own more than 9.9% of the total combined voting power, or is necessary to eliminate the non-de minimis adverse tax, legal or regulatory consequences. These provisions may restrict the voting rights and transferability of our shares, which could also affect the price that some investors are willing to pay for our common stock.Proceedings

~~Delaware~~We ~~law~~are ~~may~~subject ~~discourage~~to ~~takeover~~routine ~~attempts and~~legal ~~may~~proceedings ~~result~~ in ~~entrenchment~~the ordinary course of ~~management~~business. We believe that the ultimate resolution of these matters will not have a material adverse effect on our business, financial condition or results of operations.

~~Our~~ITEM certificate of incorporation, bylaws, and Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors4. Mine ~~Our~~Safety corporate governance documents include provisions; - authorizing "blank check" preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock; - limiting the liability of, and providing indemnification to, our directors and officers; - limiting the ability of our stockholders to call and bring business before special meetings; - controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; and - providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock. Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.Disclosures

~~ITEM~~Not 1Bapplicable. ~~Unresolved Staff Comments~~

~~None.~~24

~~ITEM~~PART ~~2. Properties~~II

AsITEM of5. Market ~~December 31, 2013, we leased 6,738 square feet of office space in Irving, Texas and the monthly rent~~ for this space was $9,128.40 payable in equal monthly installments. Rent may be increased each December 31st, with a maximum increase equal to 95% of our pro rata share, based on occupancy, of any increase in the landlord’Registrant's ~~operating~~Common ~~costs. The cost of utilities is charged separately~~Equity, ~~prorated~~Related ~~based on~~Stockholder ~~occupancy.~~Matters Inand ~~January~~Issuer ~~2014,~~Purchases ~~the company executed a new lease agreement which increases the square footage~~ of ~~office~~Equity ~~space to approximately 9,450 square feet. In April 2014, the monthly rent for this space will increase to $11,597.00 per month. The lease for this office space expires on May 31, 2017.~~Securities

~~ITEM~~Market ~~3. Legal Proceedings~~Information

WeThere ~~are~~is ~~subject~~no public market for our common stock. Our application to ~~routine legal~~have ~~proceedings~~our instock ~~the~~quoted ~~ordinary~~on ~~course~~one of ~~business~~the Over-the-Counter exchanges (OTCQB) was approved by FINRA on February 25, 2015. WeWith ~~believe~~this ~~that~~regulatory approval, the ~~ultimate~~Company ~~resolution~~is ofnow ~~these~~in ~~matters~~the ~~will~~process ~~not~~of ~~have~~completing ~~a material~~required ~~adverse~~filings ~~effect~~with onthe exchange and our ~~business,~~stock ~~financial~~transfer ~~condition~~agent orto ~~results~~facilitate the trading of ~~operations~~our shares. The initial price of our securities is subject to review by FINRA.

~~ITEM~~Holders 4.of ~~Mine~~Common ~~Safety Disclosures~~Equity

~~Not~~As ~~applicable~~of March 26, 2015, there are approximately 63 stockholders of record of our common stock.

25Dividends

~~PART~~We IIhave never declared or paid any cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. Any cash that might be available for payment of dividends will be used to expand our business. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant to our board of directors.

~~ITEM~~Recent 5.Sales ~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases~~ of ~~Equity~~Unregistered Securities

~~Market Information~~None.

~~There~~Repurchases is no public market for our common stock. Our application to have our stock quoted on the Over-the-Counter Bulletin Board has been denied by FINRA. Our application is still considered to be active, however, it is in denied status due to concentration of ~~shareholders~~Equity as well as a limited number of shareholders. The Company is actively seeking ways to meet FINRA’s requirements to be quoted on the over-the-counter bulletin board; however, no assurance can be given as to our success in qualifying for quotation on the OTCBB.Securities

~~Holders of Common Equity~~None.

AsITEM of6. Selected ~~March~~Financial ~~28, 2014, there are approximately 22 stockholders of record of our common stock.~~Data

~~Dividends~~Not Applicable.

We have never declared or paid any cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. Any cash that might be available for payment of dividends will be used to expand our business. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant to our board of directors.25

~~Recent~~ITEM ~~Sales~~7. Management's Discussion and Analysis of ~~Unregistered~~Financial ~~Securities~~Condition and Results of Operations

~~None~~You should read the following discussion in conjunction with our consolidated financial statements and related notes and information included elsewhere in this annual report on Form 10-K. You should review the "Risk Factors" section of this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

~~Repurchases~~Some of ~~Equity~~the ~~Securities~~information contained in this discussion and analysis or set forth elsewhere in this annual report on Form 10-K, including information with respect to our plans and strategy for our business and related financing includes forward-looking statements that involve risks and uncertainties.

~~The following table summarizes share repurchase activity during the third quarter of 2013 as adjusted for the 2.5:1 forward stock split that became effective August 31, 2013:~~General

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Forward Stock Split on 08/31/13	Treasury Shares Post Forward Split
July 1 - 31, 2013		-		-			-
August 1 - 31, 2013		540,000	$	0.01	2.5:1		1,350,000
September 1 - 30, 2013		-		-			-
Total		540,000					1,350,000

HAHC is a property and casualty insurance holding company incorporated in Delaware in 2005. In May 2006, we began selling property and casualty insurance products in Texas and beginning April, 2014, we began offering property and casualty insurance products in Arizona through our subsidiary, Homeowners of America Insurance Company. Through the use of highly automated underwriting tools, we currently offer homeowners, dwelling fire and extended coverage, tenant and condominium owner's policies, within market segments which have proven to have long term profitability. Using internet-enabled applications, our products are offered to the public through independent insurance agents.

~~ITEM~~We 6have applied for licenses to write business in thirty-two additional states. ~~Selected~~To ~~Financial~~date, ~~Data~~we have received certificates of authority from twenty-five including Alabama, Arkansas, Colorado, Delaware, Georgia, Indiana, Illinois, Iowa, Kentucky, Louisiana, Michigan, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Oregon, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington, and Wyoming to offer homeowners, dwelling fire and extended coverage, tenant and condominium owner's policies. As a condition of granting a Certificate of Authority, a number of states require alien insurance companies to maintain pledged assets for the purpose of meeting obligations to policyholders and creditors.

~~Not~~The ~~Applicable~~Company began selling homeowners coverage in Arizona in 2014 and plans to begin selling homeowners products in South Carolina and Virginia during 2015. The Company is researching additional states for future expansion, which aren't planned for entry until 2016 or later. Dwelling fire and extended coverage, tenant and condominium owners policies will be added to these expansion states, including Arizona, in the latter half of 2015.

26The Company is seeing increased competition from companies entering Texas and has formulated marketing strategies to protect its market share.

~~ITEM~~As 7mentioned previously, the Company sells insurance policies predominately in Texas. ~~Management’s~~As ~~Discussion~~such, ~~and~~the ~~Analysis~~health of ~~Financial~~the ~~Condition~~Texas economy and ~~Results~~housing ofmarket ~~Operations~~has a direct impact on the Company's business activity. The following selected statistics published monthly by the Real Estate Center at Texas A&M University are key indicators that management monitors when evaluating the Company's current financial condition and operating results:

~~You~~ ~~should~~Texas ~~read~~seasonally ~~the following~~adjusted ~~discussion~~unemployment inrate ~~conjunction~~was ~~with our consolidated financial statements and related notes and information included elsewhere in this annual report on Form 10-K~~4.6% ~~You~~at ~~should~~December ~~review~~month ~~the~~end, ~~“Risk~~as ~~Factors”~~compared ~~section of this annual report for a discussion of important factors that could cause actual results~~ to ~~differ materially from~~ the ~~results~~national ~~described~~U.S. inrate orof ~~implied by the forward-looking statements contained in the following discussion and analysis~~5.6%.

~~Some~~ ofSingle ~~the~~family ~~information contained~~building inpermits ~~this~~were ~~discussion~~up ~~and~~29.3% ~~analysis~~year orover ~~set~~year ~~forth~~as ~~elsewhere~~of inDecember ~~this~~month ~~annual~~end ~~report on Form 10-K, including information with respect to our plans~~ and ~~strategy~~single ~~for~~family ~~our~~home ~~business~~sales ~~and~~were ~~related~~up ~~financing~~12.2% ~~includes~~year ~~forward-looking~~over ~~statements~~year ~~that~~as ~~involve~~of ~~risks and~~December ~~uncertainties.~~month end.

~~OVERVIEW~~· Texas nonfarm employment rate increased 4.0% at December month end, as compared to an increase of the national U.S. rate of 2.2%.

~~General~~These favorable employment and housing economic trends, along with our competitive pricing in our target markets have resulted in improved premium production during 2014. The resulting increase in earned premium, along with improved reinsurance terms for the 2014 - 2015 treaty year are all factors which aided in the positive results recorded by the Company for the year ended December 31, 2014.

~~HAHC~~The isrecent adecline ~~property~~in ~~and casualty~~the ~~insurance~~price ~~holding~~of ~~company~~oil ~~incorporated~~during inthe ~~Delaware~~4th inquarter ~~2005.~~of In2014 ~~May~~is ~~2006~~expected weto ~~began~~have ~~selling~~a ~~property~~negative ~~and~~impact ~~casualty~~on ~~insurance products~~the in Texas ~~through~~economy. If ~~our subsidiary~~so, ~~Homeowners~~this ofwill ~~America~~affect ~~Insurance~~job ~~Company.~~growth ~~Through~~and ~~the~~home ~~use of highly automated underwriting tools~~sales, weboth ~~currently~~which ~~offer~~were ~~homeowners,~~robust ~~dwelling~~in ~~fire~~2014. The ~~and~~Company ~~extended~~is ~~coverage,~~taking ~~tenant~~steps ~~and~~to ~~condominium~~at ~~owners~~least ~~policies~~partially inameliorate ~~Texas~~the ~~only, within~~effects ~~market~~of ~~segments~~a ~~which~~downturn. Expanding ~~have~~geographically ~~proven~~into toother ~~have~~states, ~~long~~as ~~term~~well ~~profitability.~~as ~~Using~~expansion ~~internet-enabled~~into ~~applications,~~other ~~our~~parts ~~products~~of ~~are offered~~Texas tois the ~~public~~main ~~through~~component ~~independent~~of ~~insurance~~this ~~agents~~strategy.

We The ~~did,~~Company's ~~until recently, offer~~ private passenger automobile ~~policies~~book toof business, written in support of its homeowners programs in Texas., ~~Our~~was terminated with our last policy ~~expired~~expiring in October, 2013. The Texas private passenger automobile program was ~~terminated~~discontinued as we were unable to capture a sufficient portion of the market at pricing which we deemed adequate to cover our expenses and provide a margin for profits.

WeOur ~~have~~principal ~~applied~~revenues ~~for licenses~~are toearned ~~write~~premiums ~~business~~(which inare ~~thirty~~reported ~~states.~~net Toof ~~date~~reinsurance costs), weceding ~~have~~commissions ~~received~~and ~~certificates~~policy offees. ~~authority~~We ~~from~~cede ~~Louisiana,~~a ~~Missouri,~~substantial ~~Nebraska, Nevada,~~portion ~~South~~of ~~Dakota,~~our ~~and~~earned ~~Utah~~premium ~~for~~to ~~approval~~reinsurers under a quota share program to ~~offer~~mitigate ~~homeowners,~~high ~~dwelling~~frequency ~~fire~~risks ~~and~~as ~~extended~~well ~~coverage,~~as ~~tenant~~protect us from catastrophic events and ~~condominium~~under ~~owners policies.~~an Weexcess ~~plan~~of loss contract program to ~~begin~~mitigate ~~writing~~losses ~~business~~from incatastrophic ~~Arizona~~events. inOur ~~the~~principal ~~second~~expenses ~~quarter~~are ofclaims ~~2014~~from policyholders, policy acquisition and other underwriting expenses, and general and administrative expenses.

AsNet ~~mentioned~~income ~~previously, the~~available ~~Company~~to ~~sells~~common ~~insurance~~stockholders ~~policies~~was ~~only within Texas. As such~~$2,164,125 ~~the~~for ~~health of~~ the ~~Texas~~year ~~economy~~ended ~~and~~December ~~housing~~31, ~~market has a direct impact on the Company’s business activity~~2014. ~~The~~As ~~following~~of ~~selected~~December ~~statistics~~31, ~~are~~2014 ~~key~~we ~~indicators~~had ~~that~~total ~~management~~assets ~~monitors when~~of ~~evaluating~~$88.1 ~~the~~million ~~Company’s~~and ~~current~~stockholders' ~~financial~~equity ~~condition~~of ~~and~~$10.7 ~~operating results:~~million.

·At the end of 2014, our market share of the approximately $7.8 billion Texas ~~unemployment~~homeowners ~~rate~~insurance market was 6estimated to be 0.176% atby SNL Financial, making us the 18th largest Texas homeowners company in terms of Texas premium. As of December ~~month~~31, ~~end~~2014, our property insurance policy in force count of 74,698 represents annualized premiums of approximately $74.4 million as compared to the ~~national~~same Utime last year when our policy in force count was 60,873 and our in force premium was approximately $58.S.3 ~~rate~~million as of 6December 31, 2013.7 Our policy growth year over year was 22.71 %, while our in force premium grew 27.62 %.

