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Executives

Peter Prygelski - Chief Financial Officer

Michael Barun - COO

Analysts

Richard West - J.M. Dutton and Associates

Charles Burger

Al Humphrey - Shimano Group

21st Century Holding Company (TCHC) Q4 2007 Earnings Call February 19, 2008 4:30 PM ET

Operator

Good afternoon. My name is Heather and I will be your conference operator today. At this time, I would like to welcome everyone to 21st Century Holding Company's year-end financial results conference call. (Operator Instructions).

Statements in this conference call or in documents incorporated by reference that are not historical facts are forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as may, will, expect, believe, anticipate, intend, could, would, estimate or continue or the negative other variations thereof or comparable terminology are intended to identify forward-looking statements. The risks and uncertainties include, but are not limited to, the risks and uncertainties described in this conference call or from time to time in our filings with the SEC.

Thank you. I will now like to turn the call over to Mr. Prygelski, Chief Financial Officer. Please go ahead, sir.

Peter Prygelski

Thank you, Operator. Thanks for joining the call today. Before we open up to questions, I want to read through some of the information that was in the press release that was sent out earlier this morning. For the three-months ended December 31, 2007, the company reported net income of $8,089,751 or a $1.02 per share on an average of 7,913,249 shares, as compared to a net loss of $4,050,889, or $0.52 per share on 7,846,037 shares outstanding for the same three-month period last year.

For the 12-months ended December 31, 2007, the company reported net income of approximately $21.3 million or $2.69 per share on 7,922,542 average undiluted shares outstanding, as compared to net income of $13,896,267, or $1.84 per share on 7,537,550 average undiluted shares outstanding in the same 12-month period last year.

On a diluted basis, the company reported earnings of $2.65 per share on an average diluted shares outstanding of 8,030,205 as compared to $1.72 per share, based on 8,085,722 average diluted shares outstanding for the 12-months ended December 31, 2006.

Also net premiums earned increased $7.8 million or 45.4% to $24.9 million for the three-months ended December 31, 2007 as compared to $17.1 million for the same three-month period last year. Net premiums earned increased $9.9 million or 11.1% to $99.2 million for the 12-months ended December 31, 2007 as compared to $89.3 million for the same 12-month period last year.

Total revenues increased $7.8 million or 35.9% to $29.5 million for the three months ended December 31, 2007, as compared to $21.7 million for the same three-month period last year. Total revenues increased $15.2 million or 14.6% to $119.1 million for the 12-months ended December 31, 2007, as compared to $103.9 million for the same 12-month period last year.

One thing I want to follow your attention to was that in the press release that went out this morning, we mentioned that our record results in 2007 included a 35% increase in net income, that was actually a 53% increase in net income and a 46% increase in earnings per share. I would also want to make a point to say that for the first time in company history, we are entering 2008, debt free.

Those are our prepared remarks and we could open up to question now, operator.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Richard West with J.M. Dutton and Associates.

Richard West - J.M. Dutton and Associates

Good afternoon and great quarter.

Peter Prygelski

Thanks Richard.

Richard West - J.M. Dutton and Associates

My question, the first one, has to do with the assessments from (inaudible) and FICA, the $5 million and you indicated that in the beginning of March of 2007, you would be recouping them.

Peter Prygelski

Right.

Richard West - J.M. Dutton and Associates

And the other income doesn't show a lot of recoupment.

Peter Prygelski

Actually, we have recouped this, including the assessments we got in the third quarter, which brought our total assessments of [$2.9] million, we have recouped. And out of that $9 million, the $2 million that we have just got in the third quarter is not in our rate set. It will be in our rates in April. So, based on the $7 million that we recessed in our rates, we have collected about 50% of that at roughly $3 million or little over $3 million.

Richard West - J.M. Dutton and Associates

Okay. Thank you.

Peter Prygelski

Yeah.

Richard West - J.M. Dutton and Associates

And then the second question on the gross premium exceeded. I wonder if you could discuss that. It looks like you have got a return from reinsurance rather than giving premiums.

Peter Prygelski

Yeah. What that is, there has been an adjustment on our reinsurance as we go through the '07 year. There were some adjustments really on what the premium was for 2007.

