SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------
                                    FORM 10-Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

      FOR THE TRANSITION PERIOD FROM ________________ TO _________________.

                        Commission file number 0-2500111

                          21st Century Holding Company
                          ----------------------------
             (Exact name of registrant as specified in its charter)

             Florida                                             65-0248866
--------------------------------------------------------------------------------
(State or Other Jurisdiction of                                (IRS Employer
 Incorporation or Organization)                              Identification No.)

  3661 West Oakland Park Boulevard, Suite 300, Lauderdale Lakes, Florida 33313
  ----------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                  954-581-9993
                                  ------------
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

      Yes [X] No[ ]

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

      Yes [ ] No [X]

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

      Common Stock, $.01 par value - 6,343,207 outstanding as of May 12, 2005.


                                        1
<PAGE>

                          21ST CENTURY HOLDING COMPANY

                                      INDEX

PART I: FINANCIAL INFORMATION                                               PAGE
                                                                            ----

ITEM 1

Financial Statements (Unaudited)

Consolidated Balance Sheets
     as of  March 31, 2005
     and December 31, 2004...................................................  4

Consolidated Statements of Operations
     for the three months ended March 31, 2005
     and 2004................................................................  5

Consolidated Cash Flow Statements
     for the three months ended March 31, 2005
     and 2004................................................................  6

Notes to Consolidated Financial Statements...................................  8

ITEM 2

Management's Discussion and Analysis
     of Financial Condition and Results of Operations........................ 20

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk................... 29

ITEM 4

Controls and Procedures ......................................................29

PART II: OTHER INFORMATION

ITEM 1

Legal Proceedings............................................................ 30

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds.................. 30

ITEM 3

Defaults upon Senior Securities.............................................. 31

ITEM 4

Submission of Matters to a Vote of Security Holders.......................... 31


                                       2
<PAGE>

ITEM 5

Other Information............................................................ 31

ITEM 6

Exhibits .................................................................... 31

Signatures................................................................... 32

Exhibits

      Exhibit 31.1 Certification of Chief Executive Officer
      Pursuant to Section 302 of the SARBANES-OXLEY
      Act.................................................................... 33

      Exhibit 31.2 Certification of Chief Financial Officer
      Pursuant to Section 302 of the SARBANES-OXLEY
      Act.................................................................... 34

      Exhibit 32.1 Certification of Chief Executive Officer
      Pursuant to Section 906 of the SARBANES-OXLEY
      Act.................................................................... 35

      Exhibit 32.2 Certification of Chief Financial Officer
      Pursuant to Section 906 of the SARBANES-OXLEY
      Act.................................................................... 36


                                       3
<PAGE>

PART I: FINANCIAL INFORMATION
ITEM 1

                          21ST CENTURY HOLDING COMPANY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        March 31, 2005    December 31, 2004
                                     ASSETS
Investments
<S>                                                                     <C>                <C>
      Fixed maturities, available for sale, at fair value               $   69,224,767     $   69,587,030
      Equity securities                                                     10,783,785         14,795,143
                                                                        --------------     --------------

           Total investments                                                80,008,552         84,382,173
                                                                        --------------     --------------

Cash and cash equivalents                                                    3,681,222          6,127,706
Finance contracts, net of allowance for credit
  losses of $555,059 in 2005 and $475,788 in 2004                            9,727,498          8,289,356
Prepaid reinsurance premiums                                                 2,835,084          5,510,379
Premiums receivable, net of allowance for credit losses
  of $108,739 and $541,851, respectively                                     8,144,458          6,024,913
Reinsurance recoverable, net                                                23,264,669         25,488,956
Deferred policy acquisition costs                                            7,699,405          6,957,168
Income taxes recoverable                                                     3,848,740          7,915,424
Deferred income taxes                                                        2,930,068          3,656,076
Property, plant and equipment, net                                           4,148,290          4,272,733
Goodwill, net                                                                                     153,546
Other assets                                                                 4,712,593          4,822,942
                                                                        --------------     --------------

           Total assets                                                 $  151,000,579     $  163,601,372
                                                                        ==============     ==============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and LAE                                                   $   26,766,395     $   46,570,679
Unearned premiums                                                           55,838,271         50,152,711
Premiums deposits                                                            2,878,666          1,871,683
Revolving credit outstanding                                                 2,023,241          2,148,542
Bank overdraft                                                              11,005,788         14,832,698
Subordinated debt                                                           15,208,333         16,875,000
Deferred income from sale of agency operations                               2,500,000          2,500,000
Accounts payable and accrued expenses                                        2,228,351          3,673,324
                                                                        --------------     --------------

           Total liabilities                                               118,449,045        138,624,637
                                                                        --------------     --------------