~~· Single family building permits were up 15.0% year over year as of November month end, while home prices were up 7.9% for the same period.~~26

~~These~~RESULTS ~~favorable~~OF economic indicators in addition to low severity convectional thunderstorms and other catastrophic events are all factors which aided in the positive results recorded by the Company for the year ended December 31, 2013.OPERATIONS

~~Our~~Year ~~principal revenues~~Ended ~~are~~December ~~earned premiums (which are reported net of reinsurance costs)~~31, ~~ceding~~2014 ~~commissions~~compared ~~and policy fees. We cede a substantial portion of our earned premium~~ to ~~reinsurers~~Year ~~under~~Ended a quota share program to mitigate high frequency risks as well as catastrophic events and under excess of loss contracts to mitigate losses from catastrophic events. Our principal expenses are claims from policyholders, policy acquisition expenses, and underwriting and other operating expenses. Our net income for the year ended December 31, 2013 ~~was $1,968,763.~~

~~Net~~The ~~income~~following ~~available to~~table ~~common~~summarizes ~~stockholders~~our ~~was~~results ~~$994,584~~of operations for the ~~year~~years ended December 31, ~~2013.~~2014 ~~As of December 31, 2013 we had total assets of $73.2 million~~ and ~~stockholders’ equity of $8.3 million.~~2013:

At the end of 2013, our market share of the approximately $7.2 billion Texas homeowners insurance market was estimated to be 0.66% by SNL Financial, making us the 20th largest Texas homeowners company in terms of Texas premium. Our current property insurance policy in force count of 60,873 represents annualized premiums of approximately $58.3 million.

	2014			2013
Revenues:

Premiums earned	$	64,895,484		$	53,238,811
Ceded premiums		(60,484,640	)		(48,422,943	)
Net premiums earned		4,410,844			4,815,868
Policy fees		5,616,525			4,655,315
Ceding commissions and reinsurance profit share		16,651,464			11,805,811
Investment income, net of investment expenses		43,603			41,649
Loss adjustment and other fee income		1,530,234			1,232,123

Total revenue		28,252,670			22,550,766

Expenses:

Losses and loss adjustment expenses		2,930,295			2,259,107
Policy acquisition and other underwriting expenses		16,497,662			13,058,774
General and administrative expenses		5,496,391			4,224,898

Total expenses		24,924,348			19,542,779

Income before income taxes		3,328,322			3,007,987

Provision (benefit) for income taxes:
Current		1,748,911			1,155,634
Deferred		(584,714	)		(116,410	)
Total income taxes		1,164,197			1,039,224

Net income	$	2,164,125		$	1,968,763

Cumulative preferred stock dividends		-			(974,179	)

Net income available to common stockholders	$	2,164,125		$	994,584

Basic income per common share	$	0.13		$	0.15
Diluted income per common share	$	0.12		$	0.11
Cash dividend declared per common share	$	-		$	-

Losses and loss adjustment expenses to net earned premium		66.43	%		46.91	%
Expenses to direct earned premium		33.89	%		32.46	%
Acquisition & underwriting and other operating expenses to fee income		92.42	%		97.69	%
Combined loss & expense to total earned revenue		88.36	%		86.82	%

~~RESULTS~~Net OFincome ~~OPERATIONS~~for the year ended December 31, 2014 was $2,164,125, as compared to net income of $1,968,763 for the year ended December 31, 2013. Results for the year ended December 31, 2014, improved over the same time frame last year primarily as a result of enhanced fee income from policy production and ceding commissions coming from our quota share reinsurance program.

~~Year~~Operating ~~Ended~~income for the year ended December 31, ~~2013~~2014 was unfavorably impacted by an increase in loss and loss adjustment expenses, primarily the result of increased severe convectional thunderstorm activity. During 2014, the Company sustained gross losses (prior to reinsurance recoveries) from such storms in the amount of $27.7 million as compared to ~~Year~~$18.2 ~~Ended~~million ~~December~~of ~~31,~~gross ~~2012~~losses (prior to reinsurance recoveries) during 2013.

~~The~~Our ~~following table summarizes our~~ results of operations for the year ended December 31, ~~2013~~2014 ~~and~~reflect ~~2012:~~income available to common stockholders of $2,164,125, or $0.12 earnings per diluted common share, compared to income available to common stockholders of $994,584, or $0.11 earnings per diluted common share, for the year ended December 31, 2013.

	2013			2012
Revenues:
Premiums earned	$	53,238,811		$	47,185,700
Ceded premiums		(48,422,943	)		(42,207,361	)
Net premiums		4,815,868			4,978,339
Policy fees		4,655,315			4,442,069
Ceding commissions		10,493,183			9,601,837
Gross investment income		41,649			17,980
Reinsurance profit sharing, installment fees and other income		2,544,751			1,392,732
Total Revenue		22,550,766			20,432,957
Expenses:
Losses and loss adjustment expenses		2,259,107			4,064,797
Policy acquisition expenses		11,606,188			10,178,892
Underwriting and other operating expenses		5,677,484			5,325,414
Total Expenses		19,542,779			19,569,103
Income before income taxes		3,007,987			863,854
Provision (benefit) for income taxes:
Current		1,155,634			376,688
Deferred		(116,410	)		(615,830	)
Total income taxes		1,039,224			(239,142	)
Net income	$	1,968,763		$	1,102,996
Cumulative preferred stock dividends		(974,179	)		(1,288,750	)
Net income (loss) available to common stockholders	$	994,584		$	(185,754	)
Basic income (loss) per common share	$	0.15		$	(0.08	)
Weighted average number of common shares outstanding - basic		6,777,047			2,250,000
Diluted income (loss) per common share	$	0.11		$	(0.08	)
Weighted average number of common shares outstanding - diluted		17,633,640			2,250,000
Cash dividend declared per common share	$	0		$	0
Loss ratio to net earned premium		46.91	%		81.65	%
Expenses to direct earned premium		32.46	%		32.86	%
Acquisition & underwriting and other operating expenses to fee income		97.69	%		100.44	%
Combined loss & expense to total earned revenue		86.82	%		95.86	%

Commencing April 1, 2014 and ending March 31, 2015, the Company reinsured its property and casualty risk under quota share reinsurance treaties with third party reinsurers. The treaties cover 80% of its risk under property coverage on any one loss occurrence not to exceed $110 million; 10% of its risk under property coverage on any one loss occurrence not to exceed $4 million and approximately 64% of its risk under casualty coverages.

~~Net~~Property ~~income~~catastrophe ~~for the year ended December 31~~treaties, ~~2013~~which ~~was~~went ~~positively~~into ~~impacted~~effect byon ~~improved~~the ~~underwriting~~same ~~results.~~day ~~Net~~and ~~income~~having ~~was $1,968,763 for~~ the ~~year ended~~same ~~December~~term ~~31, 2013~~ as ~~compared to net income of $1,102,996 for~~ the ~~year~~quota ~~ended~~share ~~December 31~~treaties, ~~2012.~~develop ~~The~~over ~~primary~~four ~~factor~~layers ~~in our improved results was the improvement in underwriting income, a direct result of reduced numbers~~ and ~~intensity~~20% of ~~springtime~~our ~~convectional thunder~~risk ~~storm~~on ~~activity~~property incoverage ~~the~~on ~~geographical~~a ~~areas~~gross ~~where~~loss ~~the Company writes the majority~~ of ~~its business. During 2013, the Company sustained gross losses (losses prior to reinsurance recoveries) totaling~~ $~~6.0~~110 million ~~from eight storms occurring in the calendar year. The same period in 2012~~, ~~the~~excess ~~Company incurred gross losses (losses prior to reinsurance recoveries)~~ of $~~36.3~~4 million ~~in losses~~per ~~on seven storms occurring in the calendar year~~occurrence. The ~~Net of reinsurance recoveries, the~~ Company’'s ~~loss~~net ~~experience~~retention ~~resulted in~~is ~~a negative income impact of~~ $~~601~~400,000 ~~for~~per ~~the~~loss ~~year ended December 31, 2013~~occurrence.

28Commencing August 1, 2014 and ending November 30, 2014, the Company increased its catastrophe coverage through fifth layer reinsurance with third party reinsurers. This layer extended the Company's coverage to $140 million, excess of $4 million of ultimate net loss arising out of each loss occurrence. The Company considered this increased coverage limit during the Atlantic hurricane season to be a prudent risk management decision, given the growth in both the number of policy holders, as well as total insured values. When this coverage was in force, the Company's net retention on each loss occurrence remained at $400,000.

For the 12 month period commencing April 1, 2013 and ending March 31, 2014, the Company reinsured with various third party reinsurers under residential quota share reinsurance treaties, 90% of its risk. The reinsurers’ liability under the quota share arrangement beginning in respect to any one loss occurrence shall not exceed $80,000,000. Property catastrophe treaties, which went into effect on the same day and have the same term as the quota share treaties, develop over four layers and cover a gross loss of $76,000,000 excess of $4,000,000 per occurrence. The Company’s net retention is $400,000 per occurrence.Revenue

~~Effective~~Premium ~~with~~production ~~the~~for ~~new treaty,~~ the ~~Company~~year ~~began~~ended ~~ceding~~December to31, ~~reinsurers~~2014 onwas a$73.6 ~~premium written basis~~million, ~~rather~~an ~~than~~increase onof ~~premium~~$15.7 ~~collected~~million ~~basis~~or ~~as it had in the past~~27.03 ~~The~~% ~~impact~~over of the ~~procedural~~same ~~change~~period ~~can~~in be2013. ~~seen~~The ~~within the~~ Company’s ~~consolidated~~attributes ~~balance~~this ~~sheets,~~growth asto ~~ceded~~the ~~deferred premium~~effects ~~which~~of ~~was~~an ~~$2.38~~increased ~~million~~number as of ~~December~~insured 31properties, ~~2012,~~increased ~~was~~pricing ~~$0 at December 31, 2013. This change~~ in ~~the~~selected ~~way~~markets ~~premium~~and ismaintaining ~~remitted to~~persistency ~~reinsurers has no impact~~ on ~~the~~policies ~~way~~subject ~~coverage~~to isrenewal ~~provided~~in byits ~~the~~target ~~reinsurance program~~markets.

~~Revenue~~Gross Premiums Earned for the year ended December 31, 2014 and 2013 were $64.9 million and $53.2 million, respectively. The $11.7 million increase or 21.90 %, is primarily the result of increased property insurance premium, which increased $15.8 million or 27.32 %. The increase in property insurance premium is partially offset by a reduction of $0.1 million in private passenger auto insurance written premium year over year. The Company has made the strategic decision to exit the private passenger auto insurance business, the last policy expired October 2013.

~~Premium~~Premiums ~~production~~Ceded for the year ended December 31, 2014 and 2013 ~~was~~were approximately $5860.5 million and $48.4 million, anrespectively. ~~increase~~Our premiums ceded represent amounts paid to reinsurers to cover losses under both our quota share and excess of $6loss reinsurance treaties.7 ~~million~~Premiums orceded 12were 93.9820 % ~~over~~and 90.95 % of gross premiums earned during the ~~same~~year ~~period~~ended inDecember ~~2012~~31, 2014 and 2013, respectively, primarily the result of our 90% quota share reinsurance program. ~~The~~We ~~Company attributes~~expect ~~this~~our ~~growth~~reinsurance premiums applicable to the ~~effects~~current offiscal anyear, ~~increased~~as ~~number~~well as the reinsurance treaty year, to remain in excess of ~~insured~~90% ~~properties~~of direct earned premium, ~~increased~~trending ~~pricing~~slightly upward reflecting our increase in ~~selected~~in-force ~~markets~~premium. ~~and maintaining~~The ~~persistency~~cost onof ~~policies~~additional ~~subject~~catastrophe coverage the Company purchased during the Atlantic hurricane season was $831,550, which along with the Company's 22 % increase in premiums earned, led to ~~renewal~~our nearly 25 % increase in ~~its~~ceded ~~target~~earned ~~markets~~premiums for the period.

~~Gross~~Net Premiums Earned for the year ended December 31, ~~2013~~2014 and ~~2012~~2013 were $534.24 million and $474.28 million, respectively~~. The $6.1 million increase or 12.83%~~, isand ~~primarily~~reflect the ~~result~~gross ofpremiums ~~increased~~earned ~~property~~less insurance premium, which increased $8.5 million or 17.33%. The increase in property insurance premium is partially offset by a reduction of $1.9 million in private passenger auto insurance written premium year over year. The Company has made the ~~strategic~~appropriate ~~decision~~reinsurance tocosts ~~exit~~as ~~the~~described ~~private passenger auto insurance business, the last policy expired October 2013~~above.

~~Premiums~~Ceding ~~Ceded~~ Commission and Other Fee Income for the year ended December 31, ~~2013~~2014 ~~and~~was ~~2012 were approximately~~ $4822.41 million ~~and~~compared to $4216.24 million, ~~respectively.~~for Our premiums ceded represent amounts paid to reinsurers to cover losses under both our quota share and excess of loss reinsurance treaties. Premiums ceded were 90.95% and 89.45% of gross premiums earned during the year ended December 31, 2013. ~~and~~The ~~2012,~~primary ~~respectively,~~ factors ~~primarily~~for ~~the~~this ~~result~~improvement ofinclude ~~our~~increased ~~90%~~earned ~~quota~~premium, ~~share~~further ~~reinsurance~~supported ~~program.~~by Weimproved ~~expect our~~ reinsurance ~~premiums applicable~~terms tofor the ~~current~~2014 ~~fiscal~~- ~~year,~~2015 ~~as well as the reinsurance~~ treaty year~~, to remain in excess of 90% of direct earned premium, trending slightly upward reflecting our increase in in-force premium~~.

