Contract analysis

I. Introduction and Purpose This memorandum has been prepared by Calderwood & Harkness LLP ("C&H") at the direction and under the authority of the Audit Committee of the Board of Directors of Quorum Insurance Holdings Corp. ("QIH" or the "Company") in connection with the investigation engagement formally opened on February 27, 2026. The Audit Committee retained C&H for the specific purpose of advising on and, if warr

II. Summary of Allegations The following is a summary of the core allegations as set forth in the Complaint (IntegriLine Intake No. IL-QIH-2026-0214-0033), which was submitted anonymously through QIH's IntegriLine ethics and compliance reporting portal on February 14, 2026, and escalated by the IntegriLine review team to General Counsel Owen R. Hargrove on February 17, 2026. A. Fabrication of Binder Confirmations and

1. Garrett T. Lomax, President of BSU, who is alleged to have directed the overall scheme and to have authorized or approved the fabrication of binder confirmations and the release of IBNR reserves.

2. Neil W. Stadler, Senior Vice President, Commercial Property Division of BSU, who is alleged to have been directly involved in the fabrication of binder confirmations and the creation of documentation supporting the phantom placements.

3. Rhonda M. Kessler, Vice President, Finance & Operations of BSU, who is alleged to have participated in the recognition of phantom commission income on BSU's books and records and to have directed or facilitated the premature release of IBNR reserves. The Complaint does not allege that any senior corporate officer of QIH — including CEO Marcus P. Galvin, CFO Denise R. Nakamura, or General Counsel Owen R. Hargrove —

III. Federal Securities Law Exposure A. Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 QIH is a publicly traded company whose common stock is listed on the Nasdaq Stock Market under the ticker symbol QIHC. As a reporting issuer, QIH is subject to the antifraud provisions of the federal securities laws, including Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange A

1. Elements of a Section 10(b) / Rule 10b-5 Claim A claim under Section 10(b) and Rule 10b-5, whether asserted by the SEC in an enforcement action or by private plaintiffs in a class-action lawsuit, requires the establishment of the following elements: (1) a material misstatement or omission; (2) made in connection with the purchase or sale of a security; (3) with scienter (i.e., intent to deceive, manipulate, or def

2. Materiality Analysis The question of materiality is of central importance to the assessment of QIH's securities law exposure. Under the Supreme Court's standard articulated in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), and Basic Inc. v. Levinson, 485 U.S. 224 (1988), a fact is material if there is a substantial likelihood that a reasonable investor would consider it important in making an investm

3. Scienter. The scienter element requires a showing that the defendant acted with intent to deceive, manipulate, or defraud, or with severe recklessness amounting to a strong inference of such intent. The Complaint alleges that three senior BSU executives — Lomax, Stadler, and Kessler — orchestrated and carried out the scheme. If those allegations are substantiated, establishing scienter as to these individuals shou

4. Private Class-Action Risk If the allegations are substantiated and a corrective disclosure causes a decline in the market price of QIHC common stock, QIH faces a significant risk of a private securities class-action lawsuit under Section 10(b) and Rule 10b-5. Such a suit would likely be filed in the United States District Court for the District of Connecticut or the Southern District of New York by purchasers of Q

5. SEC Enforcement Risk In addition to the risk of private litigation, QIH faces the risk that the SEC's Division of Enforcement may open a formal investigation into the matters alleged in the Complaint. As discussed in Section VIII.B below, the anonymous complainant may have already reported (or may in the future report) the same allegations directly to the SEC under the Dodd-Frank whistleblower bounty program. If t

Section 302 Certifications (Civil — Exchange Act Rule 13a-14(a)): Section 302 of SOX requires the principal executive officer and principal financial officer of each reporting company to certify, in each annual and quarterly report filed under the Exchange Act, that: (i) the signing officer has reviewed the report; (ii) based on the officer's knowledge, the report does not contain any untrue statement of a material f

Section 906 Certifications (Criminal — 18 U.S.C. § 1350): Section 906 of SOX requires the CEO and CFO to certify, in each periodic report filed under the Exchange Act, that: (i) the periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and (ii) the information contained in the periodic report fairly presents, in all material respects, the financial condition and results o

IV. Potential Financial Restatement and Disclosure Obligations A. Restatement Analysis If the allegations in the Complaint are substantiated in whole or in material part, QIH's historical financial statements for fiscal years 2023, 2024, and 2025 may require restatement. The nature and scope of a potential restatement would be governed by Accounting Standards Codification ("ASC") Topic 250, Accounting Changes and Err

1. Revenue Recognition Impact The alleged phantom commission income of approximately $9.6 million over approximately ten quarters would need to be reversed in the periods in which it was improperly recognized. The precise allocation of this amount across the affected quarters — and the determination of which specific quarterly and annual filings would require restatement — will require a forensic analysis of BSU's co

