SNC State National Companies, Inc.

YOU SHOULD READ THE SECTION OF THIS PROXY STATEMENT TITLED “ THE MERGER—U.S. FEDERAL INCOME TAX CONSIDERATIONS ” FOR A MORE DETAILED DISCUSSION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. TAX MATTERS ARE COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, STATE NATIONAL STRONGLY URGES YOU TO CONSULT WITH YOUR TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.

Q: Do any of the Company’s directors or officers have interests in the merger that may differ from or be in addition to the interests of the Company stockholders?

A: The Company’s executive officers and directors may have interests in the merger that may be different from or in addition to those of the Company stockholders generally. The Company board of directors was aware of and considered these interests, among other matters, to the extent such interests existed at the time, in evaluating and negotiating the merger agreement, in approving the merger agreement and the merger and in recommending that the merger agreement be approved by the stockholders of the Company. As described in more detail below, these interests potentially include:

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See the section of this proxy statement titled “ The Merger— Interests of Certain Persons in the Merger ” beginning on page [●] for a more detailed discussion on the interests of the Company’s directors and executive officers in the merger.

Q: What is the required quorum for the special meeting?

A: The holders of a majority of the voting power of the stock issued and outstanding and entitled to vote, present in person or represented by proxy will constitute a quorum for the transaction of business at the special meeting.

Q: What stockholder vote is required to approve the items to be voted on at the special meeting, including the merger?

A: The approval of the merger proposal requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of Company common stock and entitled to vote on the merger proposal.

The approval of the merger-related compensation proposal requires the affirmative vote of a majority of the shares of Company common stock present in person or represented by proxy at the special meeting and entitled to vote.

The approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of Company common stock present in person or represented by proxy at the special meeting and entitled to vote.

See the section of this proxy statement titled “Questions and Answers About the Merger and the Special Meeting—Who is entitled to vote at the special meeting?” for a more detailed description.

Q: What effect do abstentions and “broker non-votes” have on the proposals?

A: Abstentions will be counted toward the presence of a quorum at the special meeting, but “broker non-votes” will not be counted toward the presence of a quorum at the special meeting.

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The approval of the merger proposal requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of Company common stock and entitled to vote on the merger proposal. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and abstentions will have the same effect as voting “AGAINST” the merger proposal.

The approval of the merger-related compensation proposal requires the affirmative vote of a majority of the shares of Company common stock present in person or represented by proxy at the special meeting and entitled to vote. Accordingly, abstentions will have the same effect as a vote “AGAINST” the merger-related compensation proposal, but shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee will have no effect on the outcome of the merger-related compensation proposal.

The approval of the adjournment proposal requires the affirmative vote of a majority of the shares of Company common stock present in person or represented by proxy at the special meeting and entitled to vote. Accordingly, abstentions will have the same effect as a vote “AGAINST” the adjournment proposal, but shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee will have no effect on the outcome of the adjournment proposal.

Q: Does Parent have the financial resources to complete the merger?

A: Yes, Parent has informed the Company that it has the financial resources to complete the merger and to cause Merger Sub and the surviving corporation to perform their respective obligations under the merger agreement.

Q: Who is entitled to vote at the special meeting?

A: Only the Company stockholders of record, as shown on the Company’s register of members at the close of business on [●] [●], 2017, the record date for the special meeting, will be entitled to notice of, and to vote at, the special meeting or any adjournment or postponement thereof.

Q: What do I need to do now?

A: We urge you to carefully read this proxy statement, including its annexes and the documents incorporated by reference in this proxy statement. You are also encouraged to review the documents referenced under the section of this proxy statement titled “Where You Can Find More Information” and consult with your accounting, legal and tax advisors. Once you have considered all relevant information, we encourage you to fill in and return the enclosed proxy card (if you are a stockholder of record) or voting instruction form you receive from your bank, broker or other nominee (if you are a stockholder who holds your shares through a bank, broker or other nominee) or to follow the instructions provided to you for voting over the Internet or by telephone.

Q: How do I vote my shares?

A:  Stockholder of Record. If your shares of Company common stock are registered directly in your name, then you are considered a stockholder of record of the Company with respect to those shares and this proxy statement and the enclosed proxy card were sent to you directly by the Company. As a Company stockholder of record, you may vote by completing, dating, signing and mailing the enclosed proxy card in the return envelope provided as soon as possible or by following the instructions on the proxy card to submit your proxy by telephone or over the Internet at the website indicated. Submission of the proxy by telephone or over the Internet is available through 11:59 p.m. Eastern Time on the business day immediately before the special meeting. The Company stockholders

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of record may also vote by attending the special meeting in person by bringing valid picture identification. However, whether or not you plan to attend the special meeting in person, we encourage you to vote your Company shares in advance to ensure that your vote is represented at the special meeting. Abstentions will be counted toward the presence of a quorum, but “broker non-votes” will not be counted toward the presence of a quorum at the special meeting, as described above under the question titled “—What effect do abstentions and ‘broker non-votes’ have on the proposals ?”

Beneficial Owner of Shares Held in Street Name. If your shares of Company common stock are held in the name of a bank, broker or other similar organization or nominee, then you are considered a beneficial owner of such shares held for you in what is known as “street name.” If this is the case, this proxy statement has been forwarded to you by your bank, broker or other organization or nominee together with a voting instruction form. You may vote by completing and returning your voting instruction form to your broker. Please review the voting instruction form to see if you are able to submit your voting instructions by telephone or over the Internet. The organization or nominee holding your account is considered the stockholder of record for purposes of voting at the special meeting. As a beneficial owner, you have the right to instruct the organization that holds your shares of record how to vote the Company shares that you beneficially own.

Q: If my shares of Company common stock are held in “street name,” how do I vote in person at the special meeting?

A: If you are a beneficial owner of shares of Company common stock held in “street name” rather than a stockholder of record, you may only vote your shares of Company common stock in person at the special meeting by bringing valid picture identification and a legal proxy form from your broker, bank or other nominee.

Q: What do I do if I want to change my vote?

A: You may revoke your proxy at any time prior to the vote at the special meeting by: (i) delivering a written notice revoking your proxy to the Company’s Secretary at the address above prior to [●]; (ii) delivering a new proxy bearing a date after the date of the proxy being revoked prior to [●]; or (iii) voting in person at the special meeting.

If your Company common stock is held in “street name” by your bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee as to how to revoke your previously provided voting instructions.

Q: If I hold my shares of Company common stock in book-entry form, how will I receive payment when the merger occurs?

A: Each holder of record of one or more book-entry shares whose shares were converted into the right to receive the merger consideration will automatically upon the effective time (or, at any later time at which such book-entry shares will be converted) be entitled to receive, and Parent will cause the paying agent to pay and deliver as promptly as practicable and in any event within three business days after the effective time, the merger consideration to which such holder is entitled to receive.