~~Net~~Reinsurance ~~Premiums~~Profit ~~Earned~~ Sharing income for the year ended December 31, ~~2013~~2014 ~~and~~was ~~2012 were~~ $41.87 million ~~and~~compared to $51.03 million for the year ended December 31, ~~respectively~~2013. Reinsurance profit sharing income, ~~and~~calculated ~~reflect~~on ~~the~~a ~~gross~~treaty ~~premiums~~ year basis (April - March), is recognized when earned, ~~less~~which ~~the~~includes ~~appropriate~~adjustments to earned reinsurance ~~costs~~profit share based on changes in incurred losses. The $400,000 increase in income reported in 2014 as ~~described~~compared ~~above~~to 2013 is primarily due to the positive 4th quarter treaty year 2013 results reported in calendar year 2014.

~~Ceding~~Net ~~Commission, Reinsurance~~Premiums ~~Profit~~Written ~~Sharing~~during ~~and Other Fee Income for~~ the year ended December 31, 2014 and 2013 was $178.75 million ~~compared~~and to $156.53 million ~~for~~, ~~the~~respectively. Net ~~year~~premiums ~~ended~~written ~~December~~represent ~~31,~~the ~~2012.~~premiums ~~The~~charged ~~primary~~on ~~factors~~policies ~~for~~issued ~~this~~during ~~improvement~~a ~~include~~fiscal ~~increased~~period ~~policy~~less ~~volume~~any ~~and~~applicable ~~improved~~quota ~~underwriting results~~share ~~mentioned~~reinsurance ~~previously~~costs.

~~Net~~The ~~Premiums~~following ~~Written during~~is ~~the~~a ~~year~~reconciliation ~~ended~~of ~~December~~our ~~31,~~total ~~2013~~net ~~was~~premiums ~~$6.3~~written ~~million and remained relatively flat as compared~~ to ~~the~~net ~~same period in 2012. Net~~ premiums ~~written~~earned ~~represent~~for the ~~premiums~~year ~~charged~~ended onDecember ~~policies~~31, ~~issued~~2014 ~~during~~and a2013 ~~fiscal~~(values ~~period~~in ~~less any applicable quota share reinsurance costs.~~thousands):

The following is a reconciliation of our total net premiums written to net premiums earned for the year ended December 31, 2013 and 2012 (values in thousands):

	Year Ended December 31,
	2014			2013
Net Premiums Written	$	8,541		$	6,273
Change in Unearned Premium		(1,207	)		(389	)
Catastrophe & Excess of Loss Reinsurance Premium		(2,923	)		(1,068	)
Net Premiums Earned	$	4,411		$	4,816

	Year Ended
	December 31,
	2013			2012
Net Premiums Written	$	6,273		$	6,258
Change in Unearned Premium		(389	)		(358	)
Catastrophe & EXOL Premium		(1,068	)		(922	)
Net Premiums Earned	$	4,816		$	4,978

Investment Income, Net of Investment Expenses increased approximately 4.69 % for the year ended December 31, 2014, reflecting the Company's change in its investment policy, beginning June 1, 2014. This change included the decision to invest a portion of its excess cash in high quality municipal bonds.

29Expenses

~~Gross~~Our ~~Investment Income~~Losses ~~while~~and ~~still~~Loss ~~remaining~~Adjustment aExpenses ~~comparatively~~amounted ~~minor contributor~~ to ~~total~~$2.9 ~~revenue~~million ~~increased~~and ~~approximately 131~~$2.~~66%~~3 million, respectively, for the ~~year~~ years ended December 31, ~~2013~~2014 asand ~~compared~~2013. toDuring the year ended December 31, ~~2012.~~2014, ~~This~~we issustained ~~primarily~~gross ~~the~~losses ~~result~~(losses ofprior ~~increased~~to ~~cash~~reinsurance ~~balances (higher~~recoveries) ~~premium~~totaling ~~production~~$27.7 ~~and~~million ~~lower~~primarily ~~claims)~~from ~~and~~increased asevere ~~change~~convectional tothunderstorm ~~our~~activity ~~investment~~occurring ~~strategy.~~in ~~Our~~the ~~investment~~calendar ~~strategy~~year. The ~~through~~same ~~December 31~~period in 2013, ~~2012~~we ~~included~~incurred ~~the~~gross ~~holding~~losses (losses prior to reinsurance recoveries) of ~~excess~~$18.2 ~~funds~~million in ~~non-interest~~losses ~~bearing~~occurring ~~accounts~~in ~~which~~the ~~were~~calendar year. Our liability for losses and loss adjustment expense ("Reserves") is more fully ~~insured~~described bybelow ~~the~~under ~~FDIC~~"Critical Accounting Policies and Estimates". ~~Beginning January~~These 1,Reserves ~~2013,~~include ~~FDIC~~both ~~insurance~~case ~~coverage~~reserves ~~was~~on ~~reduced~~reported toclaims ~~deposits~~and ofour ~~$250,000~~reserves orfor ~~less,~~incurred ~~therefore~~but not reported ("IBNR") losses. At each period-end date, wethe ~~changed~~balance of our ~~investment~~Reserves ~~strategy by~~is ~~investing~~based ~~excess~~on ~~funds~~our inbest ~~federally~~estimate ~~insured~~of ~~certificates~~the ultimate cost of ~~deposits~~each claim for those known cases and inthe ~~money~~IBNR ~~market~~loss ~~funds~~reserves ~~backed~~are byestimated ~~securities~~based ~~issued by~~primarily ~~the~~on ~~U.S.~~our ~~Government~~historical experience.

Policy Acquisition and Other Underwriting Expenses for the years ended December 31, 2014 and 2013 were $16.5 million and $13.1 million, respectively, which primarily reflect the amortization of deferred acquisition costs including commissions payable to agents for production and renewal of policies, premium taxes and other costs associated with the acquisition of insurance policies. The net increase from the corresponding period in 2013 is primarily attributable to the increase in our overall production.

~~Our~~General ~~Losses~~ and ~~Loss Adjustment~~Administrative Expenses ~~amounted to $2.3 million and $4.1 million, respectively,~~ for the years ended December 31, ~~2013~~2014 and ~~2012. During~~ 2013, wewere ~~experienced~~$5.5 ~~improved~~million ~~loss~~and ~~experience~~$4.2 ~~due~~million, torespectively. The ~~fewer~~$1.3 ~~convectional~~million ~~thunderstorm~~increase ~~events in~~includes ~~the~~increases ~~geographical~~of ~~areas~~$0.6 ~~where~~million ~~our~~in ~~business~~employee isrelated ~~located,~~costs ~~plus~~as toour ~~lesser~~head ~~extent,~~count ~~favorable~~grew ~~loss development with respect~~ to support our ~~net~~growth ~~unpaid~~in ~~losses and loss adjustment expenses established as of December 31~~production, ~~2012. Together,~~an ~~these~~increase ~~factors contributed to the overall favorable variance~~ of approximately $10.86 million ~~with~~in ~~respect~~professional ~~to the total losses and loss adjustment~~ expenses ~~incurred~~related ~~for~~to ~~the~~being ~~year~~a ~~ended~~public ~~December~~company ~~31,~~as ~~2013~~well as ~~compared~~increases toin ~~the year ended December 31~~technology, ~~2012. Our liability for losses~~ and ~~loss~~other ~~adjustment~~administrative ~~expense (“Reserves”) is more fully described below under “Critical Accounting Policies and Estimates”~~costs. ~~These~~As ~~Reserves~~of ~~include~~December ~~both~~31, ~~case~~2014, ~~reserves on~~we ~~reported~~had ~~claims~~43 ~~and~~employees ~~our~~all ~~reserves for incurred~~ but ~~not~~one ~~reported~~whom ~~(“IBNR”)~~are ~~losses.~~full ~~At each~~time ~~period-end~~compared ~~date,~~to ~~the~~39 ~~balance~~employees ofas ~~our Reserves is based on our best estimate~~ of ~~the~~December ~~ultimate~~31, ~~cost of each claim for those known cases and the IBNR loss reserves are estimated based primarily on our historical experience~~2013.

~~Policy~~Income ~~Acquisition Expenses~~Taxes for the years ended December 31, ~~2013~~2014 and ~~2012~~2013 were $111.62 million and $101.20 million, respectively, ~~which~~for ~~primarily reflect~~state ~~the~~and ~~amortization~~federal oftaxes ~~deferred~~resulting ~~acquisition~~in ~~costs~~an ~~including~~effective ~~commissions~~tax ~~payable~~rate toof ~~agents~~34.98 % for ~~production~~2014 and ~~renewal~~34.55 of% ~~policies, premium~~for ~~taxes~~2013. ~~and~~The ~~other~~effective ~~costs~~tax ~~associated~~rate ~~with~~for the ~~acquisition~~year ofended ~~insurance~~December ~~policies.~~31, ~~The~~2014 ~~net~~was ~~increase in~~impacted ~~2013~~primarily isas ~~primarily~~a ~~attributable~~result toof ~~the~~permanent ~~increase~~tax indifferences ~~our~~on ~~overall~~meals ~~production~~and entertainment and stock-based compensation.

Underwriting and Other Operating Expenses for the years ended December 31, 2013 and 2012 were $5.7 million and $5.3 million, respectively. The $352,000 increase is primarily attributable to increases in compensation and compensation-related costs, and other administrative costs, which include a variety of professional service fees, recruiting fees, and other general expenses. As of December 31, 2013, we had 39 employees all but one whom are full time compared to 36 employees as of December 31, 2012.28

Income Taxes for the years ended December 31, 2013 and 2012 were $1,039,224 and ($239,142), respectively, for state and federal taxes resulting in an effective tax rate of 34.55% for 2013 and (27.68%) for 2012. The effective tax rates were impacted primarily as a result of changes in the deferred tax asset valuation allowance.Ratios:

~~Ratios:~~The loss ratio applicable to the year ended December 31, 2014 (losses and loss adjustment expenses incurred related to net premiums earned) was 66.43 % compared to 46.91 % for the year ended December 31, 2013. The primary factor contributing to our increased loss ratio is the increase in ceded earned premium, discussed previously.

~~The~~Our ~~loss~~expenses ~~ratio~~(policy ~~applicable to~~acquisition, ~~the year ended December 31~~underwriting, ~~2013 (losses~~ and ~~loss~~other ~~adjustment~~operating expenses), ~~incurred~~as ~~related~~a topercentage ~~net~~of ~~premiums~~direct earned) premium was 4633.9189 % for the year ended December 31, 2014, compared to 8132.6546 % for the year ended December 31, ~~2012~~2013. ~~Our~~The ~~loss~~increase in our expense ratio ~~was~~is ~~positively~~primarily ~~impacted~~attributable byto ahigher ~~significant~~property ~~decrease~~inspections, the result of an increase in ~~incurred~~quoting ~~losses incurred~~the asCompany's aproduct ~~result~~by ofits ~~spring~~agency ~~storm~~force, ~~events~~and other underwriting expenses, asincluding ~~previously~~an ~~mentioned~~increase in agent's compensation, employee compensation and compensation-related costs.

~~Our~~Another ~~expenses~~important ~~(policy~~ measurement of operational effectiveness of the Company is the margin between our fee income and acquisition, underwriting, and other operating expenses) due to our reliance on quota share reinsurance, asunder awhich ~~percentage~~approximately 90% of ~~direct~~our ~~earned~~property insurance premium ~~was~~is 32ceded to reinsurers.~~46%~~ The Company receives a ceding commission from reinsurers for the ~~year~~production ~~ended~~of ~~December~~the 31business. This fee income, ~~2013~~along with other policy related fees that the Company charges, ~~compared~~are used to 32offset the underwriting and other operating expenses it incurs in the production of premium.~~86%~~ ~~for~~For the year ended December 31, ~~2012.~~2014 ~~The~~our ~~decrease~~acquisition inand ~~our~~underwriting ~~expense~~and ~~ratio is~~other ~~primarily~~operating ~~attributable~~expenses towere ~~higher~~92.42 ~~direct~~%, ~~earned~~of ~~premium~~policy related fee income, ~~the~~as ~~result~~compared ofto 97.69 % for the ~~expansion~~year ofended ~~our~~December ~~business~~31, 2013.

~~Another~~Due ~~important measurement~~to ~~of operational effectiveness of~~ the ~~Company~~impact ~~is the margin between~~ our ~~fee~~reinsurance ~~income~~costs ~~and~~have ~~acquisition,~~on ~~underwriting, and~~net ~~other~~premiums ~~operating~~earned ~~expenses~~from ~~due~~period to ~~our reliance on quota share reinsurance~~period, ~~under~~our ~~which~~management ~~approximately~~believes ~~90%~~the ofcombined ~~our~~loss ~~property insurance~~and ~~premium~~expense isratio ~~ceded~~measured to ~~reinsurers,~~total ~~the~~earned ~~Company~~revenues ~~receives~~is amore ~~ceding~~relevant ~~commission~~in ~~from~~assessing ~~reinsurers~~overall ~~for the production of the business~~performance. ~~This~~The ~~fee~~combined ~~income,~~loss ~~along~~and ~~with~~expense ~~other~~ratio ~~policy related fees that the Company charges, are used~~ to ~~offset~~total ~~the~~earned ~~underwriting and~~revenue ~~other~~for ~~operating expenses it incurs in~~ the ~~production of premium. For the~~ year ended December 31, ~~2013~~2014 ~~our~~was ~~acquisition and underwriting and other operating expenses were 97~~88.6936 %, ~~of policy related fee income, as~~ compared to ~~100~~86.4482 % for the year ended December 31, ~~2012~~2013.

~~Due~~Seasonality toof ~~the~~Our impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined loss and expense ratio measured to total earned revenues is more relevant in assessing overall performance. The combined loss and expense ratio to total earned revenue for the year ended December 31, 2013 was 86.82% compared to 95.86% for the year ended December 31, 2012.Business

Trends within our insurance business are seasonal, both as they relate to premium production and as they relate to incurred losses. Premium production tends to increase during the late spring and summer due to increased home purchases, while our claims activity increase with the occurrence of convectional thunderstorms which often produce strong winds, tornadoes and hail typically during the period from March 1 through June 30 each year. With the commencement of our reinsurance treaty year on April 1, any variation in reinsurance costs whether due to changes in rates or in total values insured will be reflected in our financial results beginning April 1 each year.