2. Reserve Impact The alleged premature release of approximately $38.5 million in IBNR reserves — concentrated in the fourth quarter of fiscal year 2024 and the second quarter of fiscal year 2025, according to the Complaint — would need to be reversed, with the reserves re-established on QIH's balance sheet. The re-establishment of these reserves would reduce QIH's reported net income and could reduce policyholder su

3. Combined Impact The combined pre-tax impact of the alleged misstatements is approximately $48.1 million across the affected periods. The after-tax impact will depend on the applicable effective tax rates for each affected period and the tax treatment of the specific adjustments, which has not yet been determined.

4. External Auditor Considerations QIH's external auditor, Kellner & Strauss LLP ("K&S"), with lead engagement partner Howard M. Bressler, issued an unqualified (clean) opinion on QIH's consolidated financial statements for fiscal year 2025, which were included in the Form 10-K filed February 21, 2026. K&S also issued reports on the effectiveness of QIH's internal control over financial reporting for fiscal year 2025

5. Appointed Actuary Considerations QIH's appointed actuary, Margaret Y. Cho, FCAS, of the Linden Actuarial Consulting Group ("Linden"), is responsible for opining on the adequacy of QIH's loss and loss-adjustment-expense reserves. The actuary's reserve opinions for the affected periods will need to be examined to determine whether the alleged IBNR reserve releases were reflected in Linden's actuarial analyses and op

V. State Insurance Regulatory Exposure A. Connecticut Insurance Department QIH is headquartered in Stamford, Connecticut, and BSU is a Connecticut corporation with principal offices in Hartford, Connecticut. The Connecticut Insurance Department ("CID") is the domestic regulator for QIH's insurance subsidiaries, including BSU, and exercises broad supervisory, examination, and enforcement authority over Connecticut-dom

1. Surplus-Lines Licensing Requirements If BSU, acting as a managing general agent or wholesale broker, placed commercial property policies through the three Subject Brokers — Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC — and if those entities lack valid surplus-lines licenses, BSU may have facilitated or effected placements through unlicensed intermediaries in violatio

2. Unfair Insurance Practices The fabrication of binder confirmations and the creation of fictitious policy placements could constitute fraudulent insurance acts within the meaning of CGS § 38a-816 et seq. (the Unfair Insurance Practices Act). The CID has authority to investigate unfair or deceptive practices by insurers and insurance intermediaries and to impose cease-and-desist orders, fines, and other sanctions.

3. Reserve Adequacy The alleged manipulation of IBNR reserves at BSU may implicate the reserve-adequacy requirements applicable to QIH's insurance-company subsidiaries. Connecticut law requires insurers to maintain adequate reserves for all outstanding claims, including incurred-but-not-reported claims. CGS § 38a-82 and related provisions govern reserving requirements. If the alleged premature release of $38.5 millio

4. CID Examination and Enforcement Authority The CID has broad statutory authority to conduct financial and market-conduct examinations of Connecticut-domiciled insurers, both on a routine periodic basis and on a targeted or special-examination basis when concerns arise regarding an insurer's financial condition, practices, or compliance. If the CID becomes aware of the allegations in the Complaint — whether through

5. Self-Reporting Obligations QIH may have an affirmative obligation under Connecticut law or CID regulations to self-report the allegations to the CID. Our analysis of the applicable self-reporting requirements is underway and will be completed during the scoping phase. Regardless of any legal obligation, the Audit Committee should consider whether voluntary self-reporting to the CID is advisable as a matter of regu

VI. Potential Criminal Exposure The allegations in the Complaint, if substantiated, describe conduct that may give rise to federal criminal liability for the individual subject persons and potentially for QIH as a corporate entity. This section identifies the principal federal criminal statutes that may be implicated and discusses the potential for Department of Justice involvement. A. Federal Criminal Statutes

1. Wire Fraud — 18 U.S.C. § 1343 The federal wire fraud statute prohibits the use of interstate wire communications — including electronic mail, electronic fund transfers, facsimile transmissions, and telephone calls — to execute or further a scheme to defraud or to obtain money or property by means of false or fraudulent pretenses, representations, or promises. If the subject individuals used interstate wire communi

2. Mail Fraud — 18 U.S.C. § 1341 The federal mail fraud statute prohibits the use of the United States Postal Service or private interstate carriers to execute or further a scheme to defraud. If physical mailings — such as printed binder confirmations, policy documents, commission checks, or other correspondence — were used in furtherance of the alleged scheme, each such mailing could constitute a separate count of m