Q: Who will solicit and pay the cost of soliciting proxies?

A: The Company has engaged Alliance Advisors LLC (which we refer to as “Alliance”) to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay Alliance a fee of approximately $[●] and reimbursement of certain expenses.

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Q: Who should the Company stockholders contact with any additional questions?

A: If you have any additional questions about the merger or you would like additional copies of this proxy statement or assistance voting your shares, you should contact Alliance at:

ALLIANCE ADVISORS LLC

200 Broadacres Drive, 3 ^rd Floor Bloomfield, New Jersey 07003 Stockholders may call toll free: [●] Banks and Brokers may call collect: [●]

Q: Where can I find more information about the Company?

A: You can find more information about State National in the documents described under the section of this proxy statement titled “Where You Can Find More Information .”

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

Some of the statements in this proxy statement may include forward-looking statements which reflect our current views with respect to future events and financial performance, and State National may make related oral, forward-looking statements on or following the date hereof. Such statements may include forward-looking statements both with respect to us in general and the insurance sector specifically, both as to underwriting and investment matters. These statements may also include assumptions about our proposed acquisition by Markel (including its benefits, results, effects and timing). Statements which include the words “should,” “would,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this material for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.

The proposed transaction is subject to risks and uncertainties, including: (A) that State National and Markel may be unable to complete the proposed transaction because, among other reasons, conditions to the closing of the proposed transaction may not be satisfied or waived; (B) uncertainty as to the timing of completion of the proposed transaction; (C) the inability to complete the proposed transaction due to the failure to obtain State National stockholder approval for the proposed transaction or the failure to satisfy other conditions to completion of the proposed transaction, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; (D) the exercise of appraisal rights by State National stockholders, which could permit Markel to terminate the merger agreement even if State National stockholder approval has been obtained; (E) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (F) risks related to disruption of management’s attention from State National’s ongoing business operations due to the proposed transaction; (G) the effect of the announcement of the proposed transaction on State National’s relationships with its clients, operating results and business generally; (H) the outcome of any legal proceedings to the extent initiated against State National, Markel or others following the announcement of the proposed transaction; (I) risks related to Markel’s post-closing integration of State National’s business and operations; (J) risks related to a downgrading of State National’s or Markel’s A.M. Best ratings or other similar financial strength or debt ratings as a result of the announcement or completion of the proposed transaction; and (K) the loss or impairment of State National’s material client or other relationships as a result of the announcement or completion of the proposed transaction, as well as State National’s and Markel’s management’s response to any of the aforementioned factors.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in State National’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q and other documents of State National on file with the SEC. Any forward-looking statements made in this material are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by State National will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, State National or its business or operations. Except as required by law, the parties undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Additional factors that may affect future results and conditions are described in the Company’s filings with the SEC, which are available at the SEC’s website at www.sec.gov or at the Company’s website at http://www.statenational.com.

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PARTIES TO THE MERGER

State National

State National Companies, Inc.

1900 L. Don Dodson Drive

Bedford, Texas 76021

State National Companies, Inc. (NASDAQ: SNC) is a leading specialty provider of property and casualty insurance services operating in two niche markets across the United States. In its lender services segment, the Company specializes in providing collateral protection insurance, which insures personal automobiles and other vehicles held as collateral for loans made by credit unions, banks and specialty finance companies. In its program services segment, the Company leverages its “A” (Excellent) A.M. Best rating, expansive licenses and reputation to provide access to the U.S. property and casualty insurance market in exchange for ceding fees.

For additional information on State National and its business, including how to obtain the documents that State National has filed with the SEC, see the section of this proxy statement titled “Where You Can Find More Information.”

Markel

Markel Corporation

4521 Highwoods Parkway

Glen Allen, Virginia 23060

Markel Corporation is a diverse financial holding company serving a variety of niche markets. Markel’s principal business markets and underwrites specialty insurance products. In each of Markel’s businesses, it seeks to provide quality products and excellent customer service so that it can be a market leader. Markel’s financial goals are to earn consistent underwriting and operating profits and superior investment returns to build shareholder value.

Merger Sub

Markelverick Corporation

1209 Orange Street

New Castle, Delaware 19801

Markelverick Corporation is a direct, wholly-owned subsidiary of Markel that was formed by Markel solely for purposes of entering into the merger agreement and completing the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will be merged with and into the Company and will cease to exist.

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THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, a copy of which is incorporated by reference in its entirety and included in this proxy statement as Annex A. You should read the merger agreement in its entirety because it, and not this proxy statement, is the legal document that governs the merger.

Effects of the Merger

Pursuant to the merger agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. The Company, as the surviving corporation, will continue in existence as a Delaware corporation and a direct, wholly-owned subsidiary of Parent. As a result of the merger under Delaware law, the surviving corporation will have all the properties, rights, privileges, powers, interests and franchises and will be subject to all restrictions, disabilities, duties and liabilities of the Company and Merger Sub. The closing of the merger is expected to occur on the second business day after the satisfaction or waiver of the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions), unless otherwise agreed in writing by the parties. The effective time of the merger will occur when the certificate of merger is duly filed with and accepted by the Delaware Secretary, or such later time as agreed by the parties and specified in such certificate of merger.

Background of the Merger

The Company board of directors and senior management periodically review the Company’s operations, financial condition and performance, and long-term strategic plan and objectives, as well as industry conditions, regulatory developments and their impact on the Company’s long-term strategic plan and objectives. Prior to the Company’s initial public offering in 2014, the Company undertook a sales process but it was ultimately determined that the Company would undertake its initial public offering. Within the past two years, the Company board of directors has reviewed and considered the current and future industry trends and risks to the Company’s ability to execute its strategic plan as a stand-alone entity. The Company board of directors also reviewed with the Company’s senior management a range of strategic alternatives available to it, including possible acquisitions and divestitures and the Company’s standalone strategy based on management projections.

In November 2016, an executive session of the Company board of directors authorized the Company’s senior management, in consultation with the Company board of directors, to consider potential strategic alternatives for the Company, including a sale of the Company. During these discussions, it was acknowledged that the Ledbetter family had indicated a preference that any transaction result in their exit from the Company on the same basis as other stockholders.

On January 26, 2017, the Company’s senior management engaged Evercore to further consider potential strategic alternatives for the Company, including a sale of the Company. Prior to engaging Evercore, the Company’s senior management interviewed a number of investment banks with insurance-related experience. Evercore was selected based upon a number of factors, including their extensive knowledge of the Company’s business model, the positive view of Evercore’s performance in connection with the Company’s strategic alternative exploration in 2014 and the fact that Evercore designed an outreach process that the Company believed would create the highest probability of an attractive outcome for Company stockholders.