~~Seasonality~~Reinsurance ~~of Our Business~~ Agreements

~~Our~~The ~~insurance~~Company ~~business is~~has ~~seasonal,~~completed asnegotiations ~~convectional~~with ~~thunderstorms~~a ~~producing~~panel ~~tornadoes~~of ~~and~~third ~~hail~~party ~~typically~~reinsurers ~~occur~~on ~~during~~what ~~the~~management ~~period~~considers ~~from~~to ~~March~~be 1favorable ~~through June~~terms, 30including ~~each~~extending ~~year.~~coverage ~~With~~on ~~our~~the ~~reinsurance~~quota ~~treaty~~share ~~year~~portions ~~effective April 1 each year, any variation in the cost~~ of ~~our~~its reinsurance~~, whether~~ ~~due~~program to ~~changes in reinsurance rates or changes in~~ the ~~total~~end ~~insured value~~ of ~~our policy base will occur and be reflected in our financial results beginning April 1 each year~~2016.

~~LIQUIDITY~~In ~~AND~~addition, ~~CAPITAL~~the ~~RESOURCES~~Company completed the placement of an excess of loss catastrophe reinsurance program, effective April 1, 2015, with a panel of third party reinsurers. These treaties replace the Company's excess of loss reinsurance program expiring on March 31, 2015 and provides coverage on the Company's retained risk on its property insurance business. Approximately 60% of the program will be for a period of 24 months, while the remaining 40% will have a term of 12 months.

Since inception, we have financed our cash flow requirements through net premiums received and investment income. We believe our cash flow from net premiums and investment income will be sufficient to cover our cash outflows for at least the next 12 months. Beyond the next 12 months, our primary cash flow sources will continue to be from premiums and investment income.29

InLIQUIDITY ~~the~~AND ~~insurance~~CAPITAL industry cash collected for premium from policies written is invested, interest and dividends earned thereon. Our primary cash outflows are claim payments and operating expense. In regard to claim payments, while the substantial portion of our claims are paid out within 90 – 180 days, the period of time payments are made varies by the circumstances of the claim, and loss settlement expenses can be paid over periods of more than one year. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and overhead expenses.RESOURCES

WeHAIC's ~~believe~~operational ~~that~~goals ~~we maintain sufficient liquidity to pay claims and expense obligations~~ of ~~HAIC as well as to satisfy any unforeseen events including inadequate~~ premium ~~rates~~growth and ~~reserve~~state ~~deficiencies.~~expansion ~~The~~are ~~Company~~dependent ~~maintains~~upon ~~substantial~~adequate ~~reinsurance~~capital ~~through~~and ~~reinsurers with superior financial ratings to provide sufficient liquidity in the case disasters impact the business we underwrite~~surplus.

~~Cash~~Insurance ~~Flows~~companies capital and surplus levels are regularly monitored by the insurance department of its state of domicile. The primary tool used to monitor an insurance company's capital adequacy is the National Association of Insurance Commissioner' Risk Based Capital Model or "RBC". Remedial action of varying severity begin once an insurance company's RBC falls below under 200%. HAIC's ratio at year end 2014 was 458% and 396% at the end of 2013. The industry guidelines for net premium writings to surplus is approximately 3:1. HAIC net writings to surplus were .46 in 2014 and .58 in 2013.

~~Our~~Since inception, we have financed our cash ~~flows~~flow requirements through net premiums received and investment income. We believe our cash flow from ~~operating, investing~~net premiums and ~~financing~~investment ~~activities~~income will be sufficient to cover our cash outflows for at least the ~~years~~next ~~ended~~12 ~~December~~months. 31Beyond the next 12 months, ~~2013~~our ~~and~~primary ~~2012~~cash ~~are~~flow ~~summarized~~sources ~~below~~will continue to be from premiums and investment income.

~~Cash~~In ~~Flows~~the insurance industry cash collected for premium from policies written is invested, interest and dividends earned thereon. Our primary cash outflows are claim payments and operating expense. In regard to claim payments, while the ~~Year~~substantial ~~ended~~portion ~~December 31~~of our claims are paid out within 90 – 180 days, ~~2013~~the period of time payments are made varies by the circumstances of the claim, and loss settlement expenses can be paid over periods of more than one year. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and overhead expenses.

~~Net~~We ~~cash~~believe ~~used~~that bywe ~~operating activities~~maintain ~~for~~sufficient ~~the~~liquidity ~~year~~to ~~ended~~pay ~~December~~claims ~~31,~~and ~~2013~~expense ~~was~~obligations ~~approximately $1.9 million. Significant factors in this movement consisted primarily~~ of anHAIC ~~increase in cash received from higher net written premiums, less cash used for paid claims and operating expenses,~~ as well as ~~increased disbursements related~~ to ~~the~~satisfy ~~settlement~~any ofunforeseen ~~the~~events ~~Company’s~~including ~~reinsurance~~inadequate ~~treaties.~~premium ~~Net~~rates ~~cash used in investing activities of $0.2 million was primarily due to purchases of short-term investments of $1.8 million, purchases of long-term investments of $2.0 million~~ and ~~the~~reserve ~~purchases of furniture, equipment, and software of $0~~deficiencies.1 ~~million~~The ~~offset~~Company bymaintains ~~maturities~~substantial ofreinsurance ~~short-term~~through ~~investments of~~reinsurers ~~$1.5~~with ~~million~~superior ~~and~~financial ~~maturities~~ratings ofto ~~long-term~~provide ~~investments~~sufficient ofliquidity ~~$2.2 million. Net cash used~~ in ~~financing~~the ~~activities~~case ~~totaled~~disasters ~~$5,400 for~~impact ~~repurchase~~the ofbusiness ~~common~~we ~~stock~~underwrite.

~~Cash~~Deferred ~~Flows~~policy ~~for~~acquisition ~~the~~costs ~~Year~~"DAC" ~~ended~~are ~~December 31~~reviewed quarterly by management and are expected to be recoverable from future income, ~~2012~~including investment income. However, the amount of DAC considered recoverable could be reduced in the near term if management's estimates of future premium and investment income is reduced which could impair the Company's ability to recover these costs.

~~Net~~Cash cash provided by operating activities for the year ended December 31, 2012 was approximately $6.0 million, which consisted primarily of cash received from net written premiums and investment income less cash disbursed for operating expenses and losses and loss adjustment expenses. Net cash used in investing activities of $4.0 million was primarily due to purchases of short-term investments of $1.8 million, purchases of long-term investments of $2.0 million and the purchases of furniture, equipment, and software of $0.2 million. Net cash provided by financing activities totaled $1.0 million from proceeds of convertible notes payable.Flows

~~Credit~~Our ~~Risk~~cash flows from operating, investing and financing activities for the years ended December 31, 2014 and 2013 are summarized below.

~~Credit~~Summary ~~risk is a major factor in operating our business. We review credit risk from a variety~~ of ~~sources:~~Cash financial institutions in regard to cash deposits; investment risk; counter-party risk from reinsurers; premium receivables; notes receivable and long-term investment assets; loss sensitive underwriting accounts; and key vendor relationships. We have established specific guidelines and procedures to evaluate our exposure, particularly with regard to our excess cash and investment holdings, and our receivable balances from insureds and reinsurers.Flows

	Year Ended
	December 31,
	2014			2013

Net cash provided by (used in) operating activities	$	3,533,953		$	(1,883,572	)
Net cash used in investing activities	$	(5,997,835	)	$	(201,093	)
Net cash provided by (used in) financing activities	$	7,850		$	(5,400	)

In regard to our investments and cash deposits as of December 31, 2013, we have limited our credit exposure to financial instruments by investing and holding our excess cash in bank demand and time deposits (i.e., CDs) as well as money market accounts which are covered by FDIC insurance. To meet liquidity needs, all deposit mature in no more than eighteen months.30

~~The~~Cash ~~credit~~Flows ~~risk~~for ~~we are exposed to on ceded premium and losses recoverable from reinsurers is managed through~~ the ~~careful~~Year ~~selection~~ended of reinsurance companies. When selecting reinsurance coverage, we consider the financial strength and stability of the providers, their history of responding to claims, and their overall reputation. We require that all reinsurers have an A.M. Best rating of A- (Excellent), or better, or an S&P rating of AA- or better, in order to minimize the risk of uncollectable balances. HAIC continually monitors the financial condition of its reinsurers with the aid of its reinsurance brokers, AON, and Guy Carpenter. As of December 31, ~~2013,~~ ~~no reinsurance recoverable balance is outstanding beyond 30 days. We do not use credit default swaps to mitigate our credit exposure from either investments or counterparties.~~2014

~~Our~~Net ~~key~~cash ~~vendor~~provided ~~(agent) and~~by ~~insured~~operating ~~credit~~activities ~~risk~~for ~~centers~~the ~~around~~year ~~the~~ended ~~collectability~~December of31, ~~policy~~2014 ~~premium.~~was ~~Initially,~~approximately ~~overall~~$3.5 ~~premium~~million. ~~collection~~Significant ~~credit~~factors ~~risk is~~in ~~limited~~this bymovement ~~our~~consisted ~~collection~~primarily of ~~approximately~~an ~~62%~~increase ofin ~~our~~cash ~~property~~received ~~insurance~~from ~~policies~~net ~~through~~written ~~property~~premiums ~~mortgagee~~and ~~escrow~~policy ~~accounts. Agent~~related ~~credit~~fees ~~risk~~less iscash ~~limited~~disbursed ~~through~~for ~~the~~operating ~~daily~~expenses ~~sweep~~and losses and loss adjustment expenses. Net cash used in investing activities of ~~all~~$6.0 ~~premiums~~million ~~paid~~was ~~directly~~primarily due to ~~the~~purchases ~~agent~~of byfixed-maturity ~~the~~securities, ~~insured~~held as available-for-sale of $5.0 ~~Finally~~million, onpurchases ~~any premium~~of ~~collected~~short-term ~~directly~~investments ~~from~~of an$4.3 ~~insured~~million, wepurchases ~~require~~of along-term ~~17%~~investments ~~down~~of ~~payment~~$3.4 million and ~~limit~~ the ~~period~~purchases ~~over~~of ~~which~~furniture, ~~the~~equipment, ~~balance~~and issoftware ~~collected to~~of aapproximately ~~maximum~~$228,000, offset by redemptions of 8short-term ~~installments~~and long-term investments of $4.4 ~~Policies~~million ~~are~~and ~~cancelled~~$1.9 asmillion, ~~soon~~respectively asand ~~any~~$0.6 ~~installment~~million isfrom ~~past~~early ~~due~~calls of several fixed-maturity securities, ~~where~~held ~~the~~as ~~policy~~available-for-sale. isNet ~~out~~cash ofprovided ~~equity~~by financing activities totaled $7,850 for proceeds from stock options exercised.

~~OFF-BALANCE~~Cash ~~SHEET~~Flows ~~ARRANGEMENTS~~for the Year ended December 31, 2013

AsNet ofcash used by operating activities for the year ended December 31, 2013 ~~and~~ ~~2012~~was approximately $1.9 million. Significant factors in this movement consisted primarily of an increase in cash received from higher net written premiums, weless ~~did~~cash ~~not~~used ~~have~~for ~~any~~paid ~~off-balance~~claims ~~sheet~~and ~~arrangements~~operating expenses, as ~~defined~~well as increased disbursements related to the settlement of the Company's reinsurance treaties. Net cash used in ~~Item~~investing ~~303(a)(4)~~activities of ~~Regulation~~$0.2 Smillion was primarily due to purchases of short-Kterm investments of $1.8 million, purchases of long-term investments of $2.0 million and the purchases of furniture, equipment, and software of approximately $99,000, offset by maturities of short-term investments of $1.5 million and maturities of long-term investments of $2.2 million. Net cash used in financing activities total $5,400 for repurchase of common stock.

~~CRITICAL~~Credit ~~ACCOUNTING POLICIES AND ESTIMATES~~Risk

~~General~~Credit risk is a major factor in operating our business. We review credit risk from a variety of sources: financial institutions in regard to cash deposits; investment risk; counter-party risk from reinsurers; premium receivables; notes receivable and long-term investment assets; loss sensitive underwriting accounts; and key vendor relationships. We have established specific guidelines and procedures to evaluate our exposure, particularly with regard to our excess cash and investment holdings, and our receivable balances from insureds and reinsurers.

WeIn ~~are~~regard ~~required~~ to ~~make~~ ~~estimates~~our investments and ~~assumptions~~cash indeposits ~~certain~~as ~~circumstances~~of ~~that~~December ~~affect~~31, ~~amounts~~2014, ~~reported~~we inhave limited our ~~consolidated~~credit exposure to financial ~~statements~~ instruments by investing and ~~related~~holding ~~footnotes.~~our Weexcess ~~continually~~cash ~~evaluate~~in ~~these~~bank ~~estimates~~demand and ~~assumptions~~time ~~based~~deposits on(i.e., ~~historical developments~~CDs), money market ~~conditions, industry~~accounts ~~trends~~which ~~and~~are ~~other~~covered ~~information~~by ~~that~~FDIC weinsurance, ~~believe~~and tofixed-maturity besecurities, ~~reasonable~~classified ~~under~~as ~~the circumstances~~available-for-sale. ~~There~~At ~~can~~times, bethe noCompany's ~~assurance~~bank ~~that actual~~deposits ~~results~~may ~~will~~exceed ~~conform~~the toFDIC ~~our~~limit. ~~estimates~~To ~~and~~meet ~~assumptions~~liquidity needs, all bank demand and ~~that~~time ~~reported~~deposits ~~results~~mature ofin ~~operation~~no ~~will~~more ~~not~~than beeighteen ~~materially~~months. ~~adversely affected~~We bymitigate the ~~need~~credit torisk ~~make~~for ~~accounting~~our ~~adjustments~~fixed-maturity tosecurities ~~reflect~~by ~~changes~~investing in ~~these~~fixed-maturity ~~estimates~~securities ~~and~~that ~~assumptions~~are ~~from~~generally ~~time~~investment tograde ~~time.~~and ~~We believe~~by ~~the~~diversifying ~~following~~our ~~reserve~~investment ~~liabilities~~portfolio ~~are~~to ~~the~~avoid ~~most~~concentrations ~~sensitive~~in toany ~~estimates~~single ~~and~~issuer ~~judgments~~or business sector.

