Contract analysis

I. EXECUTIVE SUMMARY This memorandum summarizes the findings from the Phase 1 Assessment and Gap Analysis conducted by Calderwood & Harkness LLP ("C&H" or the "Firm") during the period August 19, 2025 through October 3, 2025, a total engagement period of approximately six and one-half weeks. The purpose of this memorandum is to provide Quorum Insurance Holdings Corp. ("QIH" or the "Company") with a comprehensive, pri

II. METHODOLOGY AND SCOPE OF REVIEW A. Documents and Data Reviewed Over the course of the Phase 1 assessment, C&H reviewed an extensive body of documents, data, and regulatory materials. The principal categories of documents and data reviewed are set forth below, although this summary is not exhaustive of every document or data point considered during the engagement. Regulatory Examination Materials. We reviewed the

III. BACKGROUND: QUORUM CORPORATE AND OPERATIONAL PROFILE To provide context for the findings set forth in this memorandum, we briefly summarize the corporate structure and operational profile of QIH and its relevant subsidiaries. Quorum Insurance Holdings Corp. QIH is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol QIHC. The Company is headquartered at 280 Asylum Street, Su

IV. SUMMARY OF FL OIR EXAMINATION FINDINGS A. Overview. In September 2023, the CTDOI, acting in its capacity as domestic regulator for QIIC, initiated a coordinated multi-state market-conduct examination of QIIC under the auspices of the NAIC Market Regulation protocols. Pursuant to those protocols, FL OIR was designated as the lead examining state and assumed primary responsibility for conducting the examination and

V. SUBSIDIARY-SPECIFIC GAP ANALYSIS A. Quorum Indemnity Insurance Company (QIIC)

1. Claims-Handling Timeliness. QIIC is licensed in 28 states, all of which were reviewed as part of the Phase 1 assessment. Compliance gaps in claims-handling timeliness were identified in the substantial majority of these states. The deficiencies are pervasive and systemic, rather than isolated to particular jurisdictions or lines of business. As noted in Section IV.B, QIIC's average claims acknowledgment time of 18

2. Advertising Compliance. QIIC has specific advertising findings in four states: Florida, California, Illinois, and Ohio. As detailed in Section IV.C, a total of 43 non-compliant digital advertising creatives were identified, of which 31 (72.1%) were placed by Pinnacle Bridge MGA's in-house marketing team and the remaining 12 were placed directly by QIIC's marketing department. Our review of QIIC's existing advertis

3. Consumer Complaint Response. QIIC's 2024 complaint ratio of 1.47 complaints per 1,000 policies in force is 79.3% above the NAIC median of 0.82 complaints per 1,000 policies (calculated as 1.47 ÷ 0.82 = 1.793, or 179.3% of the median). This is the highest complaint ratio among the three Quorum carrier subsidiaries and places QIIC well above industry benchmarks. In 2024, a total of 2,847 consumer complaints were fil

4. Overall Assessment. QIIC presents the highest concentration of compliance risk among the Quorum carrier subsidiaries. This assessment is based on several converging factors: QIIC is the largest subsidiary by DWP ($2.14 billion), maintains the most extensive geographic footprint (28 licensed states), was the specific subject of the FL OIR examination, has the highest complaint ratio (79.3% above median), and is the

1. Claims-Handling Timeliness. All 22 states in which QSU is licensed were reviewed as part of the Phase 1 assessment. While QSU was not the subject of the FL OIR examination — that examination was limited to QIIC — our independent review identified similar, though less severe, timeliness gaps in QSU's claims-handling operations. Commercial lines claims, which constitute the entirety of QSU's book of business, inhere

2. Advertising Compliance. QSU shares advertising compliance risk with QIIC through the Pinnacle Bridge MGA channel. Pinnacle Bridge underwrites and binds policies on behalf of both QIIC and QSU, and certain of the 43 non-compliant digital advertisements identified during the examination period included references to QSU products — specifically, commercial general liability and cyber liability offerings. To the exten