In February 2017, three private equity sponsors (including Party 1) and an insurance company contacted representatives of Evercore expressing interest in the Company based upon market speculation that the Company was considering a sale process. Representatives of Evercore also engaged in a general discussion with an insurance broker regarding the Company to gauge potential interest.

During February 2017, the Company board of directors met with the Company’s senior management team and representatives of Evercore and Skadden, Arps, Slate, Meagher & Flom LLP, the Company’s outside legal counsel (“Skadden”) to discuss the potential sale process. Representatives of Skadden discussed with the

Company board of directors the legal principles and standards applicable to its consideration of the potential sale

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process. Representatives of Evercore reviewed with the Company board of directors and the Company’s senior management a range of potential buyers for the Company with varied investment theses, including insurance companies, reinsurance companies, insurance brokers and private equity sponsors (and including the parties that had contacted Evercore in early February 2017). Based upon discussions with Evercore, the Company’s senior management authorized the final list and the Company board of directors authorized Evercore to contact 14 potential buyers for the Company, representing a group of companies across the range of potential buyers believed to be likely buyers for the Company. Included within this group of 14 potential buyers were: Parent; Party 4, a reinsurer; Party 5, a leading private equity sponsor; and Party 6, a leading private equity sponsor; and one of the private equity sponsors who had made contact in February.

In March 2017, representatives of Evercore contacted the 14 potential buyers which had been identified with the Company board of directors. 10 of these potential buyers (including Parent, Party 4, Party 5 and Party 6) responded positively and requested additional information from Evercore regarding the Company.

In addition, during the months of March and April 2017, at the direction of senior management of the Company preliminary discussions were had with 11 other parties (including Party 2, an insurance company in early March 2017, and Party 3, an insurance company, in early April 2017) regarding the sale process, including through discussions with Evercore and parties making inbound inquiries regarding the Company. Also during this period, in mid-April 2017, Party 1 contacted representatives of Evercore to inquire as to the status of any process to acquire the Company.

Between late March 2017 and late May 2017, Evercore and the Company’s senior management team met with a total of 12 parties (including Parent, Party 2, Party 3, Party 4, Party 5 and Party 6) who had expressed interest in acquiring the Company and had been identified to the Company board of directors as likely buyers of the Company and entered into confidentiality agreements including standstill provisions with these parties. Each of these potential buyers received a confidential information memorandum and financial model following these meetings. Four other parties, including Party 8 in May 2017 and Party 1 in June 2017, ultimately entered into confidentiality agreements including standstills.

In early May, at the direction of senior management of the Company, Evercore contacted 8 of the 12 parties who had met with Company management and requested that initial indications of interest in acquiring the Company be submitted by May 17, 2017.

On May 3, 2017, representatives of Evercore had a telephone conversation with Richard Whitt, Co-Chief Executive Officer of Parent and on the following day provided a confidential information memorandum and financial information to Parent.

On May 17, 2017, Party 5 provided an initial indication of interest to Evercore to acquire the Company for $17.00 per share in cash, which represented a total approximate value of $720 million.

Also on May 17, 2017, Party 2 delivered an indication of interest to Evercore to acquire the Company for $17.50 per share in Party 2’s publicly listed stock.

Additionally, on May 17, 2017, Parent provided an initial indication of interest to Evercore to acquire the Company for $19.00 per share in cash, which Parent indicated represented a total value of approximately $800 million.

On May 18, 2017, the Company’s senior management team provided an update to the Company board of directors regarding the status of the potential sale process and terms of the bids received to date. During the period between May 18, 2017 and July 10, 2017, Mr. Ledbetter provided regular updates to the Company board of directors regarding the status of and terms of the bids that had been received.

Also on May 19, 2017, the Insurance Insider , an insurance industry publication, reported that Evercore had been engaged to run a process to sell the Company. The Company did not publicly comment for, or on, this article.

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Following this report, an additional 8 parties (including Party 7, a leading private equity sponsor and Party 8, a leading private equity sponsor) contacted Evercore to inquire regarding the potential sale process.

On May 22, 2017, Party 6 submitted an initial indication of interest to Evercore to acquire the Company for between $18.00 and $20.00 per share, which represented a total approximate value of $760-840 million. Thereafter, on May 31, 2017, Party 6 was provided access to an electronic data room.

On May 23, 2017, Party 4 provided an initial indication of interest to Evercore to acquire the Company for $20.00 per share in cash, which represented a total approximate value of $840 million.

On May 24, 2017, Party 7, a leading private equity sponsor, contacted Evercore to express interest in the reported sale process for the Company.

Also on May 24, 2017, Party 8, a leading private equity sponsor, contacted Evercore to express interest in the reported sale process for the Company. On May 30, 2017, Party 8 entered into a confidentiality agreement including a standstill with the Company.

On May 30, 2017, Party 6 discussed with Evercore that any proposal to acquire the Company would include a substantial rollover of equity from members of the Ledbetter family.

On May 31, 2017, Party 4 contacted Evercore to request the ability to partner with Party 7 in order to make a joint bid to acquire the Company. The Company’s senior management subsequently directed Evercore to allow the joint bid.

On June 1, 2017, Party 4 was provided access to an electronic data room.

On June 2, 2017, Party 1 entered into a confidentiality agreement including a standstill.

On June 2, 2017, Parent was provided access to an electronic data room.

Also on June 2, 2017, at the direction of senior management of the Company, representatives of Evercore delivered the confidential information memorandum and financial model which had been previously delivered to other potential buyers to Party 1.

On June 5, 2017, Mr. Whitt delivered to Evercore a list of agenda items for a meeting between senior management of Parent and senior management of the Company.

On June 6, 2017, at the direction of senior management of the Company, representatives of Evercore delivered a confidential information memorandum and financial model which had been previously delivered to other potential buyers to Party 8.

On June 7, 2017, Party 3 delivered an indication of interest to Evercore to acquire the Company’s lender services business for between $275 million and $325 million.

On June 12, 2017, members of senior management of Parent and members of senior management of the Company met.

On June 14, 2017, at the direction of senior management of the Company, Evercore sent Party 4, Party 6 and Parent an email requesting a submission of a final proposal to acquire the Company and a markup of a merger agreement no later than June 28, 2017. Evercore also provided management’s updated financial projections to all bidders at this stage.

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Also on June 14, 2017, at the direction of senior management of the Company, representatives of Evercore sent a process letter to Party 1, Party 8 and a private equity sponsor requesting submissions of an indication of interest to acquire the Company no later than June 26, 2017.

During June 2017 and early July 2017, Evercore and members of the Company’s senior management continued to respond to due diligence requests from potential buyers.

On June 26, 2017, Party 8 submitted an initial indication of interest to acquire the Company for between $20.00 and $22.50 per share in cash on a fully diluted basis, which represented a total approximate value of $870-990 million.