~~Reserves~~The ~~for~~credit ~~Loss~~ risk we are exposed to on ceded premium and ~~Loss~~losses ~~Adjustment~~recoverable ~~Expenses~~from reinsurers is managed through the careful selection of reinsurance companies. When selecting reinsurance coverage, we consider the financial strength and stability of the providers, their history of responding to claims, and their overall reputation. We require that all reinsurers have an A.M. Best rating of A- (Excellent), or better, or an S&P rating of AA- or better, in order to minimize the risk of uncollectable balances. HAIC continually monitors the financial condition of its reinsurers with the aid of AON Benfield, its reinsurance broker. As of December 31, 2014, no reinsurance recoverable balance is outstanding beyond 30 days. We do not use credit default swaps to mitigate our credit exposure from either investments or counterparties.

WeOur ~~establish~~key ~~reserves for~~vendor ~~the~~(agent) ~~estimated total unpaid costs of losses including loss adjustment expenses, or LAE. Unless otherwise specified below, the term "loss reserves" shall encompass reserves for both losses~~ and ~~LAE.~~insured ~~Loss~~credit ~~reserves~~risk ~~reflect~~centers ~~management's~~around ~~best estimate of~~ the ~~total~~collectability ~~cost~~ of ~~(i)~~policy ~~claims~~premium. ~~that have been incurred~~Initially, ~~but~~overall ~~not~~premium ~~yet~~collection ~~paid,~~credit ~~and~~risk ~~(ii)~~is ~~claims~~limited ~~that have been "incurred but not yet reported". Loss reserves established~~ by usour ~~are~~collection ~~not an exact calculation~~ of ~~our~~approximately ~~liability.~~62% ~~Rather, loss reserves represent management's best estimate~~ of our ~~company's~~property ~~liability~~insurance ~~based~~policies onthrough ~~application~~property ofmortgagee ~~actuarial~~escrow ~~techniques~~accounts. ~~and~~Agent ~~other~~credit ~~projection~~risk ~~methodology, taking~~is ~~into~~limited ~~consideration~~through ~~other facts and circumstances known at~~ the ~~balance~~daily ~~sheet~~sweep ~~date. The process~~ of ~~establishing~~all ~~loss~~premiums ~~reserves is~~paid ~~complex~~directly ~~and~~to ~~necessarily~~the ~~imprecise,~~agent ~~as it involves judgment which is affected~~ by ~~many~~the ~~variables~~insured. ~~such~~Finally, ason ~~past~~any ~~loss~~premium ~~experience, current~~collected ~~claim~~directly ~~trends~~from ~~and~~an ~~the prevailing social~~insured, ~~economic~~we ~~and~~require ~~legal~~a ~~environments.~~17% ~~The~~down ~~impact~~payment ~~of both internal~~ and ~~external~~limit ~~variables on~~the ~~ultimate~~period ~~loss~~over ~~and~~which ~~LAE~~the ~~costs~~balance is ~~difficult~~collected to ~~estimate.~~a ~~Our~~maximum ~~exposure is impacted by both the risk characteristics~~ of ~~the~~8 ~~physical locations~~installments. ~~where~~Policies weare ~~write~~cancelled ~~policies, such~~ as ~~weather-related~~soon ~~risks,~~ as ~~well~~any asinstallment ~~risks~~is ~~associated~~past ~~with varying social~~due, ~~judicial~~where ~~and legislative characteristics in Texas,~~ the ~~state~~policy inis ~~which~~out weof ~~operate~~equity. ~~In determining loss reserves, we give careful consideration to all available data and actuarial analyses, however this process involves significant judgment.~~

~~Case~~Cyber ~~reserves~~Security on reported claims are established on a claim by claim basis. Supported by a property damage estimate software package, more fully described later, our experienced claim personnel estimate the ultimate expected loss amount as soon as possible after the claim event, but in no case greater than 30 days from receipt of the notice of loss. Being primarily a property insurance company, our case loss reserves are “short-tail”, meaning that ultimate loss values are known and settled comparatively quickly. Most often, claims are paid out within 60 to 90 days of their reporting. Factoring into the claim cost is only damage to tangible property, requiring either its repair or replacement. The setting of case reserves for property related short-tail claims is far less complex. Claims rarely include coverage elements which routinely take many years to develop and are often paid out over long periods of time. As such, there is very little impact resulting from the “time value of money” on our reserve values, nor are there estimates of long term medical expenses, educational expenses and or the valuation of the loss of companionship, etc.Risks

32In addition to physical security measures employed at the Company's offsite operations center, which is audited annually under SOC 1 (SSAE No.16) standards, the Company's third party operations center uses firewalls, intrusion detection systems, data base field encryption and other "best practices" to protect access to customer data. Access to the databases is not allowed from outside our network, except for specific IP addresses which the Company has specified and has control over. These configurations are reviewed quarterly, to ensure policies and procedures are followed. The Company's third party operations site administration performs annual "ethical hack" tests to identify possible vulnerabilities.

~~Assisting~~Commitments ~~us in setting the case reserves, after first reviewing the elements of the claim~~ and ~~the~~Other coverage afforded under the policy, the Company uses a damage estimating software package called Xactimate, developed and owned by the industry leader, Insurance Service Office. The estimating software researches and reports on estimates of structural repair pricing and compares it to actual completed bids and market surveys. The research includes over 40,000 providers of materials, equipment and labor and over 80,000 surveys each year.Contingencies

~~IBNR~~The ~~reserves~~Company ~~are~~leases ~~developed~~its ~~separately~~corporate ~~for non-catastrophe~~office ~~losses~~space and ~~catastrophe~~certain ~~based~~office ~~claims.~~equipment ~~Both~~under ~~types~~non-cancelable operating leases. None of ~~IBNR~~these ~~reserves~~lease ~~contain~~commitments ~~factors~~subjects ~~for~~the ~~case~~Company ~~development~~to onmaterial ~~known claims:~~uncertainties through escalation clauses or other cost adjustments.

~~IBNR Factor Development – Non~~OFF-~~Catastrophe~~BALANCE ~~Events:~~SHEET ARRANGEMENTS

~~Reserves~~As ~~are~~of ~~developed by~~December ~~using~~31, ~~accident~~2014 ~~month~~and ~~/ reported month grids~~2013, ~~which~~we ~~are~~did ~~then~~not ~~rolled~~have upany ~~into~~off-balance asheet ~~cumulative~~arrangements ~~incurred~~as ~~loss~~defined ~~triangle.~~in ~~Loss~~Item ~~factors are calculated based on aggregating the month to month diagonals~~ 303(~~i.e. month 2 incurred / initial accident month incurred, month 3 incurred / month 2 incurred~~a)~~. For each accident month, development is reviewed for consistency, and outlying results~~ (~~on the high and the low side~~4) ~~as well as the most recent couple~~ of ~~months,~~Regulation ~~for which data is considered immature, are deleted from the data for smoothing purposes~~S-K. Period to period development factors are then calculated, from which period to ultimate loss incurred factors are calculated. Factors are reviewed quarterly and adjusted as needed. Factor changes for the periods under review, from period to period, are considered to be insignificant. Therefore the methodology used is considered to be consistent from period to period. IBNR reserve calculations used during the 2011 year were extended from 13 months past the accident month to 24 months past the accident month to improve upon the estimation of the final loss incurred.

~~IBNR Factor Development –Catastrophe Events:~~31

~~Traditional~~CRITICAL ~~monthly loss~~ACCOUNTING ~~reserving~~POLICIES ~~factors~~AND are not deemed appropriate for determining IBNR estimates for catastrophic events as these events do not occur evenly throughout a month, as regular loss events do. So an alternative approach to loss development has to be used, one that takes into consideration development and reporting from a specific loss date, rather than from the end of a specific month. In addition, since the HAIC is subject to catastrophic loss events (hurricane and convectional thunderstorms) which have differing cycles for loss reporting and claim development, calculations need to be made for each type event. Each analysis is made by projecting the ultimate loss value into the future and subtracting it from the known incurred losses. The Company’s claim system has the ability to track incurred claims on a “days to report” basis, so that we can look at incurred claim values for claims reported in the following bands:ESTIMATES

~~Incident to Report Date~~General

~~Same~~We ~~Day~~are 1required >to 5make 6estimates >and 15assumptions 16in >certain 30circumstances 31that >affect 60amounts 61reported >in 90our 91consolidated >financial ~~120~~statements ~~121~~and >related ~~360~~footnotes. ~~>360~~We continually evaluate these estimates and assumptions based on historical developments, market conditions, industry trends and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to our estimates and assumptions, and that reported results of operation will not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. We believe the following reserve liabilities are the most sensitive to estimates and judgments.

~~Data~~Reserves can be pulled in by event and by accident period. However, since events individually behave inconsistently, data is pulled on an accident year basis (so that variability could be reviewed), and rolled up to an ITD basis for ~~this~~Loss ~~evaluation. For each of the above bands, the $ incurred~~ and %Loss ofAdjustment total incurred from claims reported during those time frames is calculated by accident year, as were cumulative values. This data is then spread out into days from the event (so that 1-5 band became individual days 1, 2, 3, 4, 5 and so on for the other bands) on a straight line basis, which is then adjusted to scale over the time period so that claim reporting was greater earlier in the bands than later in the bands (so for the 1-5 band, proportionally more was reported on day 1 than day 2, etc.). Initially, this is done on a daily basis for days 0-30, with subsequent periods grouped broken into bands of 5, 15 and 30 days. These factors are then rolled up into cumulative factors and further scaled so that reporting is maxed out at 365 days, when the vast majority of reported claims are thought to be known. In application, the factors are stratified to a daily scale, so that actual days from event are used to select the specific factor to be used.Expenses

33We establish reserves for the estimated total unpaid costs of losses including loss adjustment expenses, or LAE. Unless otherwise specified below, the term "loss reserves" shall encompass reserves for both losses and LAE. Loss reserves reflect management's best estimate of the total cost of (i) claims that have been incurred, but not yet paid, and (ii) claims that have been "incurred but not yet reported". Loss reserves established by us are not an exact calculation of our liability. Rather, loss reserves represent management's best estimate of our company's liability based on application of actuarial techniques and other projection methodology, taking into consideration other facts and circumstances known at the balance sheet date. The process of establishing loss reserves is complex and necessarily imprecise, as it involves judgment which is affected by many variables such as past loss experience, current claim trends and the prevailing social, economic and legal environments. The impact of both internal and external variables on ultimate loss and LAE costs is difficult to estimate. Our exposure is impacted by both the risk characteristics of the physical locations where we write policies, such as weather-related risks, as well as risks associated with varying social, judicial and legislative characteristics in Texas, the state in which we operate. In determining loss reserves, we give careful consideration to all available data and actuarial analyses, however this process involves significant judgment.

~~Lastly,~~Case ~~event~~reserves ~~losses are~~on ~~capped~~reported ~~based~~claims are established on a claim by claim basis. Supported by a property damage estimate software package, more fully described later, our experienced claim personnel estimate the ~~company’s~~ultimate ~~catastrophe~~expected ~~reinsurance~~loss ~~coverage~~amount as soon as possible after the claim event, sobut ~~that~~in no ~~more~~case greater than ~~$3.0~~30 ~~million~~days ~~per~~from ~~event~~receipt isof ~~included~~the notice of loss. ~~Once~~ ~~the~~Being ~~projected~~primarily ~~event~~a ~~limit~~property ~~reaches~~insurance $3company, our case loss reserves are "short-tail", meaning that ultimate loss values are known and settled comparatively quickly.0 ~~million~~Most often, noclaims ~~further~~are ~~retained~~paid ~~IBNR~~out iswithin ~~projected~~60 ~~for~~to 90 days of their reporting. Factoring into the ~~event,~~claim cost is only ~~gross~~damage ~~and~~to ~~ceded IBNR~~tangible property, requiring either its repair or replacement. ~~Effective~~The ~~April~~setting 1,of ~~2013,~~case ~~the~~reserves ~~Company’s~~for ~~reinsurance~~property ~~coverage~~related ~~caps~~short-tail ~~losses~~claims atis $4far less complex.0 ~~million~~Claims ~~per~~rarely ~~event~~include coverage elements which routinely take many years to develop and are often paid out over long periods of time. As such, ~~for~~there ~~events occurring~~is ~~after~~very ~~April~~little 1,impact ~~2013,~~resulting ~~once~~from the ~~event~~"time ~~projected~~value ~~losses~~of ~~reach~~money" ~~$4.0~~on ~~million~~our reserve values, nonor ~~further~~are ~~retained~~there ~~IBNR~~estimates isof ~~projected~~long ~~for~~term medical expenses, educational expenses and or the ~~event~~ valuation of the loss of companionship, etc.