Richard West - J.M. Dutton and Associates

Too good. Okay, well, thank you.

Peter Prygelski

Yeah.

Operator

Your next question comes from the line of Charles [Burger], Private Investor.

Charles Burger

Great quarter. My question is regarding the homeowner's property and casualty. I was wondering if you could give us some color regarding how it performed according the expectations beginning July 1st and what do you anticipate beginning this coming July 1.

Peter Prygelski

Well, the homeowner's book is -- there is, we had an ample quarter while and there has been some competition there from citizens which we have explained in the past. That was significant with the passage of the new legislation. We have also had some more competition from other carriers instead as well. So, its definitely a more competitive environment in Florida.

Charles Burger

And has it decreased appreciably the number of amount of coverage?

Peter Prygelski

Yeah. Premiums have decreased. We had a rate decrease that was approved and that was effective we filed the pact effective June 1 of '07 and we had another pending rate decrease pending as well. And those two rate decreases are primarily because of decreased cost of reinsurance. Two reasons, that the state has offered reinsurance but also that the Florida market, the pricing has become more affordable.

Charles Burger

Were you impacted there by the recent tornadoes, which just hit Florida?

Peter Prygelski

No. We have had no impact.

Charles Burger

Okay. Thank you.

Operator

(Operator Instructions). Your next question comes from the line of [Al Humphrey with the Shimano Group].

Al Humphrey - Shimano Group

Congratulations you guys for the terrific quarter. I was wondering if you had a cash position at the end of the year and possibly a book value.

Peter Prygelski

Yeah. We do have a book value, 12/31/2007, $10.45. Our cash in the bank, shareholder equity is about $88 million and our cash in the bank, approximately $22 million.

Al Humphrey - Shimano Group

Is there any further talk about spending some of that money to buy back more shares, increase the dividend?

Peter Prygelski

Well, as far as the stock buyback goes, as we have discussed on previous calls; through ’07, we bought back approximately 320,000 share for about $3.8 million at an average price of $11.89. We are also about to buy the $5 million right now, that is where we stand on that. As far as dividend, that will be discussed in the next Board meeting, which is in the beginning of March.

Al Humphrey - Shimano Group

Okay. And can we expect any guidance going forward?

Peter Prygelski

I am glad you brought that up; I think in light of the changing events and the emerging corporate disclosure trends that we see in the financial markets today, and the companies focus on delivering improved results over the long term, we have examined our practice providing forward looking financial guidance and have made a decision to steer the company on a long term path and not give our annual guidance going forward.

Al Humphrey - Shimano Group

Okay. Again, congratulations.

Peter Prygelski

Thank you.

Al Humphrey - Shimano Group

Thank you.

Operator

Your next question comes from the line of Richard West with J.M. Dutton and Associates.

Richard West - J.M. Dutton and Associates

Yeah, one last question. A year from now, are you going to have any auto insurance outstanding? You are down pretty low and on a loss ratio, it is an anomaly, it shows but, just a question, is this completely out of it?

Peter Prygelski

Well, I will let Mike answer that question, I will say that reduction in auto is not by chance, it is kind of strategy.

Michael Barun

We have been on that path for about three to four years and we just didn’t see the opportunities in the market and I don’t think it will disappear entirely, that is a license that we are interested in keeping. So, the book will continue to get smaller, but we will ramp up to new ones, perhaps in the future. We always look at opportunities and if there is an opportunity we are going to cease on it. But right now we don’t see that.

Richard West - J.M. Dutton and Associates

Okay, well thank you.

Operator

(Operator Instructions) there are no further questions at this time. Are there any closing remarks?

Peter Prygelski

I just wanted to make one closing remark; I just wanted to highlight the fact that over the pat three years, our income become taxes has steadily climbed. In ’05, we were at 15.7 million, in ’06 we were at 21.3 million, and this year, we finished the year at 32.5 million and we are looking eventually debt free and we are certainly excited about our future. Thanks everybody for calling in.

Operator

Thank you for your participation in 21st Century Holding Company’s year end financial results conference call. You may now disconnect.

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