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Quorum Receivables Funding 2022-1 LLC — Insurance Premium Finance ABS — Rating Agency Presentation
Quorum Receivables Funding 2022-1 LLC
$500,000,000 Insurance Premium Finance Asset-Backed Notes
Presentation to Pinnacle Rating Services LLC
Attention: Monica Sung, Lead Analyst
August 8, 2022
Prepared by Calderwood & Harkness LLP and Ridgeline Capital Markets LLC
CONFIDENTIAL — For Rating Agency Use Only
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Agenda
I. Sponsor Overview — Quorum Insurance Holdings Corp.
II. Originator / Servicer — Quorum Premium Finance LLC
III. Transaction Structure & SPV Framework
IV. Capital Structure & Credit Enhancement
V. Collateral Overview — Receivables Pool Characteristics
VI. Concentration Analysis
VII. Historical Performance & Loss Analysis
VIII. Structural Protections & Early Amortization Triggers
IX. Liquidity Facility & Back-Up Servicing
X. Legal Framework — True Sale, Bankruptcy Remoteness, Perfection
XI. Tax Structuring Summary
XII. Regulatory Compliance Overview
XIII. Third-Party Participants
XIV. Requested Ratings & Preliminary Timeline
XV. Key Transaction Metrics Summary
Appendix: Servicing Fees, Transaction Costs & Contact Information
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I. Sponsor Overview — Quorum Insurance Holdings Corp.
Full Legal Name: Quorum Insurance Holdings Corp. (NYSE: QIHC)
Delaware corporation; headquartered at 400 Atlantic Street, Suite 2200, Stamford, CT 06901
Diversified platform: P&C insurance distribution, premium finance lending, and insurtech SaaS
FY2021 consolidated revenue: $3.8 billion
Total premium finance receivables portfolio: ~$2.1 billion
Unsecured credit ratings: Brindoval Ratings — BBB; Pinnacle Rating Services — Baa2
Leadership: CEO Marcus Devereaux; CFO Priya Raghavan; GC Nolan Whitford; Treasurer Sandra Ling-Hwang
EIN: 82-4391067
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II. Originator / Servicer — Quorum Premium Finance LLC
Full Legal Name: Quorum Premium Finance LLC — Delaware LLC, wholly owned subsidiary of QIH
Principal Office: 400 Atlantic Street, Suite 2200, Stamford, CT 06901 (EIN: 84-2653198)
Originates and services insurance premium finance loans to commercial policyholders across all 50 states
Licensed premium finance company in all 50 states
Total serviced portfolio: ~$2.1 billion in receivables
Average loan term: 9 months; short-duration, self-liquidating assets
Portfolio weighted-average APR: 7.85%
Historical net loss rate (2019–2021, 3-year average): 0.42%
Managed by Sandra Ling-Hwang (QIH Treasurer)
Robust origination platform, collection infrastructure, and delinquency management systems
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III. Transaction Structure & SPV Framework
Sponsor/Parent: Quorum Insurance Holdings Corp. (QIH)
Originator/Seller: Quorum Premium Finance LLC (QPF) — sells receivables to QRH
Depositor/Intermediate SPV: Quorum Receivables Holding LLC (QRH) — transfers receivables to QRF 2022-1
Issuer: Quorum Receivables Funding 2022-1 LLC (QRF 2022-1) — issues notes backed by receivables
QRF 2022-1: Delaware LLC (DE SOS File No. 7894231); sole member: QRH; independent manager: Timothy R. Callan (Fortbridge Corporate Services LLC)
QRH: Delaware LLC (DE SOS File No. 7894228); sole member: QPF; independent manager: Eleanor M. Vasquez (Fortbridge Corporate Services LLC)
Both SPVs formed August 3, 2022 with full bankruptcy-remote protections
Registered Agent for both SPVs: Ashgrove Services Inc., 28 Liberty Street, New York, NY 10005
Two-step true sale transfer: QPF → QRH → QRF 2022-1
Indenture Trustee: Calvoneth Trust Company, N.A. — holds security interest for benefit of noteholders
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IV. Capital Structure & Credit Enhancement
Total Issuance: $500,000,000
Class A Notes: $375,000,000 (75.0%) — Requested Rating: Aaa(p) — Credit Enhancement: 25.0% — Coupon Guidance: SOFR + 125 bps
Class B Notes: $75,000,000 (15.0%) — Requested Rating: A1(p) — Credit Enhancement: 10.0% — Coupon Guidance: SOFR + 210 bps
Class C Notes: $35,000,000 (7.0%) — Requested Rating: Baa2(p) — Credit Enhancement: 3.0% — Coupon Guidance: SOFR + 375 bps
Overcollateralization / Retained Interest: $15,000,000 (3.0%) — Unrated
Credit Enhancement Sources: subordination (sequential), overcollateralization, excess spread, and $25M liquidity facility
Risk Retention: QIH retains 5% horizontal interest via OC/retained interest (Dodd-Frank Section 941 compliance)
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V. Collateral Overview — Receivables Pool Characteristics
Cut-Off Date: June 30, 2022
Initial Pool Balance: $612,000,000
Number of Loans: ~82,400
Average Loan Balance: ~$7,427
Weighted Average APR: 7.85%
Weighted Average Original Term: 9.2 months
Weighted Average Remaining Term: 5.7 months