~~IBNR~~Assisting ~~Factor~~us ~~Development –Automobile:~~in setting the case reserves, after first reviewing the elements of the claim and the coverage afforded under the policy, the Company uses a damage estimating software package called Xactimate, developed and owned by the industry leader, Insurance Service Office. The estimating software researches and reports on estimates of structural repair pricing and compares it to actual completed bids and market surveys. The research includes over 40,000 providers of materials, equipment and labor and over 80,000 surveys each year.

~~Virtually~~IBNR ~~all~~reserves ~~auto claims~~ are ~~reported~~developed ~~within~~separately 3for ~~months,~~non-catastrophe ~~and most within 30 days. HAIC has had negligible liability~~ losses ~~experience~~and ~~since~~catastrophe ~~beginning to~~based ~~write private passenger automobile insurance (monthly average liability loss under $3,000). As such, virtually all~~ claims ~~reported are for physical damage~~. ~~Inasmuch~~Both astypes ~~auto~~of ~~physical damage claims typically develops very quickly, an~~ IBNR ~~calculation~~reserves ~~for~~contain ~~this line of business using traditional~~ factors ~~produces exceptionally low results and does not provide a reasonable amount of IBNR~~ for ~~the~~case ~~most~~development ~~recent~~on ~~month~~known ~~and for accidents occurring during the last part of the month. Therefore, an alternative approach was taken.~~claims:

~~Similar data is used to determine automobile~~ IBNR asFactor isDevelopment ~~used~~– ~~to do catastrophe events so that historically, reported incurred losses are looked at based on the number of days from the incident. For this analysis, all auto claims, cat and non~~Non-~~cat, are included.~~ Catastrophe ~~claims~~ for auto coverages are minimal. In addition, total loss development is determined using traditional loss triangles. Our factors are developed so that the most recent months incurred is split into 3 partsEvents: 1st half of the month, days 16-25, and the last 5 days of the month. Factors are calculated for each of these periods, and the most recent month’s incurred losses are split proportionally across the month. In this way, the vast majority of IBNR losses come from the last week of the month, where one would expect them, given the very short reporting period for auto claims.

~~The~~Reserves ~~liability~~are ~~for losses~~developed ~~and~~by ~~LAE~~using ~~represents~~accident ~~estimates~~month of/ ~~the~~reported ~~ultimate~~month ~~unpaid~~grids, ~~cost~~which ofare ~~all~~then ~~losses~~rolled up into a cumulative incurred, ~~including~~loss ~~losses~~triangle. ~~for~~Loss ~~claims~~factors ~~that~~are ~~have not~~calculated ~~yet~~based ~~been~~on ~~reported~~aggregating the month to ~~our~~month ~~insurance~~diagonals ~~company~~(i.e. ~~The~~month ~~amount~~2 ofincurred ~~loss~~/ ~~reserves~~initial ~~for~~accident ~~reported~~month ~~claims~~incurred, month 3 incurred / month 2 incurred). For each accident month, development is ~~based~~reviewed ~~primarily~~for ~~upon~~consistency, aand ~~case-by-case evaluation~~outlying ofresults (on the ~~kind~~high ofand ~~loss~~the ~~involved,~~low ~~knowledge~~side) ofas well as the ~~circumstances~~most ~~surrounding~~recent ~~each~~couple ~~claim~~of ~~and~~months, for which data is considered immature, are deleted from the ~~insurance~~data ~~policy~~for ~~provisions relating~~smoothing purposes. Period to ~~the~~period ~~type~~development offactors are then calculated, from which period to ultimate loss incurred factors are calculated. ~~The~~Factors ~~amounts~~are ofreviewed ~~loss~~quarterly ~~reserves~~and adjusted as needed. Factor changes for ~~unreported~~the ~~claims~~periods ~~and~~under ~~LAE~~review, from period to period, are ~~determined~~considered ~~using~~to ~~historical~~be ~~information by~~insignificant. ~~line~~Therefore ofthe ~~insurance~~methodology asused ~~adjusted~~is considered to ~~current~~be ~~conditions~~consistent from period to period. ~~Inflation~~IBNR isreserve ~~ordinarily~~calculations ~~implicitly~~used ~~provided~~during ~~for~~the in2011 year were extended from 13 months past the ~~reserving~~accident ~~function through~~month ~~analysis~~to of24 ~~costs,~~months ~~trends~~past ~~and~~the ~~reviews~~accident ofmonth ~~results~~to ofimprove ~~historical~~upon ~~reserving~~the ~~estimates~~estimation ~~over~~of ~~multiple~~the ~~years~~final loss incurred.

Reserves are closely monitored and are recalculated periodically using the most recent information on reported claims and a variety of actuarial techniques. Specifically, management continuously reviews existing reserves, making changes to existing case reserves as indicated. As we develop historical data regarding paid and incurred losses, we use this data to develop expected ultimate loss and loss adjustment expenses which we use to establish IBNR reserves. In connection with the determination of IBNR reserves, we will also consider other specific factors such as recent weather-related losses, trends in historical paid losses, and legal and judicial trends regarding liability.32

~~When~~IBNR aFactor ~~claim~~Development is–Catastrophe reported to us, our claims personnel establish a "case reserve" for the estimated amount of the ultimate payment. This estimate reflects HAIC’s historical loss experience as it relates to the type of loss, informed judgment based upon general insurance reserving practices and on the experience and knowledge of the estimator. The individual estimating the reserve considers the nature and value of the specific claim, the severity of injury or damage, location, and the policy provisions relating to the type of loss. Case reserves are adjusted by us as more information becomes available. It is our policy to settle each claim as expeditiously as possible.Events:

WeTraditional ~~maintain~~monthly ~~IBNR~~loss ~~reserves to~~reserving ~~provide~~factors are not deemed appropriate for ~~already~~determining ~~incurred~~IBNR ~~claims~~estimates ~~that~~for ~~have~~catastrophic events as these events do not ~~yet~~occur ~~been~~evenly ~~reported~~throughout asa ~~well~~month, as ~~developments~~regular onloss ~~reported~~events ~~claims~~do. ~~The~~So ~~IBNR~~an ~~reserve~~ alternative approach to loss development has to be used, one that takes into consideration development and reporting from a specific loss date, rather than from the end of a specific month. In addition, since the HAIC is ~~determined~~subject byto ~~estimating~~catastrophic ~~our~~loss ~~insurance~~events ~~company's~~(hurricane ~~ultimate~~and ~~net~~convectional ~~liability~~thunderstorms) which have differing cycles for ~~both~~loss ~~reported~~reporting and ~~IBNR~~claim ~~claims~~development, ~~and~~calculations ~~then~~need ~~subtracting~~ to be made for each type event. Each analysis is made by projecting the ~~case~~ultimate ~~reserves~~loss value into the future and ~~payments~~subtracting ~~made~~it from the known incurred losses. The Company's claim system has the ability to ~~date~~track incurred claims on a "days to report" basis, so that we can look at incurred claim values for claims reported ~~claims.~~in the following bands:

~~Because~~Incident ~~the~~to ~~establishment of~~Report loss reserves is an inherently uncertain process, we cannot be certain that ultimate losses will not exceed the established loss reserves and have a material adverse effect on our results of operations and financial condition. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.Date

34Same Day

~~The~~1 ~~following~~> ~~table sets forth the amount of the gross reserves for loss and loss adjustment expense:~~5

	December 2013		December 2012		December 2011
Loss Reserves	$	4,190,593	$	5,265,200	$	6,191,432
Loss Adjustment Expense Reserves
Legal Defense Reserves		7,224,591		1,610,315		487,156
Claim Adjusting Reserves		148,080		168,690		202,369
Loss Reserves, Before IBNR	$	11,563,264	$	7,044,205	$	6,880,957
IBNR		4,320,798		4,597,091		2,428,017
Total Loss & Loss Adjustment Reserves	$	15,884,062	$	11,641,296	$	9,308,974

6 > 15

~~Our~~16 ~~independent~~> ~~actuary who reviews our loss reserves at calendar year ends has not required, nor suggested, there be an increase to loss reserves established by management.~~30

~~Reinsurance~~31 > 60

~~Reinsurance~~61 ~~recoverables recorded~~> with respect to insurance losses ceded to reinsurers under reinsurance contracts are also subject to estimation error. The value of ceded losses are determined using the same methods as described above, and therefore, are subject to the same uncertainties as reserves for direct losses and LAE. Additionally, estimates of reinsurance recoverables may prove uncollectible if the reinsurer is unable or unwilling to perform under the contract. The ceding of insurance does not legally discharge the ceding company from its primary liability for the full amount of the policies, and the ceding company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligation under the reinsurance agreement. We evaluate the balances due from reinsurance companies for collectability, and when indicated, in management's opinion, issues of collectability exist, establish an allowance for doubtful accounts. For information about the risks of non-collectability of reinsurance, see the risk factor under Item 1A.entitled "We face a risk of non-collectability of reinsurance, which could materially and adversely affect our business, results of operations and/or financial condition".90

~~Deferred~~91 ~~Policy~~> ~~Acquisition Costs Recoverability~~120

~~Deferred~~121 ~~policy~~> acquisitions costs (“DAC”) consist of commissions, premium taxes and policy underwriting and production expenses which are incurred through and vary directly with, the level of production of new and renewal insurance business and are amortized over the terms of the policies they relate to. The method used in calculating DAC limits the amount of the deferred cost to their estimated realizable value, which gives effect to allocating their expense along with other period costs associated with the insurance business, in relation to the amount of gross premium earned on policies to which they relate and investment income. DAC is reviewed to determine if it is recoverable from future income, including investment income. The amount of DAC considered recoverable could be reduced in the near term if estimates of future premium income from their related lines of insurance are revised.360

~~Deferred Tax Assets and Liabilities~~>360

~~Deferred~~Data ~~tax~~can ~~assets~~ be pulled in by event and ~~liabilities~~by ~~are~~accident ~~determined~~period. ~~based~~However, since events individually behave inconsistently, data is pulled on ~~the~~an ~~differences~~accident ~~between~~year ~~the~~basis ~~financial~~(so ~~reporting~~that variability could be reviewed), and ~~tax~~rolled ~~bases~~up to an ITD basis for this evaluation. For each of ~~assets~~the above bands, the $ incurred and ~~liabilities~~% of total incurred from claims reported during those time frames is calculated by accident year, as were cumulative values. ~~Deferred~~ ~~tax~~This ~~liabilities~~data ~~are~~is ~~recognized~~then spread out into days from the event (so that 1-5 band became individual days 1, 2, 3, 4, 5 and so on for ~~temporary~~the ~~differences~~other bands) on a straight line basis, which is then adjusted to scale over the time period so that ~~will~~claim ~~result~~reporting was greater earlier in ~~taxable~~the ~~amounts~~bands than later in ~~future~~the ~~years~~bands (so for the 1-5 band, proportionally more was reported on day 1 than day 2, etc.). ~~Deferred tax~~Initially, ~~assets~~this ~~are~~is ~~recognized~~done on a daily basis for ~~deductible~~days ~~temporary~~0-30, ~~differences~~with ~~and~~subsequent ~~tax~~periods ~~operating~~grouped ~~loss~~broken ~~and~~into ~~tax~~bands ~~credit~~of ~~carry~~5, ~~forwards~~15 and ~~carry backs~~30 days. ~~The~~These ~~deferred~~factors ~~tax~~are ~~assets~~then rolled up into cumulative factors and ~~liabilities~~further ~~are~~scaled ~~measured~~so bythat ~~applying~~reporting is maxed out at 365 days, when the ~~enacted~~vast ~~tax~~majority ~~rates~~of ~~and~~reported ~~laws~~claims inare ~~effect~~thought ~~for~~to be known. In application, the ~~years in~~factors ~~which~~are ~~such~~stratified ~~differences~~to a daily scale, so that actual days from event are ~~expected~~used to ~~reverse~~select the specific factor to be used.

~~Realization~~Lastly, ofevent ~~any carry~~losses ~~forward~~are ~~component~~capped ofbased ~~deferred~~on ~~tax~~the ~~assets~~company's ~~depends~~catastrophe ~~upon~~reinsurance ~~our~~coverage, ~~generation~~so ofthat ~~sufficient~~no ~~taxable~~more ~~income~~than in$4.0 million per event is included. Once the ~~future~~projected toevent ~~recover tax~~limit ~~benefits~~reaches ~~that~~$4.0 ~~cannot~~million, beno ~~recovered~~further ~~from~~retained ~~taxes~~IBNR ~~paid~~is inprojected for the ~~carryback period~~event, ~~generally~~only ~~two~~gross ~~years~~and ceded IBNR.

35We maintain IBNR reserves to provide for already incurred claims that have not yet been reported as well as developments on reported claims. The IBNR reserve is determined by estimating our insurance company's ultimate net liability for both reported and IBNR claims and then subtracting the case reserves and payments made to date for reported claims.

~~Recently~~Because ~~Issued Accounting~~the ~~Pronouncements~~establishment of loss reserves is an inherently uncertain process, we cannot be certain that ultimate losses will not exceed the established loss reserves and have a material adverse effect on our results of operations and financial condition. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.

~~See Note 2 within Item 8. Financial Statements and Supplementary Data in our Notes to Consolidated Financial Statements for a discussion of recent accounting standards that may affect us.~~33

~~ITEM~~The ~~7A.~~following ~~Quantitative~~table ~~and~~sets ~~Qualitative~~forth ~~Disclosures~~the ~~about~~amount ~~Market~~of ~~Risk~~the gross reserves for loss and loss adjustment expense:

Not applicable.

