HG HOLDINGS, INC. FILE (8-K) Disclosure of Reaching Material Definitive Agreement – ​​InsuranceNewsNet

Item 1.01 Conclusion of a definitive agreement.

On June 30, 2022100% subsidiary of HG Holdings, Inc. (the
“Company”), HG Management Agency, LLCa North Carolina limited liability company
(“HGMA”), has entered into a management consulting services agreement dated and
effective from July 1, 2022 (the “Consulting Services Agreement”) with FedNat
Underwriters, Inc. (“FNU”) under which HGMA will assist FNU and its
parent company, FedNat Holding Company (“FNHC”) in developing a restructuring plan for
FNHC non-statutory entities, including identification of cost savings and other
necessary or desirable measures in this respect and, after approval of these
plan by the FNHC Board of Directors, oversee the implementation of this plan. The
the duration of the advisory services agreement is up to July 1, 2025 and HGMA fees for
his services under the advisory services agreement is equivalent to 1.5% of gross income
annual bonus of Monarch National Insurance Company (“Monarch”).

In the background, the Florida Bureau of Insurance Regulations (OIR) authorized
Monarch will support approximately 78,000 in-force policies June 1, 2022 of
FedNat insurance company (FNIC), a wholly owned subsidiary of FNHC, resulting in
Monarch’s total font count totals around 83,000 fonts. The FNU will
continue as managing general agent for Monarch. From June 30, 2022after a $15
million investment by funds managed by Hale Partnership Capital Management LLC
(“HPCM”) in Monarch, Monarch is 60% owned by various funds managed by HPCM,
and 40% owned by FNHC. HPCM and its affiliates are beneficial owners in all
11.27% of the outstanding common shares of FNHC (for which they filed a
Waiver of Control Affidavit with the Florida Insurance Bureau
Regulation). Mr Hale also acts as an advisor to the strategic review
FNHC Board Committee. Mr Hale and HPCM collectively too
hold approximately 34.9% of the outstanding common shares of the Company.

The foregoing description of the advisory services agreement does not purport
be complete and qualified in its entirety by reference to the Advisory
Service Agreement, a copy of which is filed as Exhibit 10.1 to this report and
incorporated herein by reference.

Simultaneously with the conclusion of the consulting services agreement, the company
formed White Rock UNITED STATES Protected Cell 47 (the “Protected Cell”) efficient July, 1st,
2022. The Protected Cell entered into an Excess Catastrophe Reinsurance Contract
(the “Reinsurance Contract”) with House insurance company (“House”) in effect
July 1, 2022 provide the House with protection against catastrophic storms
about 7,650 Texas insurance policies in force at the start of the
Reinsurance contract. The reinsurance contract provides $7.8 million from limit to
House of more than one $5 million retention. The Company’s capital at risk is
$1.17 million. House will pay the Protected Cell $6.63 million in reinsurance
premiums for the duration of the contract. The reinsurance contract ends on
December 31, 2022.

Maison is a wholly owned subsidiary of FNHC.

The foregoing description of the Reinsurance Contract does not purport to be
complete and is qualified in its entirety by reference to Reinsurance
Contract, a copy of which is filed as Exhibit 10.2 of this report and
incorporated herein by reference.

Item 9.01 Financial statements and supporting documents.

(d)           Exhibits

10.1      Management Advisory Services Agreement, entered into as of July 1, 2022 by
        and between HG Managing Agency, LLC and FedNat Underwriters, Inc. (filed
        herewith).
10.2      Excess Catastrophe Reinsurance Contract, entered into as of July 1, 2022
        by and between Maison Insurance Company and The Subscribing Reinsurer (filed
        herewith).
104     Cover Page Interactive Data File (embedded within the Inline XBRL document)

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