3. Securities Fraud — 18 U.S.C. § 1348 The Sarbanes-Oxley Act created a standalone securities fraud statute at 18 U.S.C. § 1348, which criminalizes any scheme to defraud in connection with the securities of a publicly traded company or to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any security of a publicly traded c

4. Conspiracy — 18 U.S.C. § 371 If two or more persons agreed to commit any of the foregoing offenses, the agreement itself may constitute a conspiracy in violation of 18 U.S.C. § 371, even if the underlying substantive offense was not ultimately completed. The Complaint's identification of three named subject individuals who are alleged to have coordinated their actions strongly suggests the existence of a conspirat

5. False Statements in SEC Filings — 15 U.S.C. § 78ff (Exchange Act § 32(a))

Section 32(a) of the Exchange Act criminalizes the willful and knowing making of false or misleading statements of material fact in any application, report, or document required to be filed with the SEC under the Exchange Act or any rule or regulation thereunder. If QIH's periodic reports (Forms 10-K and 10-Q) for the affected periods contained material misstatements attributable to the alleged scheme, the individual

6. SOX Section 906 Criminal Certification Violations — 18 U.S.C. § 1350 As discussed in Section III.C above, Section 906 of SOX requires the CEO and CFO to certify the accuracy of periodic reports filed with the SEC. A knowing violation — i.e., certifying a report that the officer knows does not comply with the Exchange Act or does not fairly present the company's financial condition — carries a maximum penalty of te

7. Obstruction of Justice — 18 U.S.C. § 1519 (SOX § 802)

Section 802 of SOX, codified at 18 U.S.C. § 1519, criminalizes the knowing destruction, alteration, concealment, or falsification of records, documents, or tangible objects with the intent to impede, obstruct, or influence any federal investigation or the administration of any matter within the jurisdiction of any department or agency of the United States. The maximum penalty is twenty years of imprisonment. This pro

1. DOJ Corporate Enforcement Policies Under current DOJ policies — including the Deputy Attorney General's memoranda on individual accountability and corporate enforcement — cooperation credit is available to companies that (a) voluntarily self-disclose misconduct to the DOJ before the DOJ independently discovers it, (b) cooperate fully with the DOJ's investigation by providing all relevant, non-privileged facts, inc

2. Individual Liability Emphasis DOJ policy prioritizes the prosecution of individuals who are responsible for corporate misconduct. The three subject individuals identified in the Complaint — Lomax, Stadler, and Kessler — would be the primary targets of any criminal investigation. If QIH cooperates with the DOJ and provides information regarding individual wrongdoing, the DOJ may seek to enter into plea agreements w

3. Timing. We strongly recommend that no criminal referral analysis or voluntary self-disclosure decision be finalized until the scoping phase of the investigation — and, if warranted, a substantial portion of the full investigation — has been completed. Premature self-disclosure to the DOJ, before the Audit Committee has a clear understanding of the facts, could result in inaccurate or incomplete disclosures that un

1. Garrett T. Lomax Position: President, BSU FY 2025 Compensation: Approximately $1,095,000 ($685,000 base salary; $410,000 performance bonus) As president of BSU, Lomax is alleged to have directed the overall scheme, including the fabrication of binder confirmations, the creation of fictitious broker counterparties, and the authorization of premature reserve releases. If these allegations are substantiated, Lomax wo

2. Neil W. Stadler Position: Senior Vice President, Commercial Property Division, BSU FY 2025 Compensation: Approximately $615,000 ($385,000 base salary; $230,000 performance bonus) Stadler is alleged to have been directly involved in the fabrication of binder confirmations within the commercial property division. His role is described as operational in nature — creating the false documentation that supported the pha

3. Rhonda M. Kessler Position: Vice President, Finance & Operations, BSU FY 2025 Compensation: Approximately $435,000 ($290,000 base salary; $145,000 performance bonus) Kessler is alleged to have participated in recognizing phantom commission income on BSU's books and records and to have directed or facilitated the premature release of IBNR reserves. If substantiated, Kessler would face exposure under the wire fraud,

4. Retention of Personal Counsel Each of the subject individuals may choose to retain personal criminal defense counsel. Indeed, if the investigation progresses to a point where the subjects are interviewed or confronted with evidence, the retention of personal counsel should be anticipated. QIH should consider at the appropriate time whether it is obligated — under its charter, bylaws, or individual indemnification

VII. D&O Insurance Implications A. Policy Overview Based on information provided during our initial discussions, QIH maintains directors' and officers' liability insurance through Sentinel Mutual Assurance Group ("Sentinel"), structured as a two-tower program: • Primary (Tower A): Policy No. SMA-EL-2025-07741, with a per-occurrence and aggregate limit of $15,000,000 and a self-insured retention of $1,000,000. • Exces