	December 2014		December 2013		December 2012
Loss Reserves	$	4,580,284	$	4,190,593	$	5,265,200
Loss Adjustment Expense Reserves
Legal Defense Reserves		5,460,509		7,224,591		1,610,315
Claim Adjusting Reserves		160,522		148,080		168,690

Loss Reserves, Before IBNR	$	10,201,315	$	11,563,264	$	7,044,205

IBNR		4,808,191		4,320,798		4,597,091

Total Loss & Loss Adjustment Reserves	$	15,009,506	$	15,884,062	$	11,641,296

~~ITEM~~Our 8.independent ~~Financial~~actuary ~~Statements~~who ~~and~~reviews ~~Supplementary~~our ~~Data~~loss reserves at calendar year ends has not required, nor suggested, there be an increase to loss reserves established by management.

	Page
Report of Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets as of December 31, 2013 and 2012	38
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012	39
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2013 and 2012	40
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	42
Notes to Consolidated Financial Statements	43

Reinsurance

36Reinsurance recoverables recorded with respect to insurance losses ceded to reinsurers under reinsurance contracts are also subject to estimation error. The value of ceded losses are determined using the same methods as described above, and therefore, are subject to the same uncertainties as reserves for direct losses and LAE. Additionally, estimates of reinsurance recoverables may prove uncollectible if the reinsurer is unable or unwilling to perform under the contract. The ceding of insurance does not legally discharge the ceding company from its primary liability for the full amount of the policies, and the ceding company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligation under the reinsurance agreement. We evaluate the balances due from reinsurance companies for collectability, and when indicated, in management's opinion, issues of collectability exist, establish an allowance for doubtful accounts. For information about the risks of non-collectability of reinsurance, see the risk factor under Item 1A.entitled "We face a risk of non-collectability of reinsurance, which could materially and adversely affect our business, results of operations and/or financial condition".

~~REPORT OF~~Deferred ~~INDEPENDENT~~Policy ~~REGISTERED~~Acquisition ~~PUBLIC~~Costs ~~ACCOUNTING FIRM~~Recoverability

ToDeferred policy acquisitions costs ("DAC") consist of commissions, premium taxes and policy underwriting and production expenses which are incurred through and vary directly with, the ~~Board~~ level of ~~Directors~~production of new and ~~Stockholders~~renewal insurance business and are amortized over the terms of ~~Homeowners~~ the policies they relate to. The method used in calculating DAC limits the amount of ~~America~~the ~~Holding~~deferred ~~Corporation~~cost to their estimated realizable value, which gives effect to allocating their expense along with other period costs associated with the insurance business, in relation to the amount of gross premium earned on policies to which they relate and investment income. DAC is reviewed to determine if it is recoverable from future income, including investment income. The amount of DAC considered recoverable could be reduced in the near term if management's estimates of future premium and investment income is reduced which could impair the Company's ability to recover these costs.

~~Irving, Texas~~Deferred Tax Assets and Liabilities

~~We have~~Deferred ~~audited~~tax assets and liabilities are determined based on the ~~accompanying~~differences ~~consolidated~~between ~~balance~~the ~~sheets~~financial ofreporting ~~Homeowners~~and oftax ~~America~~bases ~~Holding~~of ~~Corporation~~assets and ~~Subsidiaries~~liabilities. ~~(the~~Deferred ~~Company) as~~tax ofliabilities ~~December~~are ~~31,~~recognized ~~2013~~for ~~and~~temporary ~~2012,~~differences ~~and~~that ~~the~~will ~~related~~result ~~consolidated~~in ~~statements~~taxable ofamounts ~~operations,~~in ~~stockholders’~~future ~~equity,~~years. ~~and~~Deferred ~~cash~~tax ~~flows~~ assets are recognized for ~~each~~deductible oftemporary ~~the~~differences ~~two~~and ~~years~~tax inoperating ~~the~~loss ~~period~~and ~~ended~~tax ~~December~~credit ~~31,~~carry ~~2013~~forwards and carry backs. The ~~Company’s~~deferred ~~management~~tax isassets ~~responsible~~and ~~for~~liabilities ~~these~~are ~~consolidated financial~~measured ~~statements.~~by ~~Our~~applying ~~responsibility~~the isenacted totax ~~express~~rates anand ~~opinion~~laws onin ~~these~~effect ~~consolidated~~for ~~financial~~the ~~statements~~years ~~based~~in onwhich ~~our~~such ~~audits~~differences are expected to reverse.

~~We conducted~~Management ~~our~~utilizes ~~audits in accordance with~~ the ~~standards~~criteria ofestablished ~~the~~under ~~Public Company~~ Accounting ~~Oversight~~Standards ~~Board~~Codification (~~United States~~ASC). ~~Those~~740 ~~standards require that we plan and perform the audit~~ to ~~obtain~~annually ~~reasonable~~evaluate ~~assurance about whether~~ the ~~consolidated~~need ~~financial~~for ~~statements~~a ~~are free~~deferred oftax ~~material~~valuation ~~misstatement~~allowance. All ~~The~~available ~~Company~~evidence, isincluding ~~not~~potential ~~required~~effects toof ~~have,~~both ~~nor~~positive ~~were~~and wenegative ~~engaged to perform~~evidence, anis ~~audit~~assessed ofin ~~its~~making ~~internal~~the ~~control over financial reporting~~determination. The ~~Our~~Company ~~audit~~has ~~included~~established ~~consideration~~a ofrelatively ~~internal~~consistent ~~control~~pattern ~~over~~of ~~financial~~annual ~~reporting~~taxable asincome aand ~~basis~~currently ~~for~~has ~~designing audit~~no ~~procedures~~operating ~~that~~loss ~~are~~carryback ~~appropriate~~or incarryforward ~~the circumstances~~balances. Further, ~~but not for~~ the ~~purpose~~majority of ~~expressing an opinion on~~ the ~~effectiveness of~~deferred ~~the~~tax ~~Company’s~~assets ~~internal~~have ~~control~~a ~~over~~short ~~financial~~recovery ~~reporting.~~period ~~Accordingly,~~from wea ~~express~~future norealization ~~such opinion~~standpoint. ~~An audit also includes examining~~ Accordingly, ~~on a test basis, evidence supporting~~ the ~~amounts~~deferred ~~and~~tax ~~disclosures~~asset inhas ~~the~~been ~~consolidated~~deemed ~~financial~~to ~~statements,~~be ~~assessing the~~a ~~accounting~~fully ~~principles~~realized ~~used~~amount ~~and~~as ~~significant~~of ~~estimates~~December ~~made by management~~31, ~~as well as evaluating the overall consolidated financial statement presentation~~2014. ~~We believe that our audits provide a reasonable basis for our opinion.~~

~~In our~~Realization ~~opinion,~~of ~~the~~any ~~consolidated~~carry ~~financial~~forward ~~statements~~component ~~referred~~of todeferred ~~above~~tax ~~present~~assets ~~fairly,~~depends inupon ~~all~~our ~~material~~generation ~~respects, the consolidated financial position~~ of ~~Homeowners~~sufficient oftaxable ~~America~~income ~~Holding~~in ~~Corporation as of December 31, 2013 and 2012, and~~ the ~~consolidated~~future ~~results of~~to ~~their~~recover ~~operations~~tax ~~and~~benefits ~~their~~that ~~cash~~cannot ~~flows~~be ~~for~~recovered ~~each~~from oftaxes ~~the~~paid ~~two years~~ in the ~~period~~carryback ~~ended December~~period, ~~2013, in conformity with accounting principles~~ generally ~~accepted~~two ~~in the United States of America~~years.

~~WEAVER AND~~Recently ~~TIDWELL,~~Issued ~~L.L.P.~~Accounting Pronouncements

~~Dallas, Texas~~See Note 2 within Item 8. Financial Statements and Supplementary Data in our Notes to Consolidated Financial Statements for a discussion of recent accounting standards that may affect us.

~~March 31,~~ITEM ~~2014~~7A. Quantitative and Qualitative Disclosures about Market Risk

37Not applicable.

~~Homeowners of America Holding Corporation~~34

~~Consolidated Balance~~ITEM ~~Sheets~~8. Financial Statements and Supplementary Data

December 31, 2013 and 2012

	Page

Report of Independent Registered Public Accounting Firm	36
Consolidated Balance Sheets as of December 31, 2014 and 2013	37
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013	38
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014 and 2013	39
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2014 and 2013	40
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013	42
Notes to Consolidated Financial Statements	43

	December 31,			December 31,
	2013			2012
Assets:
Cash and cash equivalents	$	8,104,310		$	10,194,375
Short-term investments		4,151,011			3,853,353
Restricted cash and investments		1,000,000			1,000,000
Long-term investments		1,960,000			2,155,695
Accrued investment income		8,853			8,435
Due and deferred premiums		4,169,824			3,643,136
Balance due from reinsurers		46,281,756			36,080,628
Property, equipment and software, net		244,516			234,156
Deferred policy acquisition costs		6,214,334			5,274,515
Deferred ceding commissions		-			683,914
TWIA assessments, net of ceded amounts		-			80,040
Prepaid expenses and other		128,195			130,296
Deferred tax assets, net		933,221			816,811
Total assets	$	73,196,020		$	64,155,354
Liabilities
Loss and loss adjustment expenses	$	15,884,062		$	11,641,296
Advance premiums		90,854			36,499
Ceded reinsurance premiums payable		3,271,858			2,782,190
Unearned premiums		31,297,118			26,578,928
Ceded deferred premiums		-			2,381,906
Unearned ceding commissions		8,067,162			6,826,778
Commissions payable, reinsurers and agents		3,716,423			6,117,170
General and other accrued expenses payable		1,906,265			729,441
Income tax payable		211,198			349,785
Taxes, licenses and other fees payable		474,503			431,382
Funds held under reinsurance treaty		-			36,573
Convertible promissory note		-			1,000,000
Total liabilities		64,919,443			58,911,948
Stockholders’ equity:
Preferred stock, convertible; 12.5% cumulative; $0.0001 par value per share;
Series A 4,500,000 shares authorized; 4,500,000 shares issued and outstanding as of December 31, 2012		-			450
Series B 1,000,000 shares authorized; 500,000 shares issued and outstanding as of December 31, 2012		-			50
Preferred stock, convertible; 12.5% cumulative; $0.0001 par value per share;
20,500,000 shares authorized; no shares issued and outstanding as of December 31, 2013		-			-
Common stock, $0.0001 par value per share; 10,000,000 shares authorized;
900,000 shares issued and outstanding as of December 31, 2012		-			90
Common stock, $0.0001 par value per share; 40,000,000 shares authorized;
17,181,140 shares issued and 15,831,140 shares outstanding as of December 31, 2013		1,583			-
Treasury stock, $0.0001 par value per share; 1,350,000 common shares as of December 31, 2013		(135	)		-
Additional paid-in-capital		5,969,550			4,906,000
Retained earnings		2,305,579			336,816
Total stockholders’ equity		8,276,577			5,243,406
Total liabilities and stockholders’ equity	$	73,196,020		$	64,155,354

~~See~~REPORT ~~accompanying~~OF ~~notes~~INDEPENDENT toREGISTERED ~~consolidated financial~~PUBLIC ~~statements.~~ACCOUNTING FIRM

38To the Board of Directors and Stockholders of

Homeowners of America Holding Corporation

~~CONSOLIDATED~~Irving, ~~STATEMENTS OF OPERATIONS~~Texas

~~For~~We have audited the ~~Years~~accompanying ~~Ended~~consolidated balance sheets of Homeowners of America Holding Corporation and Subsidiaries (the Company) as of December 31, 2014 and 2013, and ~~2012~~ the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2014. The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

	2013			2012
Revenues:
Premiums earned	$	53,238,811		$	47,185,700
Ceded premiums		(48,422,943	)		(42,207,361	)
Net premiums		4,815,868			4,978,339
Policy fees		4,655,315			4,442,069
Ceding commissions		10,493,183			9,601,837
Gross investment income		41,649			17,980
Reinsurance profit sharing, installment fees and other income		2,544,751			1,392,732
Total Revenue		22,550,766			20,432,957
Expenses:
Losses and loss adjustment expenses		2,259,107			4,064,797
Policy acquisition expenses		11,606,188			10,178,892
Underwriting and other operating expenses		5,677,484			5,325,414
Total Expenses		19,542,779			19,569,103
Income before income taxes		3,007,987			863,854
Provision (benefit) for income taxes:
Current		1,155,634			376,688
Deferred		(116,410	)		(615,830	)
Total income taxes		1,039,224			(239,142	)
Net income	$	1,968,763		$	1,102,996
Cumulative preferred stock dividends		(974,179	)		(1,288,750	)
Net income (loss) available to common stockholders	$	994,584		$	(185,754	)
Basic income (loss) per common share	$	0.15		$	(0.08	)
Weighted average number of common shares outstanding - basic		6,777,047			2,250,000
Diluted income (loss) per common share	$	0.11		$	(0.08	)
Weighted average number of common shares outstanding - diluted		17,633,640			2,250,000
Cash dividend declared per common share	$	0		$	0

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~See~~In ~~accompanying~~our ~~notes~~opinion, tothe consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Homeowners of America Holding Corporation and Subsidiaries as of December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December, 2014, in conformity with accounting principles generally accepted in the United States of America.

39WEAVER AND TIDWELL, L.L.P.