On June 27, 2017, Party 1 submitted an indication of interest to acquire the Company for between $16.60 and $18.40 per share, which represented a total value of approximately $700-770 million. The Company’s stock price had closed at $17.63 the previous day.

On June 28, 2017, Parent submitted a markup of the merger agreement and a bid to acquire the Company for $19.50 per share in cash on a fully diluted basis, which represented a total approximate value of $850 million. The markup contained express language preventing waiver of a standstill.

On June 28, 2017, Party 6 notified representatives that it would be unable to make a bid above the Company’s market price based upon its financial analysis regarding leverage constraints on the business.

On June 29, 2017, at the direction of senior management of the Company, Evercore had discussions with Party 8 to clarify Party 8’s indication of interest and its proposed sources and uses of funds in connection with an acquisition of the Company.

On June 30, 2017, Party 8 delivered additional information regarding its proposed sources and uses of funds based on a illustrative purchase price of $21.25 per share in cash representing the midpoint of its previously proposed price range. Party 8’s assumptions for sources of financing included third party debt financing, special dividends from the Company’s insurance subsidiaries, which would require insurance regulatory approval, and a rollover of approximately 25% of transaction proceeds to be received by Terry Ledbetter. Party 8 also indicated during discussions with representatives of Evercore that Party 8 did not believe that it would be able to make an all-cash offer for the Company that did not include a rollover component.

On July 6, 2017, Evercore and Party 4 and Party 7 engaged in discussions regarding financial assumptions underlying a joint bid by Party 4 and Party 7.

Also on July 6, 2017, at the direction of senior management of the Company, Evercore contacted Party 1 to inform Party 1 that the Company was not interested in pursuing a transaction with Party 1 given the low price range that had been proposed by Party 1. Additionally, representatives of Evercore, at the direction of senior management of the Company, contacted Party 6 to discuss Party 6’s financial leverage assumptions and whether Party 6 would be willing to submit a bid for the Company and Party 6 confirmed that it did not intend to do so.

On July 7, 2017, representatives of Skadden sent a revised merger agreement to representatives of Sidley Austin LLP, legal counsel to Parent. The draft contained a provision allowing the Company board of directors to waive the standstill if failure to do so would be inconsistent with fiduciary duties.

On July 9, 2017, Evercore engaged in a telephone conversation with representatives of Party 8 regarding the status of the sale process.

On July 10, 2017, the Company board of directors met with the Company’s senior management team and representatives of Evercore and Skadden to discuss the status and terms of the bids received to acquire the Company. During these discussions, the Company board of directors directed Mr. Ledbetter to attempt to pursue a transaction with Parent at a higher price than $19.50 per share given Parent’s willingness to pay an all-cash

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price purchase price for the Company and the likelihood that Mr. Ledbetter and related shareholdings controlled by him would be unwilling to agree as individual stockholders to the rollover provisions of the transactions that had been proposed to date including a rollover of their equity. Also at the meeting, the Company board of directors was advised of the provision in the merger agreement allowing the Company board of directors to waive standstill provisions, including the standstills in the confidentiality agreements entered into with bidders, if failure to do so would be inconsistent with the directors’ fiduciary duties.

Also on July 10, 2017, the Company board of directors also directed Mr. Ledbetter to continue discussions with Party 4 and Party 7 regarding their joint bid to see if a higher price per share could be achieved.

On July 12, 2017, representatives of Skadden participated in a teleconference with representatives of Sidley Austin to discuss issues in the revised merger agreement draft identified by Sidley Austin, including the stockholders who would be party to voting agreements, the scope of termination events and termination fees, the scope of the “fiduciary out” exceptions within the nonsolicitation covenant, the scope of Parent’s commitments to seek and obtain regulatory approvals and conditions to closing.

Also on July 12, 2017, Evercore, members of the Company’s senior management team Party 4 and Party 7 engaged in additional discussions regarding financial due diligence questions and financial assumptions underlying a joint bid by Party 4 and Party 7.

On July 12, 2017, in accordance with the directions of the Company board of directors, representatives of Evercore contacted Mr. Whitt to discuss increasing the price Parent was willing to pay. During that conversation, Mr. Whitt indicated that Parent would be willing to increase its price to $20.00 per share of Company common stock on a fully diluted basis and that Parent could possibly increase its price to $20.50 per share of Company common stock on a fully diluted basis.

Following that conversation, on July 14, 2017, Mr. Ledbetter called Mr. Whitt to request that Parent increase the purchase price to $21.00 per share of Company common stock on a fully diluted basis.

On July 15, 2017, Mr. Whitt contacted Mr. Ledbetter by telephone and email to increase Parent’s offer price to $21.00 per share of Company common stock on a fully diluted basis. Mr. Whitt’s email included a request for exclusivity and noted certain points that Parent would require in connection with the merger agreement, including the right to terminate the merger agreement based upon Company stockholder exercise of appraisal rights, voting agreements, the size of the termination fee and the standard for obtaining regulatory approvals.

On July 16, 2017, Mr. Ledbetter called Mr. Whitt to discuss issues raised by Mr. Whitt’s email of the previous day.

Also on July 16, 2017, at the direction of the Company board of directors, Evercore contacted Party 4 and Party 7 to inform Party 4 and Party 7 that the sale process was moving towards completion and to encourage Party 4 and Party 7 to submit a final bid in the near term if they intended to do so.

On July 17, 2017, Parent submitted a markup of the merger agreement that had been provided by Skadden on July 7, 2017. Parent also communicated to representatives of Evercore that Parent would not continue discussions with the Company unless the Company entered into exclusivity with Parent.

Also on July 17, 2017, Party 4 and Party 7 submitted a markup of the merger agreement and a bid to acquire the Company for $18.50 per share in cash, conditioned on the Ledbetter family rolling a significant portion of their equity into the ongoing company.

On July 18, 2017, the Company board of directors met with the Company’s senior management team and representatives of Evercore and Skadden to discuss the status of the bids received to acquire the Company, including the bid from Parent, the joint bid by Party 4 and Party 7 and the indication from Party 8. During this meeting, the Company board of directors determined that granting exclusivity to Parent was in the best interest of the Company and its stockholders and instructed the Company’s officers and advisors to negotiate more favorable legal terms for the Company than were represented by Parent’s merger agreement prior to granting exclusivity to Parent. The Company board of directors was also updated that Parent had accepted the proposed waiver language regarding the standstill requested by the Company.

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Later on July 18, 2017, representatives of Evercore communicated the Company board of director’s message to Richard Grinnan, the General Counsel of Parent, and told him that any exclusivity agreement entered by the Company would be conditioned on Parent improving the legal terms of its offer.

During the evening of July 18, 2017, representatives of Skadden sent a revised merger agreement to representatives of Sidley Austin. The markup addressed issues in Parent’s draft merger agreement including the scope of termination events and termination fees, the scope of the “fiduciary out” exceptions within the nonsolicitation covenant, the scope of Parent’s commitments to seek and obtain regulatory approvals (including the definition of “burdensome condition”) and Parent’s proposed termination right relating to stockholder appraisal rights.

