Positive Physicians : PPHI Q2 2022

POSITIVE PHYSICIANS HOLDINGS, INC.

A Pennsylvania Company

100 Berwyn Park, Suite 220

850 Cassatt Road, Berwyn, PA 19312

Telephone: [phone]

www.positivephysicians.com

Federal EIN: 83-0824448

SIC Code: 6331

QUARTERLY REPORT

For the Period Ending June 30, 2022 (the "Reporting Period")

The number of shares outstanding of our common stock is 3,615,500 as of June 30, 2022 (the end of reporting period).

The number of shares outstanding of our common stock is 3,615,500 as of March 31, 2022 (the end of previous reporting period).

Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933 and Rule 12b-2 of the Exchange Act of 1934):

Yes: ☐ No: ☒

Indicate by check mark whether the company's shell status has changed since the previous reporting period:

Yes: ☐ No: ☒

Indicate by check mark Indicate by check mark whether a change in control of the company has occurred over this reporting period:

Yes: ☐ No: ☒

POSITIVE PHYSICIANS HOLDINGS, INC.

TABLE OF CONTENTS

Statement on Forward-Looking Information	1
Item 1.	The Exact Name of the Issuer and Address and Telephone Number of Issuer's Principal Office	3
Item 2.	Shares Outstanding	4
Item 3.	Interim Consolidated Financial Statements	4
Item 4.	Management's Discussion and Analysis of Financial Condition and Results of Operations	5
Item 5.	Legal Proceedings	12
Item 6.	Defaults Upon Senior Securities	12
Item 7.	Other Information	12
Item 8.	Exhibits	12
Item 9.	Issuer's Certification	13
Exhibit 1.1 Interim Consolidated Financial Statements	14
Consolidated Balance Sheets	14
Consolidated Statements of Operations	15
Consolidated Statements of Comprehensive Income (Loss)	16
Consolidated Statements of Stockholders' Equity	17
Consolidated Statements of Cash Flows	18
Notes to Consolidated Financial Statements	19

Statement on Forward-Looking Information

This report may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 with respect to the Company's business, financial condition and results of operations and the plans and objectives of its management. Forward-looking statements can generally be identified by use of forward-looking terminology such as "may," "will," "plan," "expect," "intend," "anticipate," and "believe." These forward-looking statements may include estimates, assumptions or projections and are based on currently available financial, industry, competitive and economic data, and our current operating plans. All forward- looking statements are subject to risks and uncertainties, including risks regarding the effects and duration of the COVID-19 pandemic, that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.

The effect of the COVID-19 pandemic on our operations could have a material adverse effect on our business, financial condition, results of operations, or cash flows. The World Health Organization declared the outbreak of COVID-19, which began in December 2019, a pandemic and the U.S. federal government declared it a national emergency. Our business and operations could be materially and adversely affected by the effects of COVID-19. The global spread of COVID-19 created significant volatility, uncertainty, and economic disruption in the markets in which we operate. Governments, public institutions, and other organizations in countries and localities where cases of COVID-19 were detected have taken certain emergency measures to mitigate its spread, including implementing travel restrictions and closing factories, schools, public buildings, and businesses. While the full impact of this outbreak is not yet known, we have closely monitored the spread of COVID-19 and continue to assess its potential effects on our business.

As a result of restrictions put in place to address COVID-19 and the related economic downturn, the Company experienced business disruptions including, but not limited to, office closures and difficulties in maintaining operational continuance during remote operations required by illness, social quarantining, and work from home orders that were in force. The extent to which our results continue to be affected by COVID-19 will largely depend on future developments which cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global

economy. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects could continue to have a material adverse effect on our business, financial condition, results of operations, or cash flows

Other factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to:

• the potential impact of fraud, operational errors, system malfunctions, or cybersecurity incidents;
• financial market conditions, including, but not limited to, changes in interest rates and the stock markets causing a reduction of investment income or investment gains and reduction in the value of our investment portfolio;
• future economic conditions in the market in which we compete that are less favorable than expected;
• the effect of legislative, judicial, economic, demographic, and regulatory events in the jurisdictions where we do business;
• our ability to successfully implement steps to optimize the business portfolio, ensure capital efficiency, and enhance investment returns;
• the risks associated with the management of capital on behalf of investors;
• our ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our producer network;
• the success with which our brokers sell our products and our ability to collect payments from our insureds;
• heightened competition, including specifically the intensification of price competition, the entry of new competitors and the development of new products by new or existing competitors, resulting in a reduction in the demand for our products;
• our concentration in medical professional liability insurance, which makes us particularly susceptible to adverse changes in that industry segment;
• changes in general economic conditions, including inflation, unemployment, interest rates and other factors;
• estimates and adequacy of loss reserves and trends in loss and loss adjustment expenses;
• changes in the coverage terms required by state laws, including higher limits;
• our inability to obtain regulatory approval of, or to implement, premium rate increases;
• inadequacy of premiums we charge to compensate us for our losses incurred;
• the effectiveness of our risk management loss limitation methods;