Commitments and contingencies

Shareholders' equity:
      Common stock, $0.01 par value. Authorized 37,500,000
        shares; issued 7,031,214 and 6,744,791 shares, respectively;
        Outstanding 6,334,365 and 6,047,942, respectively                       70,313             67,448
      Additional paid-in capital                                            29,283,652         26,310,147
      Accumulated other comprehensive income (deficit)                        (964,993)          (504,972)
      Retained earnings                                                      5,942,207            883,757
      Treasury stock, 696,849 shares, at cost                               (1,779,645)        (1,779,645)
                                                                        --------------     --------------
           Total shareholders' equity                                       32,551,534         24,976,735
                                                                        --------------     --------------
           Total liabilities and shareholders' equity                   $  151,000,579     $  163,601,372
                                                                        ==============     ==============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       4
<PAGE>

                          21ST CENTURY HOLDING COMPANY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      2005             2004
                                                                                  ------------     ------------
<S>                                                                               <C>              <C>
Revenue:

     Gross premiums written                                                       $ 30,097,044     $ 17,817,726
     Gross premiums ceded                                                           (2,901,291)         (86,850)
                                                                                  ------------     ------------

           Net premiums written                                                     27,195,753       17,730,876
                                                                                  ------------     ------------

     Decrease in prepaid reinsurance premiums                                       (2,675,295)      (3,768,152)
     (Increase) in unearned premiums                                                (5,685,560)      (1,728,906)
                                                                                  ------------     ------------
           Net change in prepaid reinsurance premiums and unearned premiums         (8,360,855)      (5,497,058)
                                                                                  ------------     ------------

           Net premiums earned                                                      18,834,898       12,233,818
     Finance revenue                                                                 1,104,530        1,090,820
     Managing general agent fees                                                       632,315          447,358
     Net investment income                                                             892,871          528,124
     Net realized investment gains                                                     159,523          121,919
     Other income                                                                      242,468          275,136
                                                                                  ------------     ------------

           Total revenue                                                            21,866,605       14,697,175
                                                                                  ------------     ------------

Expenses:
     Loss and LAE                                                                    6,909,997        6,474,833
     Operating and underwriting expenses                                             1,582,531        1,948,572
     Salaries and wages                                                              1,578,581        1,423,114
     Interest expense                                                                  430,144          231,081
     Policy acquisition costs, net of amortization                                   3,825,601          441,728
                                                                                  ------------     ------------

           Total expenses                                                           14,326,854       10,519,328

Income from continuing operations before provision for income tax expense            7,539,751        4,177,847
Provision for income tax expense                                                     2,754,075        1,546,817
                                                                                  ------------     ------------

           Net income from continuing operations                                     4,785,676        2,631,030

Discontinued operations:
     Income (loss) from discontinued operations (including gain on disposal of
       $1,630,000 and $0, respectively)                                              1,630,000          465,222
     Provision for income tax expense                                                  595,396          172,245
                                                                                  ------------     ------------
           Income on discontinued operations                                         1,034,604          292,977
                                                                                  ------------     ------------

           Net income                                                             $  5,820,280     $  2,924,007
                                                                                  ============     ============

Basic net income per share from continuing operations                             $       0.78     $       0.47
                                                                                  ============     ============

Basic net income per share from discontinued operations                           $       0.17     $       0.05
                                                                                  ============     ============

Basic net income per share                                                        $       0.95     $       0.52
                                                                                  ============     ============

Fully diluted net income per share from continuing operations                     $       0.73     $       0.43
                                                                                  ============     ============

Fully diluted net income per share from discontinued operations                   $       0.16     $       0.05
                                                                                  ============     ============

Fully diluted net income per share                                                $       0.89     $       0.48
                                                                                  ============     ============

Weighted average number of common shares outstanding                                 6,152,548        5,639,744
                                                                                  ============     ============

Weighted average number of common shares outstanding (assuming dilution)             6,532,023        6,087,228
                                                                                  ============     ============

Dividends declared per share                                                      $       0.08     $       0.08
                                                                                  ============     ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       5
<PAGE>