On July 19, 2017, representatives of Evercore communicated with Mr. Grinnan to continue the previous day’s discussions.

Later on July 19, 2017, representatives of Sidley Austin sent a revised merger agreement to representatives of Skadden reflecting discussions between the parties.

On July 20, 2017, the Company board of directors met with the Company’s senior management team and representatives of Evercore and Skadden and approved the granting of exclusivity to Parent and the Company entered into an exclusivity agreement with Parent through 11:59 p.m. on July 25, 2017.

Also on July 20, 2017, at the direction of the Company board of directors, Evercore contacted Party 7 to inform Party 6 that the Company did not intend to pursue a transaction with Party 4 and Party 7 at that time.

On July 21, 2017, representatives of Skadden participated in a teleconference with representatives of Sidley Austin to discuss issues identified by Sidley Austin, including the stockholders who would be party to voting agreements and the percentage of shares of Company common stock that the Company board of directors would permit to be bound by such agreements, the scope of termination events and termination fees, the scope of the “fiduciary out” exceptions within the nonsolicitation covenant, the scope of Parent’s commitments to seek and obtain regulatory approvals (including the definition of “burdensome condition”) and Parent’s proposed termination right relating to stockholder appraisal rights.

Also on July 21, 2017, at the direction of the Company board of directors, representatives of Evercore contacted Party 8 to inform Party 8 that the Company did not intend to pursue a transaction with Party 8.

During the period from July 21, 2017 to July 25, 2017, representatives of Skadden, with the assistance of Evercore and under the direction of the Company’s board of directors and senior management, negotiated the terms and conditions of the merger agreement with Sidley Austin.

The Company board of directors held a special meeting on July 25, 2017, attended by members of the Company’s senior management team, representatives of Evercore and representatives of Skadden. Representatives of Skadden discussed with the Company board of directors the legal principles and standards applicable to its consideration of the proposed transaction. Representatives of Skadden also reviewed the terms and conditions set forth in the proposed merger agreement, including, among other things, the parties’ respective termination rights (including the Company’s right to terminate the agreement if the Company’s board of directors in the exercise of its fiduciary duties, determines to enter into a transaction in respect of a superior proposal), the termination fee and other amounts payable in connection with certain termination events under the proposed merger agreement, the obligations of the parties to obtain applicable regulatory approvals, the definition of a “Company material adverse effect” and the applicable closing conditions. Representatives of Skadden also reviewed with the Company board of directors the terms and conditions of the voting agreement to be entered into by the supporting stockholders. Representatives of Evercore then reviewed with the Company board of directors Evercore’s financial analysis of the merger consideration, as more fully described below under the heading “—Opinion of the Company’s Financial Advisor,” and rendered to the Company board of directors its oral opinion that, as of that date and based on and subject to various assumptions, matters considered and limitations described in the opinion, the merger consideration was fair, from a financial point of view, to the holders of Company common stock, other than excluded shares and dissenting shares (and such opinion was

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subsequently confirmed in writing by Evercore on July 25, 2016). After discussion, and in light of the Company board of directors’ review and consideration of the factors described under “—Company’s Reasons for the Merger; Recommendation of the Company Board of Directors,” the Company board of directors unanimously determined that the merger and the other transactions contemplated by the merger agreement were advisable and in the best interests of the Company, and, subject to finalization of transaction documentation consistent with the terms presented to the Company board of directors, the Company board of directors unanimously approved and adopted the merger agreement and determined to recommend that the Company’s stockholders adopt the merger agreement. The Company board of directors approved the merger agreement and the related transaction documents and the transactions contemplated by such documents and authorized certain officers of the Company to execute on behalf of the Company the merger agreement and the related transaction documents.

Following the completion of definitive transaction documentation during the early morning of July 26, 2017, the Company, Parent and Merger Sub entered into the merger agreement. The Company and Parent issued a joint press release prior to the opening of trading markets July 26, 2017 announcing the transaction.

State National’s Reasons for the Merger and Recommendation of State National’s Board of Directors

The Company board of directors has unanimously (1) determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of the Company and its stockholders, (2) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and (3) declared its advisability and recommended the adoption by the Company stockholders of the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, the Company board of directors unanimously recommends that the Company stockholders vote “ FOR ” the merger proposal, “ FOR ” the merger-related compensation proposal and “ FOR ” the adjournment proposal.

Positive Factors Relating to the Merger

As described the section of this proxy statement titled “The Merger—Background of the Merger,” the Company board of directors, prior to and in reaching its determination at its meeting on July 25, 2017 that the merger, on the terms and subject to the conditions set forth in the merger agreement, is in the best interests of the Company and its stockholders, consulted with the Company’s management, financial advisor and outside legal counsel and considered a variety of potentially positive factors relating to the merger, including, but not limited to, the following:

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Risks and Other Considerations of the Merger

In the course of its deliberations, the Company board of directors, in consultation with the Company management and legal and financial advisors, also considered a variety of risks and other potentially negative factors relating to the merger, including the following:

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The foregoing discussion of factors considered by the Company board of directors is not intended to be exhaustive, but the Company board of directors believes that it includes the material factors considered by the Company board of directors. These factors are not listed in any particular order of priority. In light of the variety of factors considered in connection with its evaluation of the merger, the Company board of directors did not find it practicable to, and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the Company board of directors present applied his or her own personal business judgment to the process and may have given different weight to different factors. The Company board of directors based its recommendation on the totality of the information presented.

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The Company board of directors unanimously recommends that you vote “FOR” approval of the merger proposal, “FOR” approval of the merger-related compensation proposal and “FOR” approval of the adjournment proposal.

The foregoing discussion of the information and factors considered by the Company board of directors is forward-looking in nature. This information should be read in light of the factors described under the section of this proxy statement titled “Cautionary Statement Concerning Forward-Looking Information .”

Opinion of the Company’s Financial Advisor

In connection with the merger, the Company retained Evercore to act as its financial advisor. As part of this engagement, the Company requested that Evercore evaluate the fairness of the merger consideration, from a financial point of view, to holders of the Company common stock, other than holders of excluded shares, dissenting shares and Company restricted stock. On July 25, 2017, at a meeting of the Company board of directors, Evercore rendered its oral opinion, subsequently confirmed by delivery of a written opinion, that based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, as of such date, the merger consideration was fair, from a financial point of view, to holders of the Company common stock, other than holders of excluded shares, dissenting shares and shares of Company restricted stock.