3. Consumer Complaint Response. QSU's 2024 complaint ratio of 0.93 complaints per 1,000 policies is 13.4% above the NAIC median of 0.82 (calculated as 0.93 ÷ 0.82 = 1.134, or 113.4% of the median). While this ratio is lower than those of QIIC and QLA, it nevertheless exceeds the industry benchmark and indicates room for improvement. From a procedural standpoint, the complaint logging gaps identified at QIIC are mirro

4. Overall Assessment. QSU presents a moderate level of compliance risk. The deficiencies identified at QSU are structural and procedural in nature, and they closely mirror the patterns observed at QIIC. This congruence strongly suggests that the underlying control failures are enterprise-level rather than subsidiary-specific, a conclusion that has important implications for the design of the Phase 2 remediation prog

1. Claims-Handling Timeliness. All 19 states in which QLA is licensed were reviewed as part of the Phase 1 assessment. Life insurance and annuity claims processing is subject to different statutory frameworks than the property and casualty lines written by QIIC and QSU. The relevant timeframes typically govern the processing of death benefit claims and annuity surrender requests, among other transactions. Our review

2. Advertising Compliance. QLA's advertising compliance risk profile differs from that of QIIC and QSU in one important respect: Pinnacle Bridge MGA does not distribute QLA products. Accordingly, QLA is not exposed to the MGA advertising-workflow gap that is the most significant driver of advertising compliance risk for the other two carrier subsidiaries. However, our review revealed that QLA's internal advertising r

3. Consumer Complaint Response. QLA's 2024 complaint ratio of 1.12 complaints per 1,000 policies is 36.6% above the NAIC median of 0.82 (calculated as 1.12 ÷ 0.82 = 1.366, or 136.6% of the median). This ratio is concerning in light of the nature of QLA's products. Life insurance and annuity complaints often involve emotionally charged circumstances — death benefit claims, retirement income disputes, and policyholder

4. Overall Assessment. QLA presents moderate-to-elevated compliance risk. The 36.6%-above-median complaint ratio is the primary driver of this risk assessment, particularly given the sensitivity of life insurance and annuity products and the potential for regulatory scrutiny from QLA's domestic regulator, ADIFI. While QLA's advertising risk is lower than that of the other subsidiaries due to the absence of Pinnacle B

VI. PINNACLE BRIDGE MGA, LLC — SPECIFIC FINDINGS Pinnacle Bridge MGA, LLC warrants separate and detailed treatment in this memorandum due to its central role in the advertising compliance deficiencies identified during the Phase 1 assessment and its significance as a distribution channel for a substantial portion of Quorum's managed premium volume. Operational Role. Pinnacle Bridge operates as Quorum's fintech distri

VII. CROSS-REFERENCE: INTERNAL AUDIT REPORT NO. IA-2025-017 Internal Audit Report No. IA-2025-017 was issued on August 4, 2025 by Neil Granger, Director of Internal Audit, following an independent assessment of QIH's market-conduct compliance program. The report identified 23 control deficiencies across all three carrier subsidiaries and rated the overall market-conduct compliance program as "Needs Significant Improv

VIII. COMPLAINT RATIO BENCHMARKING ANALYSIS A central component of the Phase 1 assessment was a detailed benchmarking analysis of complaint ratios across all three Quorum carrier subsidiaries, utilizing data compiled by Ridgeline Consulting Group, LLC, under the direction of Sandra Whitfield, Managing Director, as well as publicly available data published by the NAIC. Methodology. Complaint ratios were calculated as

IX. REGULATORY LANDSCAPE AND PENDING ACTIONS A. FL OIR — Corrective Action Plan Status Following the issuance of the FL OIR final examination report on May 12, 2025, QIIC submitted a Corrective Action Plan ("CAP") to FL OIR on July 1, 2025. The CAP set forth QIIC's proposed remediation steps for addressing each of the 14 formal findings in the examination report, along with proposed implementation timelines and respo