60+ Day Delinquency Rate (at cut-off): 0.87%
All loans are USD-denominated, secured by unearned premium refund rights
Obligors: U.S. commercial policyholders; original term ≤ 12 months; no loans in default (>60 days past due) included
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VI. Concentration Analysis
Largest Single Obligor: 0.38% of pool ($2,325,600) — well below 0.75% limit
Top 10 Obligors: 2.14% of pool ($13,096,800)
Geographic Concentration (Top 3 States): Texas 14.2%, California 11.8%, Florida 9.6% (aggregate 35.6%)
All states below 20% single-state concentration limit
Concentration Limits in Indenture:
— Single obligor ≤ 0.75% of pool
— Single state ≤ 20% of pool
— Single carrier ≤ 15% of pool
Pool sourced from commercial policyholders across all 50 states
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VII. Historical Performance & Loss Analysis
Historical Net Loss Rate (3-Year Average, 2019–2021): 0.42%
Loss performance is driven by the secured nature of the collateral — unearned premium refund rights
When a borrower defaults, the lender cancels the policy and recovers the unearned premium from the carrier
Recovery mechanism significantly limits net losses
60+ Day Delinquency Rate at Cut-Off: 0.87%
Premium finance loans are self-liquidating — premium is financed over the policy period
Short duration (avg. 9.2 months original term) limits loss accumulation
Stress scenarios: even at 5x historical loss rate (2.10%), structure provides robust protection to Aaa-rated tranche
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VIII. Structural Protections & Early Amortization Triggers
Sequential Payment Waterfall: (1) Trustee fees/expenses → (2) Servicing fee → (3) Class A interest → (4) Class B interest → (5) Class C interest → (6) Class A principal → (7) Class B principal → (8) Class C principal → (9) Replenish OC to target → (10) Residual to Issuer
Revolving Period: 24 months from closing — new eligible receivables added to pool
Amortization Period: 12 months following revolving period — controlled amortization
Legal Final Maturity: 42 months from closing
Early Amortization Triggers:
— 3-month average net loss rate > 2.00%
— 60+ day delinquency rate > 3.50%
— Available funds cap deficit for 2 consecutive periods
— Servicer default or servicer rating downgrade below Ba2(p)
— Pool balance < $450,000,000 during revolving period
Minimum pool balance requirement ensures adequate collateral coverage throughout revolving period
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IX. Liquidity Facility & Back-Up Servicing
Liquidity Facility: $25,000,000 committed facility from Northvane Bank, N.A.
— Commitment fee: 0.25% per annum on undrawn amount ($62,500/year)
— Drawn rate: SOFR + 150 bps
— Available to cover timing mismatches in collections and short-term liquidity needs
Back-Up Servicer: Northvane Bank, N.A. (Diane Coletti, Managing Director, Structured Products)
— Fee: $50,000 per annum ($12,500/quarter)
— Warm standby: maintains data mapping and system readiness for servicer transition
— Transition procedures upon servicer default — ensures continuity of collections
Indenture Trustee: Calvoneth Trust Company, N.A. (Gerald K. Fontaine, Senior Trust Officer)
— Trustee fee: $35,000/year + $5,000 per payment date
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X. Legal Framework — True Sale, Bankruptcy Remoteness & Perfection
True Sale Opinions: Calderwood & Harkness to deliver opinions that both transfers (QPF → QRH and QRH → QRF 2022-1) constitute true sales under New York law
Non-Consolidation Opinions: Calderwood & Harkness to deliver opinions that QRF 2022-1 and QRH would not be substantively consolidated with QIH or QPF in bankruptcy
UCC Perfection: Three layers of UCC-1 financing statements to be filed with Delaware Secretary of State — perfecting security interests at each transfer level
Independent Managers: Fortbridge Corporate Services LLC provides independent managers (Timothy R. Callan for QRF 2022-1; Eleanor M. Vasquez for QRH) — prevents involuntary bankruptcy filings
Separateness Covenants: Both SPVs maintain separate books, records, bank accounts; no commingling of assets
Enforceability Opinion: Calderwood & Harkness to opine on enforceability of Indenture and Notes under New York law
Security Interest: First-priority grant from QRF 2022-1 to Calvoneth Trust in all receivables, collections, and accounts
Governing Law: New York
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XI. Tax Structuring Summary
Notes treated as debt for U.S. federal income tax purposes
QRF 2022-1 treated as a disregarded entity (not a separate taxable entity)
True sale characterization for federal income tax purposes — transfers constitute sales, not secured financings
FATCA Compliance: Notes structured to comply with FATCA withholding requirements; non-U.S. holders subject to W-8 documentation