                          21ST CENTURY HOLDING COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          March 31
                                                                                     2005             2004
                                                                                 ------------     ------------
<S>                                                                              <C>              <C>
Cash flow from operating activities:
      Net income                                                                 $  5,820,280     $  2,924,007
      Adjustments to reconcile net income to net cash (used for)
         provided by operating activities:
           Amortization of investment (discount) premium, net                         (53,210)          65,642
           Depreciation and amortization of property plant and equipment, net         120,725          124,957
           Proceeds from sale of discontinued operations                           (1,630,000)              --
           Net realized investment gains (loss)                                       213,756          (49,627)
           Common Stock issued for interest on Notes                                  315,625          103,125
           Provision for credit losses, net                                           393,762          380,082
           Provision for uncollectible premiums receivable                           (374,470)         180,000
           Sale of equity in subsidiary                                              (255,081)              --
      Changes in operating assets and liabilities:
           Premiums receivable                                                     (1,745,075)      (1,055,584)
           Prepaid reinsurance premiums                                             2,675,295        3,768,152
           Due from reinsurers, net                                                 2,224,287           37,714
           Income taxes recoverable                                                 4,066,684          824,787
           Deferred income tax expense                                                726,008          375,187
           Policy acquisition costs, net of amortization                             (742,237)      (1,583,470)
           Goodwill                                                                   153,546               --
           Finance contracts receivable                                            (1,831,904)         375,043
           Other assets                                                               105,455          365,797
           Unpaid losses and loss adjustment expenses                             (19,804,284)      (2,896,133)
           Unearned premiums                                                        5,685,560        1,728,906
           Premium deposits                                                         1,006,983          118,399
           Income taxes payable                                                            --          809,860
           Bank overdraft                                                          (3,826,910)              --
           Accounts payable and accrued expenses                                   (1,444,974)         683,447
                                                                                 ------------     ------------
Net cash (used for) provided by operating activities                               (8,200,179)       7,280,291
                                                                                 ------------     ------------
Cash flow provided by (used in) investing activities:
      Proceeds from sale of investment securities available for sale               81,245,978       10,653,239
      Purchases of investment securities available for sale                       (77,438,691)     (26,456,146)
      Receivable for investments sold                                                      --        2,118,595
      Collection of mortgage loans                                                         --          137,571
      Purchases of property and equipment                                            (104,749)         (40,673)
      Proceeds from sale of discontinued operations                                 1,630,000               --
      Proceeds from sale of assets                                                     59,129               --
                                                                                 ------------     ------------
Net cash provided by (used in) investing activities                                 5,391,667      (13,587,414)
                                                                                 ------------     ------------
Cash flow provided by financing activities:
      Exercised stock options                                                         994,078        1,363,332
      Dividends paid                                                                 (506,749)        (453,619)
      Revolving credit outstanding                                                   (125,301)         (41,000)
                                                                                 ------------     ------------
Net cash provided by financing activities                                             362,028          868,713
                                                                                 ------------     ------------
Net (decrease) in cash and cash equivalents                                        (2,446,484)      (5,438,410)
Cash and cash equivalents at beginning of period                                    6,127,706        6,770,169
                                                                                 ------------     ------------
Cash and cash equivalents at end of period                                       $  3,681,222     $  1,331,759
                                                                                 ============     ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       6
<PAGE>

                          21ST CENTURY HOLDING COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              March 31
(continued)                                                                              2005            2004
                                                                                     ------------    ------------
Supplemental disclosure of cash flow information:
<S>                                                                                  <C>             <C>

      Cash paid during the period for:

           Interest                                                                  $     36,188    $     57,010
                                                                                     ============    ============
           Income taxes                                                              $         --    $    185,000
                                                                                     ============    ============
      Non-cash investing and finance activities:

           Accrued dividends payable                                                 $    445,103    $    430,475
                                                                                     ============    ============
           Retirement of subordinated debt by Common Stock issuance                  $  1,666,667    $    625,000
                                                                                     ============    ============
           Stock issued to pay interest on subordinated debt                         $    315,625    $    103,125
                                                                                     ============    ============
           Notes receivable, net of deferred gains, received for sale of agencies    $         --    $    107,034
                                                                                     ============    ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       7
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

(1)   ORGANIZATION AND BUSINESS

      The accompanying unaudited consolidated financial statements of 21st
Century Holding Company (the "Company") have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions for Form 10-Q and Rule 10-01 of Regulation
S-X. These financial statements do not include all information and notes
required by GAAP for complete financial statements, and should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K/A (Amendment No. 1) for the
year ended December 31, 2004. The December 31, 2004 year-end balance sheet data
was derived from audited financial statements but does not include all
disclosures required by GAAP. The financial information furnished reflects all
adjustments, consisting only of normal recurring accruals, which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented. The
results of operations are not necessarily indicative of the results of
operations that may be achieved in the future.

      We are an insurance holding company, which, through our subsidiaries and
our contractual relationships with our independent agents, control substantially
all aspects of the insurance underwriting, distribution and claims process. We
are authorized to underwrite personal automobile insurance, commercial general
liability insurance, homeowners' property and casualty insurance and mobile home
property and casualty insurance in various states with various lines of
authority through our wholly owned subsidiaries, Federated National Insurance
Company ("Federated National") and American Vehicle Insurance Company ("American
Vehicle").

      Federated National is authorized to underwrite personal automobile
insurance, homeowners' property and casualty insurance and mobile home property
and casualty insurance in Florida as an admitted carrier. American Vehicle is
authorized to underwrite personal automobile insurance and commercial general
liability insurance in Florida as an admitted carrier. American Vehicle is also
authorized to underwrite homeowners' property and casualty insurance and
commercial general liability insurance in Louisiana as an admitted carrier. In
addition, American Vehicle is authorized to underwrite commercial general
liability insurance in Georgia as a surplus lines carrier and in Texas as an
admitted carrier. American Vehicle is authorized as a surplus lines carrier for
commercial general liability insurance in Kentucky and Alabama, and we
anticipate that underwriting will begin in these states in the near future.
American Vehicle operations in Florida, Georgia and Louisiana are on going.
American Vehicle operations in Texas, Alabama and Kentucky are expected to begin
this year. American Vehicle has pending applications, in various stages of
approval, to be authorized as a surplus lines carrier in the states of
California and Virginia.