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• our ability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us and to collect amounts that we believe we are entitled to under such reinsurance;
• our ability to attract and retain qualified management personnel;
• the potential impact on our reported net income (loss) that could result from the adoption of future accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies;
• unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;
• statutory requirements that limit our ability to receive dividends from our insurance subsidiary;
• the impact of future results on the recoverability of our deferred tax asset;
• adverse litigation or arbitration results; and
• adverse changes in applicable laws, regulations or rules governing insurance holding companies and insurance companies, including tax or accounting matters, limitations on premium levels, increases in minimum capital and reserves, other financial viability requirements, and changes that affect the cost of, or demand for, our products.

Because forward-looking information is subject to various risks and uncertainties, actual results may differ materially from that expressed or implied by the forward-looking information. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. These forward-looking statements speak only as of the date of the report. The Company expressly disclaims any obligation to publicly release any updates or revisions to reflect any change in the Company's expectations with regard to any change in events, conditions or circumstances on which any such statement is based.

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Item 1. The Exact Name of The Issuer and Address and Telephone Number of Issuer's Principal Office

Company Description

Positive Physicians Holdings, Inc. (OTCQX: PPHI) is a Pennsylvania domiciled holding company, which was incorporated on May 1, 2018 for the purpose of acquiring three Pennsylvania based reciprocal insurance exchanges: Positive Physicians Insurance Exchange ("PPIX"), Professional Casualty Association ("PCA"), and Physicians' Insurance Program Exchange ("PIPE"). In connection with the completion of PPHI's initial public offering, PPIX, PCA, and PIPE converted from reciprocal insurance exchanges into stock insurance companies and were merged together to form Positive Physicians Insurance Company ("Positive Insurance Company"), a wholly owned subsidiary of the Company. PPHI's initial public offering and its acquisition of Positive Insurance Company were completed on March 27, 2019. Prior to that time, PPHI had minimal assets and liabilities and had not engaged in any operations. The Company's standing in Pennsylvania is currently active.

On September 7, 2021, through a newly formed wholly owned subsidiary of PPHI, Positive Professionals Management LLC ("PPM"), the Company entered into an asset purchase agreement with Diversus, Inc. and its wholly owned subsidiary, Diversus Management, LLC ("Diversus Management") (collectively, "Diversus"). Prior to the acquisition, Diversus had managed and administered essentially all of the operations of Positive Insurance Company under the terms of a management agreement. The acquisition includes the working capital of Diversus at closing, the transfer and/or assignment of employment agreements and contracts with key third party vendors, including the lease of our home office, and full membership assignments of Gateway Risk Services, LLC ("Gateway") and Specialty Insurance Agency LLC ("SIA"). Prior to the acquisition, Gateway and SIA provided claims processing and risk management services and insurance policy brokerage services, respectively, to Positive Insurance Company and third-party customers.

Positive Insurance Company underwrites medical professional liability coverage for physicians, their corporations, medical groups, clinics and allied healthcare providers. Medical professional liability insurance protects physicians and other health care providers against liabilities arising from the rendering of, or failure to render, professional medical services. We offer claims-made coverage, claims-made plus, and occurrence-based policies as well as tail coverage in Pennsylvania, New Jersey, Ohio, Delaware, Maryland, South Carolina, Michigan, Florida, Texas, and Georgia. Our policies include coverage for the cost of defending claims. Claims-made policies provide coverage to the policyholder for claims reported during the period of coverage. We offer extended reporting endorsements, or tails, to cover claims reported after the policy expires. Occurrence-based policies provide coverage to the policyholders for all losses incurred during the policy coverage year regardless of when the claims are reported.

Issuer's Exact Name:	Positive Physicians Holdings, Inc.
Issuer's Address:	100	Berwyn Park, Suite 220
	850	Cassatt Road, Berwyn, PA 19312
Issuer's Telephone:	Telephone: [phone]
	Fax: [phone]
Issuer's Website:	www.positivephysicians.com
Investor Relations:	Mark J. Keyser
	Interim Chief Financial Officer
	Positive Physicians Holdings, Inc.
	100	Berwyn Park, Suite 220
	850	Cassatt Road, Berwyn, PA 19312
	Telephone: [phone]
	Email:[e-mail]

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