State Tax Nexus: QRF 2022-1 and QRH organized to avoid state-level franchise or income tax in states other than Delaware
QPF licensed in all 50 states — receivables originated in compliance with state usury and licensing laws
Tax opinions to be delivered by Sylvia Hartwell (Calderwood & Harkness, Tax Partner)
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XII. Regulatory Compliance Overview
Offering: Rule 144A / Regulation S private placement — exempt from SEC registration under the Securities Act of 1933
Reg AB II: Transaction exempt from registration-based requirements; best-practice disclosure standards followed
Dodd-Frank Risk Retention (Section 941): QIH retains 5% horizontal interest via $15M OC/retained interest
Volcker Rule: 'Loan securitization' exclusion applicable; QRF 2022-1 structured to fall outside 'covered fund' definition
State Premium Finance Licensing: QPF licensed in all 50 states; receivables originated in compliance with applicable laws
Usury Compliance: All receivables comply with applicable state usury limitations
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XIII. Third-Party Participants
Structuring Agent / Lead Bookrunner: Ridgeline Capital Markets LLC (Julian Weatherstone; Rebecca Tran)
Issuer's Counsel: Calderwood & Harkness LLP (Douglas Carmichael, Responsible Partner; Yuki Nakamura, Lead Associate)
Underwriter's Counsel: Calloway & Brandt LLP (Harrison Collier, Lead Partner; Megan O'Shaughnessy, Senior Associate)
Indenture Trustee / Paying Agent / Custodian: Calvoneth Trust Company, N.A. (Gerald K. Fontaine)
Trustee's Counsel: Ashfield & Greer LLP (Vivian Sato)
Back-Up Servicer / Liquidity Provider: Northvane Bank, N.A. (Diane Coletti)
Independent Manager Provider: Fortbridge Corporate Services LLC (Timothy R. Callan; Eleanor M. Vasquez)
Auditor: Meridian Ledger LLP (Robert Falcone, Engagement Partner) — PCAOB-registered
Verification Agent: Veristead Analytics LLC (Katharine Drummond, Managing Director)
Rating Agency: Pinnacle Rating Services LLC (Monica Sung, Lead Analyst)
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XIV. Requested Ratings & Preliminary Timeline
Requested Preliminary Ratings from Pinnacle Rating Services:
— Class A Notes ($375M): Aaa(p)
— Class B Notes ($75M): A1(p)
— Class C Notes ($35M): Baa2(p)
Key Upcoming Milestones:
— Pinnacle preliminary ratings expected: Late August 2022
— First draft of core transaction documents: September 6, 2022
— First draft Offering Memorandum: September 14, 2022
— Near-final documentation package: October 12, 2022
— Investor roadshow: Late October 2022
— Targeted pricing and closing: November 2022
Pinnacle Engagement No.: PRS-2022-ABS-3347
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XV. Key Transaction Metrics Summary
| Total Issuance: $500,000,000 | Initial Pool Balance: $612,000,000 | |
| Number of Loans: ~82,400 | Average Balance: ~$7,427 | |
| WA APR: 7.85% | WA Original Term: 9.2 months | WA Remaining Term: 5.7 months |
| Historical Net Loss Rate (3-yr avg.): 0.42% | 60+ Day Delinquency: 0.87% | |
| Class A CE: 25.0% | Class B CE: 10.0% | Class C CE: 3.0% |
| Revolving Period: 24 months | Amortization Period: 12 months | Legal Final Maturity: 42 months |
| Early Amort Trigger — Loss: 2.00% (3-mo avg.) | Delinquency: 3.50% (60+ day) |
Minimum Pool Balance (Revolving): $450,000,000
| Largest Obligor: 0.38% | Top 10: 2.14% | Top 3 States: TX 14.2%, CA 11.8%, FL 9.6% |
| Liquidity Facility: $25M (Northvane Bank) | Servicing Fee: 1.00% p.a. |
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Appendix A: Servicing Fee & Transaction Cost Summary
Servicing Fee: 1.00% per annum on outstanding pool balance (payable monthly) — $510,000/month at initial pool balance
Trustee Fee: $35,000 per annum + $5,000 per payment date (distribution calculations)
Back-Up Servicer Fee: $50,000 per annum ($12,500 per quarter)
Liquidity Facility Commitment Fee: 0.25% per annum on undrawn ($62,500/year on $25M)
Liquidity Facility Drawn Rate: SOFR + 150 bps
Placement Fees (one-time): Class A — 0.30% ($1,125,000); Class B — 0.45% ($337,500); Class C — 0.60% ($210,000); Total — $1,672,500
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Appendix B: Contact Information
Issuer's Counsel — Calderwood & Harkness LLP: Douglas Carmichael (Responsible Partner); Yuki Nakamura (Lead Associate) — 601 Lexington Avenue, New York, NY 10022
Structuring Agent — Ridgeline Capital Markets LLC: Julian Weatherstone (Head of ABS Origination); Rebecca Tran (MD, Insurance Finance ABS) — 383 Madison Avenue, 14th Floor, New York, NY 10179
Sponsor — Quorum Insurance Holdings Corp.: Sandra Ling-Hwang (Treasurer); Nolan Whitford (General Counsel) — 400 Atlantic Street, Suite 2200, Stamford, CT 06901
Pinnacle Rating Services LLC Lead Analyst: Monica Sung