      During the three months ended March 31, 2005, 30.0%, 52.0%, 17.1 % and .9%
of the policies we underwrote were for personal automobile insurance,
homeowners' property and casualty insurance, commercial general liability
insurance, and mobile home property and casualty insurance, respectively. During
the three months ended March 31, 2004, 46.5%, 36.6%, 14.4 % and 2.5% of the
policies we underwrote were for personal automobile insurance, homeowners'
property and casualty insurance, commercial general liability insurance, and
mobile home property and casualty insurance, respectively. We internally process
claims made by our own and third-party insureds through our wholly owned claims
adjusting company, Superior Adjusting, Inc. ("Superior"). We also offer premium
financing to our own and third-party insureds through our wholly owned
subsidiary, Federated Premium Finance, Inc. ("Federated Premium").

      We market and distribute our own and third-party insurers' products and
our other services primarily in Central and South Florida, through contractual
relationships with a network of approximately 1,500 independent agents and a
select number of general agents.

      Assurance Managing General Agents, Inc., a wholly owned subsidiary, acts
as Federated National's and American Vehicle's exclusive managing general agent.
Assurance MGA currently provides all underwriting policy administration,
marketing, accounting and financial services to Federated National and American
Vehicle, and participates in the negotiation of reinsurance contracts. Assurance
MGA generates revenue through a 6% commission fee from the insurance company's
net written premium, policy fee income of $25 per policy and other
administrative fees from the marketing of companies' products through the
Company's distribution network. The 6% commission fee from Federated National
and American Vehicle was made effective January 1, 2005. Assurance MGA plans to
establish relationships with additional carriers and add additional insurance
products in the future.


                                       8
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

      (A) CRITICAL ACCOUNTING POLICIES

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make estimates and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Future events and
their effects cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.

      The most significant accounting estimates inherent in the preparation of
our financial statements include estimates associated with our evaluation of the
determination of liability for unpaid losses and loss adjustment expenses (LAE).
In addition, significant estimates form the basis for our reserves with respect
to finance contracts, premiums receivable, deferred income taxes, deferred
policy acquisition costs and loss contingencies. Various assumptions and other
factors underlie the determination of these significant estimates. The process
of determining significant estimates is fact specific and takes into account
factors such as historical experience, as well as current and expected economic
conditions. We periodically re-evaluate these significant factors and make
adjustments where facts and circumstances dictate.

      (B) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

      In December 2004, the Financial Accounting Standards Board ("FASB")
revised SFAS No. 123, Share-Based Payments ("SFAS No. 123R"). This statement
eliminates the option to apply the intrinsic value measurement provisions of APB
No. 25 to stock compensation awards issued to employees. Rather, SFAS No. 123R
requires companies to measure the cost of employee services received in exchange
for an award of equity instruments based on the grant date fair value of the
award. That cost will be recognized over the period during which an employee is
required to provide services in exchange for the award - the requisite service
period (usually the vesting period). SFAS No. 123R will also require companies
to measure the cost of employee services received in exchange for employee stock
purchase plan awards. SFAS No. 123R will be effective for 21st Century's fiscal
year beginning January 1, 2006 as subsequently extended by the SEC pursuant to
its April 13, 2005 announcement. We have not yet determined the effect on us of
the adoption of SFAS No. 123R.

      (C) STOCK OPTIONS

      The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by APB Opinion No. 25, under which no
compensation cost for stock options is recognized for stock option awards
granted to employees at or above fair market value. Had compensation expense for
the Company's stock compensation plans been determined based upon fair values at
the grant dates for awards under the plan in accordance with SFAS No. 123, the
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated below.

                                           For the three months ended March 31,
                                           ------------------------------------
                                                   2005             2004
                                               ------------     ------------
Net Income as reported                         $  5,820,280     $  2,924,007
Compensation, net of tax effect                     653,931          212,707
                                               ------------     ------------
Pro forma net income                           $  5,166,349     $  2,711,300
                                               ============     ============
Net income per share
As reported - Basic                            $       0.95     $       0.52
As reported - Diluted                          $       0.89     $       0.48
Pro forma - Basic                              $       0.84     $       0.48
Pro forma - Diluted                            $       0.79     $       0.45

Additional stock option awards are anticipated in future years.


                                       9
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      The weighted average fair value for new options granted during the three
months ending March 31, 2005, estimated on the date of grant using the
Black-Scholes option-pricing model was $20.00. In connection with the sale of
Express Tax Service, Inc. and EXPRESSTAX Franchise Corporation on January 1,
2005, 105,000 Incentive Stock Options under the 2002 Stock Option plan were
cancelled and reissued as Non-Qualified Stock Options. The weighted average fair
value of options granted during 2004 as estimated on the date of grant using the
Black-Scholes option-pricing model was $6.13 to $18.26 in 2004. The fair value
of options granted is estimated on the date of grant using the following
assumptions:

                                 March 31, 2005         December 31, 2004
                                 --------------         -----------------
Dividend yield                   2.33% to 2.41%          2.24% to 3.19%
Expected volatility             95.82% to 96.76%        96.76% to 103.20%
Risk-free interest rate          3.34% to 3.86%          2.13% to 3.25%
Expected life (in years)          2.60 to 2.63            2.60 to 3.60

      (D) EARNINGS PER SHARE

      Basic earnings per share ("Basic EPS") is computed by dividing net income
by the weighted average number of common shares outstanding during each period
presented. Diluted earnings per share ("Diluted EPS") is computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period presented; outstanding warrants
and stock options are considered common stock equivalents and are included in
the calculation using the treasury stock method. Additionally, when applicable,
we include in our computation of the weighted average number of common shares
outstanding all common stock issued in connection with the repayment of our
Subordinated note.