The full text of the written opinion of Evercore, dated as of July 25, 2017, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement. The following summary of Evercore’s opinion is qualified in its entirety by reference to the full text of the opinion, which is incorporated herein by reference. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Company board of directors (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view, and did not address any other aspects or implications of the merger. The opinion does not constitute a recommendation to the Company board of directors or to any other persons in respect of the merger, including as to how any holder of shares of Company common stock should vote or act in respect of the merger. Evercore’s opinion did not address the relative merits of the merger as compared to other business or financial strategies that might be available to the Company, nor did it address the underlying business decision of the Company to engage in the merger.

In connection with rendering its opinion and performing its related financial analysis, Evercore, among other things:

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For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore assumed no liability therefor. Evercore assumed that the projections received from the management of the Company were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of the Company as to the future financial performance of the Company under the assumptions reflected therein. Evercore expressed no view as to any projected financial data relating to the Company or the assumptions on which they are based.

For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the merger will be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the merger will be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on the Company or the consummation of the merger or materially reduce the benefits to the holders of Company common stock of the merger. Evercore also assumed that the executed merger agreement would not differ in any material respect from the draft merger agreement dated July 23, 2017 that Evercore reviewed.

Evercore neither made nor assumed any responsibility for making any independent valuation or appraisal of the assets or liabilities of the Company, nor was Evercore furnished with any such valuation or appraisal, nor did Evercore evaluate the solvency or fair value of the Company under any state, federal or foreign laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion is necessarily based upon information made available to Evercore as of July 25, 2017 and financial, economic, market and other conditions as they existed and as could be evaluated as of such date. It is understood that subsequent developments may affect Evercore’s opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness, from a financial point of view, of the merger consideration to the holders of Company common stock, other than holders of excluded shares, dissenting shares and shares of Company restricted stock. Evercore did not express any view on, and its opinion did not address, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other securities, creditors or other constituencies of the Company nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or any class of such persons, whether relative to the merger consideration or otherwise.

Evercore assumed that any modification to the structure of the merger would not vary its analysis in any material respect. Evercore’s opinion did not address the relative merits of the merger as compared to other business or

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financial strategies that might be available to the Company, nor did it address the underlying business decision of the Company to engage in the merger. Evercore’s opinion does not constitute a recommendation to the Company board of directors or any other persons in respect of the merger, including as to how any holder of shares of Company common stock should vote or act in respect of Proposal 1 or otherwise. Evercore expressed no opinion as to the price at which shares of Company common stock would trade at any time. Evercore is not a legal, regulatory, accounting or tax expert and has assumed the accuracy and completeness of assessments by the Company and its advisors with respect to legal, regulatory, accounting and tax matters.

Summary of Material Financial Analysis

Set forth below is a summary of the material financial analyses reviewed by Evercore with the Company board of directors on July 25, 2017 in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before July 21, 2017, and is not necessarily indicative of current market conditions.

The following summary of Evercore’s financial analyses includes information presented in tabular format. In order to fully understand the analyses, the tables must be read together with the full text of each summary. The tables are not intended to stand-alone and alone do not constitute a complete description of Evercore’s financial analyses. Considering the tables below without considering the full narrative description of Evercore’s financial analyses, including the methodologies and assumptions underlying such analyses, could create a misleading or incomplete view of such analyses.

Selected Public Company Trading Analysis

In performing a selected public company trading analysis, Evercore reviewed and compared certain financial, operating and market information relating to the Company to corresponding information of certain publicly traded companies, which Evercore deemed most relevant to consider in relation to the Company, based on its professional judgment and experience, because they are public companies with operations that for purposes of this analysis Evercore considered similar to the operations of the Company. The selected companies are identified below and referred to herein as the “U.S. Specialty Insurers”:

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Evercore reviewed, among other things, the closing price of each selected company’s common stock on July 21, 2017 as multiples of such company’s (i) book value per share (“P/BV”) as of the first quarter-end of 2017 (“Q1 2017 P/BV”), (ii) tangible book value (“TBV”) per share (“P/TBV”) as of the first quarter-end of 2017 (“Q1 2017 P/TBV”) and (iii) calendar year 2017 mean estimated earnings per share (“2017E P/E”). The financial data of the selected peer companies used by Evercore for this analysis were based on publicly available research analysts’ estimates, public filings and other publicly available data. The financial data of the Company were based on the Company’s publicly available financial statements, as well as the Updated Projections (as defined below) and other information provided by the management of the Company.

Based on its professional judgment and experience, Evercore then applied the relevant reference range, based on the first and third quartile of the selected multiples derived from the selected companies, to the corresponding financial data of the Company. This analysis indicated the following approximate implied valuation ranges per share of Company common stock:

Evercore compared these resulting implied values to the merger consideration of $21.00 per share of Company common stock. Evercore observed that the market historically has treated P/BV and P/TBV ratios as the primary valuation methodologies for the industry in which the Company operates.

Although the selected public companies were compared to the Company for purposes of this analysis, and while they have certain characteristics that are similar to the Company, none of the companies identified is identical to the Company because of the inherent differences between the businesses, operations, performance, financial conditions and prospects of the selected companies to those of the Company.

As-Traded Sum-of-the-Parts

In addition to its analyses of the Company’s business on a consolidated basis, Evercore conducted financial analyses on a sum-of-the-parts basis by analyzing each of the lender services division and the program services division on a standalone basis.

In performing a trading multiples analysis of the Company on a sum-of-the-parts basis, Evercore reviewed publicly available financial and market information with respect to the selected public companies listed in the table below, divided into two groups: (1) companies Evercore deemed most relevant to consider in relation to the lender services division (personal auto insurance carriers), and (2) companies Evercore deemed most relevant to consider in relation to the program services division (insurance broker companies), in each case, based on its professional judgment and experience, because they are public companies with operations that for purposes of this analysis Evercore considered similar to the operations of the lender services division and the program services division, respectively.

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Evercore reviewed, among other things, (1) in respect of the lender services division, a selected range of multiples of Q1 2017 P/TBV of the selected publicly traded companies and (2) in respect of the program services division, a selected range of enterprise values of the selected publicly traded companies, calculated as fully-diluted equity values based on closing stock prices on July 21, 2017, plus net debt, as a multiple of each company’s calendar year 2017 estimated earnings before interest, taxes, depreciation and amortization (“EV/EBITDA”). Evercore selected EV/EBITDA as the valuation analysis for the program services division given that, in Evercore’s professional judgment and experience, the market has historically used EV/EBITDA as the primary valuation methodology for insurance businesses that are highly cash generative and have a fee-for-service model (rather than a risk-retention model), which is the case for both the program services division and the selected insurance broker companies. The financial data of the selected public companies used by Evercore for this analysis were based on publicly available research analysts’ estimates, and, in the case of the lender services division and the program services division, on the estimates and other information provided by management of the Company.