~~Homeowners~~Dallas, ~~of America Holding Corporation~~Texas

~~CONSOLIDATED~~March ~~STATEMENTS~~27, ~~OF STOCKHOLDERS’ EQUITY~~2015

~~For the Year Ended December 31, 2013~~ 36

																						Additional					Total
	Preferred Stock Series A						Preferred Stock Series B						Common Stock				Treasury Stock					Paid-In			Retained		Shareholders'
	Shares			Amount			Shares			Amount			Shares		Amount		Shares		Amount			Capital			Earnings		Equity
Balance December 31, 2012		4,500,000		$	450			500,000		$	50			900,000	$	90		-		-		$	4,906,000		$	336,816	$	5,243,406
Net Income		-			-			-			-			-		-		-		-			-			1,968,763		1,968,763
Conversion of Series A Preferred Stock		(4,500,000	)		(450	)		-			-			11,250,000		1,125		-		-			-			-		675
Conversion of Series B Preferred Stock		-			-			(500,000	)		(50	)		1,250,000		125		-		-			-			-		75
Conversion of Convertible Note Payable		-			-			-			-			2,272,500		227		-		-			999,773			-		1,000,000
Conversion of Interest on Convertible Note Payable		-			-			-			-			158,640		16		-		-			69,792			-		69,808
Repurchase of Common Stock		-			-			-			-			-		-		1,350,000		(135	)		(5,265	)		-		(5,400	)
Adjustment of Par Value to reflect Forward Stock Split		-			-			-			-			-		-		-		-			(750	)		-		(750	)
Balance December 31, 2013		-		$	-			-		$	-			15,831,140	$	1,583		1,350,000	$	(135	)	$	5,969,550		$	2,305,579	$	8,276,577

Homeowners of America Holding Corporation

~~See~~CONSOLIDATED ~~accompanying~~BALANCE ~~notes to consolidated financial statements.~~SHEETS

40December 31, 2014 and 2013

Homeowners of America Holding Corporation

	December 31, 2014			December 31, 2013

Assets:
Cash and cash equivalents	$	5,648,278		$	8,104,310
Short-term investments		1,231,881			4,151,011
Restricted cash and investments		3,790,000			1,000,000
Restricted fixed-maturity securities, available-for-sale, at fair value (amortized cost $539,558)		539,654			-
Fixed-maturity securities, available-for-sale, at fair value (amortized cost $3,827,268)		3,827,245			-
Long-term investments		3,430,000			1,960,000
Accrued investment income		55,908			8,853
Due and deferred premiums		5,089,131			4,169,824
Balance due from reinsurers		54,157,528			46,281,756
Property, equipment and software, net		344,495			244,516
Deferred policy acquisition costs		7,897,806			6,214,334
Prepaid expenses and other		552,728			128,195
Deferred tax assets, net		1,517,935			933,221

Total assets	$	88,082,589		$	73,196,020

Liabilities:

Loss and loss adjustment expenses	$	15,009,506		$	15,884,062
Advance premiums		74,172			90,854
Ceded reinsurance premiums payable		4,342,874			3,271,858
Unearned premiums		40,021,934			31,297,118
Unearned ceding commissions		11,200,317			8,067,162
Commissions payable, reinsurers and agents		3,754,929			3,716,423
General and other accrued expenses payable		2,232,547			1,906,265
Income tax payable		-			211,198
Taxes, licenses and other fees payable		765,782			474,503

Total liabilities		77,402,061			64,919,443

Stockholders' equity:

Common stock, $0.0001 par value per share; 40,000,000 shares authorized;
17,479,852 shares issued and 16,168,852 shares outstanding as of December 31, 2014 and 17,181,140 shares issued and 15,831,140 shares outstanding as of December 31, 2013		1,617			1,583
Treasury stock, $0.0001 par value per share; 1,311,000 common shares as of December 31, 2014 and 1,350,000 common shares as of December 31, 2013		(131	)		(135	)
Additional paid-in-capital		6,209,265			5,969,550
Accumulated other comprehensive income		73			-
Retained earnings		4,469,704			2,305,579

Total stockholders' equity		10,680,528			8,276,577

Total liabilities and stockholders' equity	$	88,082,589		$	73,196,020

~~CONSOLIDATED~~See ~~STATEMENTS~~accompanying OFnotes ~~STOCKHOLDERS’ EQUITY~~to consolidated financial statements.

~~For the Year Ended December 31, 2012~~ 37

													Additional					Total
	Preferred Stock Series A				Preferred Stock Series B				Common Stock				Paid-In		Retained			Shareholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Earnings			Equity
Balance December 31, 2011		4,500,000	$	450		500,000	$	50		900,000	$	90	$	4,906,000	$	(766,180	)	$	4,140,410
Net Income		-		-		-		-		-		-		-		1,102,996			1,102,996
Balance December 31, 2012		4,500,000	$	450		500,000	$	50		900,000	$	90	$	4,906,000	$	336,816		$	5,243,406

Homeowners of America Holding Corporation

~~See~~CONSOLIDATED ~~accompanying~~STATEMENTS ~~notes~~OF ~~to consolidated financial statements.~~OPERATIONS

41For the Years Ended December 31, 2014 and 2013

Homeowners of America Holding Corporation

	2014			2013
Revenues:

Premiums earned	$	64,895,484		$	53,238,811
Ceded premiums		(60,484,640	)		(48,422,943	)
Net premiums earned		4,410,844			4,815,868
Policy fees		5,616,525			4,655,315
Ceding commissions and reinsurance profit share		16,651,464			11,805,811
Investment income, net of investment expenses		43,603			41,649
Loss adjustment and other fee income		1,530,234			1,232,123

Total revenue		28,252,670			22,550,766

Expenses:

Losses and loss adjustment expenses		2,930,295			2,259,107
Policy acquisition and other underwriting expenses		16,497,662			13,058,774
General and administrative expenses		5,496,391			4,224,898

Total expenses		24,924,348			19,542,779

Income before income taxes		3,328,322			3,007,987

Provision (benefit) for income taxes:
Current		1,748,911			1,155,634
Deferred		(584,714	)		(116,410	)
Total income taxes		1,164,197			1,039,224

Net income	$	2,164,125		$	1,968,763

Cumulative preferred stock dividends		-			(974,179	)

Net income available to common stockholders	$	2,164,125		$	994,584

Basic income per common share	$	0.13		$	0.15
Diluted income per common share	$	0.12		$	0.11
Cash dividend declared per common share	$	0		$	0

~~CONSOLIDATED~~See ~~STATEMENTS~~accompanying OFnotes ~~CASH~~to ~~FLOWS~~consolidated financial statements.

~~For the Years Ended December 31, 2013 and 2012~~ 38

	December 31,			December 31,
	2013			2012
Cash flows from operating activities:
Net income	$	1,968,763		$	1,102,996
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation & amortization		88,770			72,704
Deferred tax assets		(116,410	)		(615,830	)
(Increase) decrease in:
Accrued investment income		(418	)		621
Due and deferred premiums		(526,688	)		(89,507	)
Balance due from reinsurers		(10,201,128	)		(2,470,169	)
Deferred policy acquisition costs		(939,819	)		(844,771	)
Deferred ceding commissions		683,914			755,673
TWIA assessments		80,040			80,040
Prepaid and other		2,101			(20,946	)
Increase (decrease) in:
Losses and loss adjustment expenses		4,242,766			2,332,322
Advance premiums		54,355			(31,093	)
Ceded reinsurance premiums payable		489,668			(1,873,909	)
Unearned premiums		4,718,190			4,112,674
Ceded deferred premiums		(2,381,906	)		(370,275	)
Unearned ceding commissions		1,240,384			1,057,503
Commissions payable, reinsurance & agents		(2,400,747	)		1,870,654
General and other accrued expenses		1,246,632			328,248
Funds held under reinsurance treaty		(36,573	)		36,573
Income tax payable		(138,587	)		309,258
Taxes, licenses and other fees payable		43,121			292,017
Net cash provided by (used in) operating activities		(1,883,572	)		6,034,783
Cash flows from investing activities:
Purchases of long-term certificate of deposit		(1,960,000	)		(2,032,000	)
Maturities of long-term certificate of deposit		2,155,695			-
Maturities of short-term investments		1,455,000			-
Purchases of short-term investments		(1,752,658	)		(1,814,142	)
Additions to furniture, equipment and software		(99,130	)		(187,668	)
Net cash used in investing activities		(201,093	)		(4,033,810	)
Cash flows from financing activities:
Repurchase of common stock		(5,400	)		-
Proceeds from convertible notes payable		-			1,000,000
Net cash provided by (used in) financing activities		(5,400	)		1,000,000
Net increase (decrease) in cash and cash equivalents		(2,090,065	)		3,000,973
Cash and cash equivalents, beginning of period		10,194,375			7,193,402
Cash and cash equivalents, end of the period	$	8,104,310		$	10,194,375
Supplemental disclosure of cash flow information:
Cash paid during the year for income tax	$	1,260,724		$	70,000
Cash paid during the year for interest expense	$	-		$	-
Non cash investing from financing activities
Repayment of debt on convertible note and conversion to common stock	$	1,000,000		$	-
Conversion of interest on convertible note	$	69,808		$	-

Homeowners of America Holding Corporation

~~See~~CONSOLIDATED ~~accompanying~~STATEMENTS ~~notes~~OF toCOMPREHENSIVE ~~consolidated financial statements.~~INCOME

42For the Years Ended December 31, 2014 and 2013

Homeowners of America Holding Corporation

	Year Ended
	December 31,
	2014		2013

Net income	$	2,164,125	$	1,968,763
Other comprehensive income:
Change in unrealized gain on investments:
Unrealized gain arising from the period		73		-
Deferred income taxes on securities		-		-
Total other comprehensive income, net of income taxes		73		-
Comprehensive income	$	2,164,198	$	1,968,763

~~NOTES~~See TOaccompanying ~~CONSOLIDATED~~notes ~~FINANCIAL~~to ~~STATEMENTS~~consolidated financial statements.

~~1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~39

Homeowners of America Holding Corporation (“HAHC”) is an insurance holding company established to hold insurance entities for the purpose of marketing homeowners insurance products on a national basis. HAHC owns 100% of Homeowners of America Insurance Company (“HAIC”). HAIC is domiciled in Texas, licensed in multiple states and is authorized to write various forms of homeowners and auto insurance. All coverage is concentrated in Texas. HAHC also owns 100% of Homeowners of America MGA, Inc. (“MGA”), a Texas Corporation, formed as a captive managing general agency to produce business for HAIC. HAHC, along with its subsidiaries HAIC and MGA, are collectively referred to as “the Company”.

~~Principles~~CONSOLIDATED ofSTATEMENTS ~~Consolidation~~OF STOCKHOLDERS' EQUITY

~~The~~For ~~accompanying consolidated financial statements include~~ the ~~accounts~~Year ofEnded ~~Homeowners~~December of31, ~~America Holding Corporation and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.~~2014

Basis of Presentation

	Common Stock				Treasury Stock
	Shares		Amount		Shares			Amount			Additional Paid In Capital		Accumulated Other Comprehensive Income, net of Tax		Retained Earnings		Total Shareholders' Equity
Balance December 31, 2013		15,831,140	$	1,583		1,350,000		$	(135	)	$	5,969,550	$	-	$	2,305,579	$	8,276,577
Net Income		-		-		-			-			-		-		2,164,125		2,164,125
Total other comprehensive income, net of income taxes		-		-		-			-			-		73		-		73
Stock options exercised		10,250		1		-			-			7,849		-		-		7,850
Common stock issued		327,462		33		(39,000	)		4			170,243		-		-		170,280
Stock-based compensation		-		-		-			-			61,623		-		-		61,623
Balance December 31, 2014		16,168,852	$	1,617		1,311,000		$	(131	)	$	6,209,265	$	73	$	4,469,704	$	10,680,528

~~The~~See accompanying notes to consolidated financial ~~statements~~ ~~have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”)~~statements.

~~Cash and Cash Equivalents~~40

~~Cash~~Homeowners ~~and cash equivalents include cash and highly liquid short-term investments, with original maturities~~ of ~~three~~America ~~months~~Holding or less. The amount is carried at cost, which approximates fair value. At December 31, 2013 and 2012, cash and cash equivalents consist of cash on deposit with financial institutions, as well as money market mutual funds.Corporation

~~General~~CONSOLIDATED ~~and~~STATEMENTS ~~other~~OF ~~accrued~~STOCKHOLDERS' ~~expenses payable as of December 31, 2013 include $1.2 million of checks issued in excess of cash book balances, not yet presented for payment.~~EQUITY

~~Investments~~For the Year Ended December 31, 2013

The Company’s investments are comprised of short-term, restricted, and long-term investments. Restricted investments and long-term investments are described below. Short-term investments include certificates of deposit with original maturities greater than three months and maturities of one year or less. Due to the short-term nature of these investments, significant changes in prevailing interest rates and economic conditions should not adversely affect the timing and amount of cash flows on such investments or their related values. Accordingly, certificates of deposit are carried at cost, which approximates fair value.

	Preferred Stock Series A						Preferred Stock Series B						Common Stock				Treasury Stock
	Shares			Amount			Shares			Amount			Shares		Amount		Shares		Amount			Additional Paid-In Capital			Retained Earnings		Total Shareholders' Equity

Balance December 31, 2012		4,500,000		$	450			500,000		$	50			900,000	$	90		-	$	-		$	4,906,000		$	336,816	$	5,243,406
Net Income		-			-			-			-			-		-		-		-			-			1,968,763		1,968,763
Conversion of Series A Preferred Stock		(4,500,000	)		(450	)		-			-			11,250,000		1,125		-		-			-			-		675
Conversion of Series B Preferred Stock		-			-			(500,000	)		(50	)		1,250,000		125		-		-			-			-		75
Conversion of Convertible Note Payable		-			-			-			-			2,272,500		227		-		-			999,773			-		1,000,000
Conversion of Interest on Convertible Note Payable		-			-			-			-			158,640		16		-		-			69,792			-		69,808
Repurchase of Common Stock		-			-			-			-			-		-		1,350,000		(135	)		(5,265	)		-		(5,400	)
Adjustment of Par Value to reflect Forward Stock Split		-			-

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