      (E) RECLASSIFICATIONS

      Certain amounts in 2004 financial statements have been reclassified to
conform to the 2005 presentation.

(3)   REVOLVING CREDIT OUTSTANDING

      Federated Premium's operations are funded by a revolving loan agreement
("Revolving Agreement") with FlatIron Funding Company LLC ("FlatIron"). The
Revolving Agreement is structured as a sale of contracts receivable under a sale
and assignment agreement with Westchester Premium Acceptance Corporation
("WPAC") (a wholly-owned subsidiary of FlatIron), which gives WPAC the right to
sell or assign these contracts receivable. Federated Premium, which services
these contracts, has recorded transactions under the Revolving Agreement as
secured borrowings.

      During September 2004, we negotiated a new revolving loan agreement in
which the maximum credit commitment available to us was reduced at our request
to $2.0 million with built-in options to incrementally increase the maximum
credit commitment up to $4.0 million over the next three years. Our lender could
determine to change our available credit based on a number of factors, including
the A.M. Best ratings of Federated National and American Vehicle. Pursuant to
our loan agreement, if the A.M. Best rating of Federated National falls below a
"C," or if the financial condition of American Vehicle, as determined by our
lender (in its sole and absolute discretion) suffers a material adverse change,
then under the terms of our loan agreement, policies written by that subsidiary
will no longer be eligible collateral, causing our available credit to be
reduced if we do not have other collateral qualifying as eligible collateral. As
of December 31, 2004, policies written by Federated National were not considered
by our lender to be eligible collateral. In March 2005, our lender agreed to
permit policies written by Federated National to be eligible collateral and
agreed to increase our total available credit by $0.5 million from $2.0 million
to $2.5 million. We currently believe that this higher available credit limit
will be sufficient based on our current operations. If policies written by our
insurance subsidiaries again do not qualify as eligible collateral under our
loan agreement and we are not able to obtain working capital from our operations
or other sources, then we would have to restrict our growth and, possibly, our
operations.


                                       10
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      The amounts of WPAC's advances are subject to availability under a
borrowing base calculation, with maximum advances outstanding not to exceed the
maximum credit commitment. The annual interest rate on advances under the
Revolving Agreement equals the prime rate plus additional interest varying from
1.25% to 3.25% based on the prior month's ratio of contracts receivable related
to insurance companies with an A. M. Best rating of B or lower to total
contracts receivable. The effective interest rate on this line of credit, based
on our average outstanding borrowings under the Revolving Agreement, was 6.94%
and 5.59% for the three months ended March 31, 2005 and 2004, respectively.

      Outstanding borrowings under the Revolving Agreement as of March 31, 2005
were approximately $2.0 million. Outstanding borrowings as of December 31, 2004
were approximately $2.1. Outstanding borrowings in excess of the $2.0 million
credit limits totaled $148,542 as of December 31, 2004. The excess amount was
permissible by reason of a compensating cash balance of $156,095 for December 31
2004, that was held for the benefit of WPAC and was included in other assets.
Interest expense on this revolving credit line for the three months ended March
31, 2005 and March 31, 2004 totaled approximately $36,000 and $57,000,
respectively.

(4)   COMMITMENTS AND CONTINGENCIES

      We are involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on our
consolidated financial position, results of operations, or liquidity.

      In June 2000, a lawsuit was filed against us, our directors and our
executive officers seeking compensatory damages in an undisclosed amount on the
basis of allegations that our amended registration statement dated November 4,
1998 was inaccurate and misleading concerning the manner in which we recognized
ceded insurance commission income, in violation of Sections 11 and 15 of the
Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934. The lawsuit was filed in the United States District Court for the
Southern District of New York. The plaintiff class purportedly includes
purchasers of our common stock between November 5, 1998 and August 13, 1999. The
Court granted the plaintiffs class status.

      Specifically, the plaintiffs alleged that we recognized ceded commission
income on a written basis, rather than amortized on a pro rata basis. The
plaintiffs alleged that this was contrary to the Statement of Financial
Accounting Concepts Nos. 1, 2 and 5. We believe, however, that the lawsuit was
without merit and we have vigorously defended the action, because we reasonably
relied upon outside subject matter experts to make these determinations at the
time. We have also since accounted for ceded commission on a pro rata basis and
have done so since these matters were brought to our attention in 1998.
Nevertheless, we have also continued to actively participate in settlement
negotiations with the plaintiffs and have agreed to settle the case for
$525,000. The Court has issued a Preliminary Order approving the settlement and
the full amount was funded in February 2005. Notices have been sent to class
members and the Court has set the Final Settlement Hearing for July 26, 2005. We
anticipate our active involvement with this matter to be concluded. We had
reserved and charged against fourth quarter 2003 earnings $600,000 for the
potential settlement and associated costs.