Selected Public Company Personal Auto Insurance Carriers

Selected Public Insurance Broker Companies

Evercore then applied a reference range of Q1 2017 P/TBV multiples of 1.75 to 2.25x for the lender services division, derived from selecting close to the highest multiple of the selected public companies with a market capitalization of less than $5 billion, and increasing to 2.25x, based on Evercore’s professional judgment and experience, to the Q1 2017 tangible book value of the lender services division of $57 million. Evercore then applied a reference range of EV/EBITDA multiples of 8.0 to 12.0x for the program services division, derived from applying a discount to the EV/EBITDA multiples at which the selected broker companies trade, given their meaningful differences from the Company as a result of, among other things, (i) the lack of capital required to support their businesses relative to the capital requirements of the program services division, (ii) their larger scale, (iii) their global footprint, (iv) their lower client concentration and (v) their greater recurring revenue, based on Evercore’s professional judgment and experience, to the 2017 estimated EBITDA (“2017E EBITDA”) for the program services division of $61 million.

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This analysis resulted in implied equity values for the lender services division of $99 to $128 million, and the program services division of $493 to $737 million (which includes $5 million of Q1 2017 net cash in the calculated enterprise value), which when added together and divided by the number of shares of Company common stock and Company restricted stock outstanding, indicated implied equity value per share reference ranges for the Company on a sum-of-the parts basis of $13.94 to $20.35. Evercore compared these resulting implied values to the merger consideration of $21.00 per share of Company common stock.

Public Company Regression Analysis

In order to evaluate the relationship between trading multiples and forecasted returns on capital, Evercore compared certain financial information of the Company with publicly available financial information for (i) the U.S. Specialty Insurers and (ii) global insurers with broader portfolios (“Broader Global Insurers”), listed below:

Broader Global Insurance Subset

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For purposes of this analysis, Evercore performed a regression analysis that evaluated the ratio of (i) the Q1 2017 P/TBV for each of the U.S. Specialty Insurers and the Broader Global Insurers, to (ii) the estimated return on tangible book value for calendar year 2017, in each case as derived from publicly available information, including equity research analyst estimates. These analyses yielded a linear regression line with an R-squared (a statistical measure of how close the data are to the fitted regression line) value of 63%, in the case of the U.S. Specialty Insurers, and 57%, in the case of the Broader Global Insurers.

Based on the results of the regression analysis, and the resulting implied multiple of the Company’s Q1 2017 P/TBV of 4.15x, in the case of the U.S. Specialty Insurers, and 3.20x, in the case of the Broader Global Insurers, Evercore calculated the estimated implied value per share of Company common stock (based on the number of shares of Company common stock and Company restricted stock outstanding) as set forth in the table below:

Evercore compared these resulting implied values to the merger consideration of $21.00 per share of Company common stock.

Regression analysis is a widely used valuation methodology in the industry in which the Company operates, but no company utilized in the regression framework is identical to the Company. In evaluating comparable companies, Evercore made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. These include, among other things, the impact of competition on the businesses of the Company and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Company or the industry, or in the financial markets in general.

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Dividend Discount Model Analysis

Evercore performed a dividend discount analysis to determine per share implied valuation ranges of Company common stock on a standalone basis based on the sum of the discounted net present values of (i) the maximum potential dividends that the Company is estimated to be able to pay to its stockholders as a dividend for the fiscal years ending December 31, 2017 through December 31, 2021 and (ii) a projected terminal value of Company common stock as of December 31, 2021, based on management’s estimate of the book value of the Company as of such date ($652.1 million), assuming the maximum potential dividends described in clause (i) were paid to the Company’s stockholders, and the Company’s historical trading range.

For the implied valuation range of the Company on a standalone basis, Evercore reviewed historical financial information and the Updated Projections and other information prepared by management of the Company. Evercore then utilized management’s estimates of the maximum amount of possible dividends that could be paid out each year based on management’s estimates and assuming a 220% Risk Based Capital ratio (which, per management’s guidance, is the minimum amount of capital that would be needed to run the Company’s business in compliance with applicable regulatory requirements) and that no additional capital contributions would be required (the amounts in excess of the dividends described in the section of this proxy statement titled “ The Merger—Certain Company Prospective Financial Statements ” are referred to therein as “Additional Dividends Available”). To determine the present value of the implied valuation of the Company, Evercore considered a range of discount rates from 11.0% to 13.0%, and a range of terminal values of 1.75x to 2.25x, based upon the Company’s historical trading range.

Utilizing the range of discount rates and terminal value multiples, Evercore calculated an implied valuation range of Company common stock of $17.53 to $23.85 per share of Company common stock. Evercore compared these resulting implied values to the merger consideration of $21.00 per share of Company common stock.

The dividend discount analysis is not necessarily indicative of actual values or future results. A dividend discount analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions being made, including earnings growth rates, dividend payout amounts, terminal values and discount rates.

Selected Precedent Transaction Analysis

Evercore performed an analysis of selected precedent transactions to compare multiples paid in other transactions to the multiples implied in the merger. Evercore analyzed 18 merger and acquisition transactions that closed between January 1, 2007 and July 21, 2017 involving acquisitions of companies in the property and casualty insurance industry (excluding businesses with over 50% of their premiums from reinsurance), with deal values between $500 million and $5 billion.

While none of the companies that participated in the selected precedent transactions is directly comparable to the Company and none of the transactions in the selected precedent transactions analysis is directly comparable to the merger, Evercore selected these transactions because each of the target companies was involved in the property and casualty insurance industry (excluding businesses with over 50% of their premiums from reinsurance) and had operating characteristics and products that for purposes of analysis may be considered similar to certain of the Company operating characteristics and products.

For each of the selected transactions, Evercore reviewed transaction values and calculated (where determinable) the P/BV, the P/TBV and the price to latest twelve months earnings per share (“LTM EPS”) for each target company based on the consideration paid in the selected transaction.

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The selected precedent transactions and the P/BV, P/TBV and LTM EPS related thereto are set forth in the table below:

Evercore’s analysis indicated first quartile and third quartile multiples of (i) P/BV of 1.57x and 2.09x, respectively, (ii) P/TBV of 1.48x and 2.37x, respectively and (iii) LTM EPS of 12.1x and 18.6x, respectively.

Evercore then applied the selected first and third quartile multiples of 1.57x and 2.09x, respectively, to the Q1 2017 P/BV of the Company of $307 million, and determined a value per share range (based on the number of shares of Company common stock and Company restricted stock outstanding) of $11.33 to $15.08. Evercore then applied the selected first and third quartile P/TBV multiples of 1.48x and 2.37x, respectively, to the Q1 2017 P/TBV of the Company of $293 million, and determined a value per share range (based on the number of shares of Company common stock and Company restricted stock outstanding) of $10.20 to $16.34. Evercore then applied the selected first and third quartile LTM P/E multiples of 12.1x and 18.6x, respectively, to the Q1 2017 LTM P/E of the Company of $51 million, and determined a value per share range (based on the number of shares of Company common stock and Company restricted stock outstanding) of $14.47 to $22.28. Evercore compared

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these resulting implied values to the merger consideration of $21.00 per share of Company common stock. Evercore observed that the market historically has treated P/BV and P/TBV ratios as the primary valuation methodologies for the industry in which the Company operates.