      As a direct premium writer in the State of Florida, we are required to
participate in certain insurer solvency pools under Florida Statutes 631.57(3)
(a). Participation in these pools is based on our written premium by line of
business to total premiums written statewide by all insurers. Participation may
result in assessments against us.

      Federated National and American Vehicle are also required to participate
in an insurance apportionment plan under Florida Statutes 627.351 referred to as
a Joint Underwriting Association Plan ("JUA Plan"). The JUA Plan provides for
the equitable apportionment of any profits realized, or losses and expenses
incurred, among participating insurers. In the event of an underwriting deficit
incurred by the JUA Plan and the deficit is not recovered through the
policyholders in the JUA Plan, such deficit shall be recovered from the
companies participating in the JUA Plan in the proportion that the net direct
premiums of each such member written during the preceding calendar year bear to
the aggregate net direct premiums written in this state by all members of the
JUA Plan. No assessments have been incurred by either insurance company through
the date of issuance of this report.


                                       11
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

(5)   COMPREHENSIVE INCOME

      For the three months ended March 31, 2005 and 2004, comprehensive income
consisted of the following:

                                                   Three months ended March 31,

                                                      2005             2004
                                                  ------------     ------------

Net income                                        $  5,820,280     $  2,924,007
Change in net unrealized gain (loss) on
  investments available for sale                      (737,566)         809,549
                                                  ------------     ------------
Comprehensive income, before tax                     5,082,714        3,733,556
Income tax benefit (expense) related to
  items of other comprehensive income                  278,520         (305,702)
                                                  ------------     ------------
Comprehensive income                              $  5,361,234     $  3,427,854
                                                  ============     ============

(6)   SEGMENT INFORMATION

      The Company and its subsidiaries operate principally in two business
segments consisting of insurance and financing. The insurance segment consists
of underwriting through Federated National and American Vehicle, managing
general agent operations through Assurance MGA and claims processing through
Superior. The insurance segment sells personal automobile, homeowner's, and
commercial general liability lines of property and casualty insurance products
and includes substantially all aspects of the insurance and claims process. The
financing segment consists of premium financing through Federated Premium. The
financing segment provides premium financing to the Company's insureds and is
marketed through the Company's relationship with its network of non-affiliated
agencies.

      The accounting policies of the segments are the same as those described in
the summary of significant accounting policies and practices. The Company
evaluates its business segments based on GAAP pretax operating earnings.
Corporate overhead expenses are allocated to business segments. Transactions
between reportable segments are accounted for at fair value.

      Operating segments that are not individually reportable, based on the
extent of the current operations in such segments, are included in the "All
Other" category. The "All Other" category currently includes the operations of
21st Century Holding Company, the parent company.

      Information regarding components of operations for the three months ended
March 31, 2005 and 2004 follows:


                                       12
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

                                                 Three months ended March 31,
                                                 ----------------------------
                                                    2005             2004
                                                ------------     ------------
Total revenue
    Insurance segment                           $ 22,239,071     $ 14,623,078
    Financing segment                                869,713          796,861
    All other segments                               463,376        1,196,011
                                                ------------     ------------
         Total operating segments                 23,572,160       16,615,950
    Intercompany eliminations                     (1,705,555)      (1,918,775)
                                                ------------     ------------
         Total revenues                         $ 21,866,605     $ 14,697,175
                                                ============     ============

Earnings before income taxes
    Insurance segment                           $  7,982,339     $  3,707,876
    Financing segment                                218,812          137,921
    All other segments                              (661,400)         332,050
                                                ------------     ------------
         Total earnings before income taxes     $  7,539,751     $  4,177,847
                                                ============     ============

      Information regarding total assets as of March 31, 2005 and December 31,
2004 as follows:

                                              March 31, 2005   December 31, 2004
                                               ------------       ------------
Total assets
    Insurance segment                          $128,000,510       $134,894,764
    Financing segment                             9,773,506          8,536,786
    All other segments                            8,465,065         15,460,463
                                               ------------       ------------
         Total operating segments               146,239,081        158,892,013
    Intercompany eliminations                     4,761,498          4,709,359
                                               ------------       ------------
         Total assets                          $151,000,579       $163,601,372
                                               ============       ============

(7)   REINSURANCE AGREEMENTS

      We follow industry practice of reinsuring a portion of our risks and
paying for that protection based upon premiums received on all policies subject
to such reinsurance. Reinsurance involves an insurance company transferring or
"ceding" all or a portion of its exposure on insurance underwritten by it to
another insurer, known as a "reinsurer." The reinsurer assumes a portion of the
exposure in return for a portion, or quota share, of the premium, and pays the
ceding company a commission based upon the amount of insurance ceded. The ceding
of insurance does not legally discharge the insurer from its primary liability
for the full amount of the policies. If the reinsurer fails to meet its
obligations under the reinsurance agreement, the ceding company is still
required to pay the loss.

      Reinsurance is ceded under separate contracts or "treaties" for the
separate lines of business underwritten and terms of coverage. The Company
collectively ceded $2.9 million and $0.9 million in premiums written for the
three months ended March 31, 2005 and 2004, respectively. During the three
months ended March 31, 2005 and 2004, respectively, we primarily reinsured
Federated National's homeowners' insurance lines of business. The Company's
reinsurance for homeowners' insurance is with several participants, all of which
are AM Best rated "A" or better.

      In August and September 2004, the State of Florida experienced four
hurricanes, Charley, Frances, Ivan and Jeanne. One of our subsidiaries,
Federated National, incurred significant losses relative to its homeowners' and
mobile homeowners' insurance lines of business. Approximately 8,500
policyholders have filed hurricane-related claims totaling an estimated $117.2
million, of which we estimate that our share of the costs associated with these
hurricanes will be approximately $45.0 million, net of reinsurance recoveries
and amortized reinstatement premiums.


                                       13
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      For each hurricane season, the excess of loss treaty will insure us for
$24 million with the Company retaining the first $10 million of loss and LAE.
The treaty has a provision which, for an additional prorated premium will insure
us for another $24 million of loss and LAE for subsequent occurrences with the
Company retaining the first $10 million in loss and LAE. As a result of the loss
and LAE incurred in connection with the Hurricanes Charles and Frances the
Company has exhausted its recoveries of $48 million under the terms of this
treaty.

      The excess of loss treaty also insures us for an additional $34 million in
excess of the Company's $10 million retention plus the next $24 million as
described above. Accordingly, loss and LAE incurred for Hurricanes Ivan and
Jeanne and any subsequent catastrophic events through June 30, 2005, up to $34
million each, are the responsibility of the Company, as illustrated in the
accompanying table.

                                         Gross      Reinsurance        Net
Hurricane                               Losses      Recoveries       Losses
---------                               ------      ----------       ------
                                              (Dollars in Millions)

Charley (August 13, 2004)              $   50.9      $   40.9      $   10.0
Frances (September 3, 2004)                41.3          31.3          10.0
Ivan (September 14, 2004)                  14.2                        14.2
Jeanne (September 25, 2004)                10.8            --          10.8
                                       --------      --------      --------

Total Loss Estimate                    $  117.2      $   72.2      $   45.0
                                       ========      ========      ========

      Furthermore, as a result of the 2004 hurricanes, we incurred a net
reinstatement reinsurance premium of $3.0 million that is amortized through
operations from the reinstatement date of August 13, 2004 to June 30, 2005.

      We continue to participate in the Florida Hurricane Catastrophe Fund
("FHCF") and we subscribe to an excess of loss reinsurance policy to protect our
interest in the insurable risks associated with our homeowner and mobile home
owner insurance products. Maximum coverage afforded from the combined policies
of our FHCFand excess of loss policies in effect for varying dates from June 1,
2004 to June 30, 2005 total approximately $200.0 million where we will retain
the first $10 million of insurable losses on each event. However, loss and LAE
incurred for Hurricanes Ivan and Jeanne and any subsequent catastrophic events
through June 30, 2005, up to $34 million each, are the responsibility of the
Company. Our amount of reinsurance coverage was determined by subjecting our
homeowner and mobile homeowner exposures to statistical forecasting models that
are designed to quantify a catastrophic event in terms of the frequency of a
storm occurring once in every "n" years. Our reinsurance coverage contemplated a
catastrophic event occurring once every 100 years.

      We are selective in choosing a reinsurer and consider numerous factors,
the most important of which are the financial stability of the reinsurer, their
history of responding to claims and their overall reputation. In an effort to
minimize our exposure to the insolvency of a reinsurer, we evaluate the
acceptability and review the financial condition of the reinsurer at least
annually. Our current policy is to use only reinsurers that have an A.M. Best
rating of "A" (Excellent) or better.

      The Company's reinsurance for automobile insurance was ceded with
Transatlantic Reinsurance Company ("Transatlantic"), an A+ rated reinsurance
company. During 2004 and through the date of this report, Federated National and
American Vehicle have not reinsured any of its automobile insurance.

(8)   STOCK COMPENSATION PLANS

      We implemented a stock option plan in November 1998 that provides for the
granting of stock options to officers, key employees and consultants. The
objectives of this plan include attracting and retaining the best personnel,
providing for additional performance incentives, and promoting our success by
providing employees the opportunity to acquire common stock. Options outstanding
under this plan have been granted at prices which are either equal to or above
the market value of the stock on the date of grant, vest over a four-year
period, and expire ten years after the grant date. Under this plan, we are
authorized to grant options to purchase up to 900,000 common shares, and, as of
March 31, 2005 and December 31, 2004, we had outstanding exercisable options to
purchase 140,850 and 198,275 shares, respectively.