M&A Sum-of-the-Parts

In addition to its analyses of selected precedent transactions for the Company’s business on a consolidated basis, Evercore conducted financial analyses, from a precedent transactions perspective, on a sum-of-the-parts basis by analyzing precedent transactions for each of the lender services division and the program services division on a standalone basis.

Evercore reviewed, among other things, (1) in respect of the lender services division, a selected range of personal lines insurance transactions and (2) in respect of the program services division, a selected range of broker and managing general agent transactions, in each case as set forth below. The financial data of the selected public companies used by Evercore for this analysis was based on publicly available information, including research analysts’ estimates, and, in the case of the lender services division and the program services division, on the estimates and other information provided by management of the Company.

Based on its professional judgment and experience, for the lender services division, Evercore applied a selected reference range of 2.83x to 5.29x (derived from Farmers Group Inc.’s acquisition of Bristol West Holdings of 2.83x at the low end, and the midpoint of an inbound preliminary indication of interest that the Company received for the lender services division by Party 3, resulting in an implied multiple of 5.29x at the high end), to

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the lender services division’s Q1 2017 TBV of $57 million. Based on its professional judgment and experience, for the program services division, Evercore applied a selected reference range of EV/EBITDA multiples of 8.0-12.0x for the program services division, derived from considering, among other factors, the more recent precedent transactions, market conditions and the meaningful differences of such businesses from the Company as a result of, among other things, (i) the lack of capital required to support their businesses relative to the capital requirements of the program services division, (ii) their larger scale, (iii) their global footprint, (iv) their lower client concentration and (v) their greater recurring revenue, to the 2017E EBITDA for the program services division of $61 million.

This analysis resulted in implied equity values for the lender services division of $160-$300 million, and the program services division of $493 to $737 million (which includes $5 million of Q1 2017 net cash in the calculated enterprise value), which when added together and divided by the number of shares of Company common stock and Company restricted stock outstanding, indicated implied equity value per share reference ranges for the Company on a precedent transaction sum-of-the parts basis of $15.38 to $24.40. Evercore compared these resulting implied values to the merger consideration of $21.00 per share of Company common stock.

Other Factors

Evercore also reviewed and considered other factors, which were not considered part of its financial analyses in connection with rendering its advice, but were referenced for informational purposes, including, among other things, premiums paid in similar transactions, the trading range since the Company’s initial public offering and the analysts’ price targets analyses described below.

Premiums Paid Analysis

Evercore reviewed and analyzed, for reference and informational purposes only, the premiums paid for all closed and/or announced transactions in the United States from January 1, 2007 through July 21, 2017 with equity transaction values equal to or greater than $500 million and less than $2 billion, of which there were 1,031. Using information from Thomson Reuters, Securities Data Corp. and FactSet Research Systems, Inc., premiums paid were calculated as the percentage by which the per share consideration paid in each such transaction exceeded the closing price per share of the relevant target company one month prior to the applicable transaction’s announcement. The average of such premia was 36.6%. Applying such average premia to the May 18, 2017 closing share price of $15.38 per share of Company common stock (the last trading date prior to the Insurance Insider releasing an article reporting that Evercore had been appointed by the Company to conduct a sale process (the “Article”)), Evercore derived an implied equity value per share of Company common stock of $21.02. Evercore compared this implied value to the merger consideration of $21.00 per share of Company common stock.

Historical Share Price Performance

Evercore reviewed, for reference and informational purposes only, the range of trading prices for shares of Company common stock for the period of time commencing on November 3, 2014, the date of the Company’s initial public offering, and ending July 21, 2017. During this period, the closing share price of Company common stock ranged from a low of $8.61 to a high of $18.65 per share. On May 18, 2017, the last trading day before the Article’s release, the closing share price of Company common stock was $15.38.

Analyst Price Targets

Evercore reviewed, for reference and informational purposes only, publicly available research analysts’ estimates, public filings and other publicly available information relating to the potential future value of Company common stock (commonly referred to as price targets). Evercore noted that the low and high share price targets ranged from $14.95 to $18.00 prior to the Article’s release, and that the low and high share price targets ranged from $17.33 to $22.00 following the Article’s release.

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Miscellaneous

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Evercore. In connection with the review of the merger by the Company board of directors, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. In addition, Evercore may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Evercore with respect to the actual value of the shares of Company common stock. No company used in the above analyses as a comparison is directly comparable to the Company, and no transaction used is directly comparable to the merger. Furthermore, Evercore’s analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company or its advisors. Rounding may result in total sums set forth in this section not equaling 100%.

Evercore prepared these analyses for the purpose of providing an opinion to the Company board of directors as to the fairness, from a financial point of view, of the merger consideration to the holders of Company common stock, other than holders of excluded shares, dissenting shares and shares of Company restricted stock. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates.

Pursuant to the terms of Evercore’s engagement letter with the Company, a fee of $1.5 million was payable to Evercore upon the delivery of Evercore’s fairness opinion to the Company board of directors, and an additional fee of $500,000 will be payable upon delivery of any subsequent fairness opinion. The Company has also agreed to pay Evercore an additional transaction fee, based upon a percentage of the transaction value of the merger, estimated to be approximately $10.975 million, which is contingent upon the closing of the merger and against which the opinion fee(s) will be credited. In addition, the Company has agreed to reimburse Evercore for its reasonable and documented out of pocket expenses and to indemnify Evercore for certain potential liabilities arising out of its engagement.

Prior to Evercore’s engagement in connection with the merger, Evercore and its affiliates provided financial advisory services to the Company in 2014 in connection with the Company’s ultimate decision to undergo its initial public offering and received $3.9 million in fees for the rendering of those services, including the reimbursement of expenses. During the two year period prior to the delivery of its opinion, no material relationship existed between Evercore and its affiliates and Parent pursuant to which compensation was received by Evercore or its affiliates as a result of such relationship. Evercore may provide financial or other services to Parent in the future and in connection with any such services Evercore may receive compensation.

In the ordinary course of business, Evercore or its affiliates may actively trade the securities, or related derivative securities, or financial instruments of the Company, Parent and/or their respective affiliates, for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or instruments.

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The issuance of the fairness opinion was approved by an Opinion Committee of Evercore.

The Company engaged Evercore to act as a financial advisor to the Company board of directors based on Evercore’s qualifications, experience and reputation, as well as a familiarity with the business of the Company. Evercore is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses in connection with mergers and acquisitions, leveraged buyouts, competitive biddings, private placements and valuations for corporate and other purposes.