                                       14
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      In 2001, we implemented a franchisee stock option plan that provides for
the granting of stock options to individuals purchasing Company owned agencies
which are then converted to franchised agencies. The purpose of the plan is to
advance our interests by providing an additional incentive to encourage managers
of Company owned agencies to purchase the agencies and convert them to
franchises. Options outstanding under the plan have been granted at prices which
are above the market value of the stock on the date of grant, vest over a
ten-year period, and expire ten years after the grant date. Under this plan, we
are authorized to grant options to purchase up to 988,500 common shares, though
in connection with our sale of our franchise operations we do not anticipate
additional options to be granted under this plan. As of March 31, 2005 and
December 31, 2004, we had outstanding exercisable options to purchase 15,000
shares.

      In 2002, we implemented the 2002 Option Plan. The purpose of this Plan is
to advance our interests by providing an additional incentive to attract, retain
and motivate highly qualified and competent persons who are key to the Company,
including key employees, consultants, independent contractors, and Officers and
Directors, upon whose efforts and judgment our success is largely dependent, by
authorizing the grant of options to purchase Common Stock to persons who are
eligible to participate hereunder, thereby encouraging stock ownership by such
persons, all upon and subject to the terms and conditions of the Plan. Options
outstanding under the plan have been granted at prices which are above the
market value of the stock on the date of grant, vest over a five-year period,
and expire six years after the grant date. Under this plan, the Company is
authorized to grant options to purchase up to 1,800,000 common shares, and, as
of March 31, 2005 and December 31, 2004, we had outstanding exercisable options
to purchase 799,059 and 906,300 shares, respectively.

      Activity in the Company's stock option plans for the period from January
1, 2003 to March 31, 2005, is summarized below:

<TABLE>
<CAPTION>
                                 ---------------------------  ------------------------------  ------------------------------
                                        1998 Plan                  2001 Franchisee Plan                2002 Plan
                                 ---------------------------  ------------------------------  ------------------------------
                                             Weighted Average               Weighted Average                Weighted Average
                                Number of    Option Exercise  Number of     Option Exercise    Number of    Option Exercise
                                 Shares           Price         Shares           Price          Shares           Price
                               ----------    ---------------  ----------   -----------------  ----------    ----------------
                                  <C>          <C>                <C>         <C>                <C>          <C>
Outstanding at January 1,
2004                              408,530      $     6.67         39,960      $     7.61         938,100      $     9.20
Granted                                --                             --                         178,750      $    18.02
Exercised                        (193,755)     $     6.67        (24,960)     $     6.67        (136,300)     $     9.16
Cancelled                         (16,500)     $     6.67             --                         (74,250)     $    10.59
                               ----------                     ----------                      ----------
Outstanding at December 31,
2004                              198,275      $     6.67         15,000      $     9.17         906,300      $    10.74
Granted                                --                             --                         110,000      $     9.66
Exercised                         (57,425)     $     6.67             --                         (69,591)     $     9.23
Cancelled                                                             --                        (147,650)     $    10.69
                                                              ----------                      ----------
Outstanding at March 31,
2005                              140,850      $     6.67         15,000      $     9.17         799,059      $    10.80
                               ==========                     ==========                      ==========
</TABLE>

      Options outstanding as of March 31, 2005 are exercisable as follows:


                                       15
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                 --------------------------------------------------------------------------------------------
                                        1998 Plan                  2001 Franchisee Plan                2002 Plan
                                 --------------------------------------------------------------------------------------------
                                             Weighted Average               Weighted Average                 Weighted Average
                                Number of    Option Exercise   Number of    Option Exercise    Number of     Option Exercise
                                 Shares           Price         Shares           Price          Shares            Price
                               ----------    ---------------  ----------   -----------------  ----------    ----------------
                                  <C>          <C>                <C>         <C>                <C>           <C>
Options Exercisable at:
   March 31, 2005                 110,850      $     6.67         15,000      $     6.67         474,809       $     8.90
 December 31, 2005                  1,500      $     6.67             --      $     6.67          71,350       $     8.90
 December 31, 2006                 28,500      $     6.67             --      $     6.67          88,550       $     8.90
 December 31, 2007                             $     6.67             --      $     6.67          88,550       $     8.90
 December 31, 2008                     --      $       --             --      $     6.67          43,700       $     8.90
     Thereafter                        --      $       --             --      $     6.67          32,100       $     8.90
                               ----------                     ----------                      ----------

Total options exercisible         140,850                         15,000                         799,059
                               ==========                     ==========                      ==========
</TABLE>

      The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by APB Opinion No. 25, under which no
compensation cost for stock options is recognized for stock option awards
granted to employees at or above fair market value. Had compensation expense for
the Company's stock compensation plans been determined based upon fair values at
the grant dates for awards under the plan in accordance with SFAS No. 123, the
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated below.

                               For the three months ended March 31,
                               ------------------------------------
                                        2005            2004
                                   ------------    ------------
Net Income as reported             $  5,820,280    $  2,924,007
Compensation, net of tax effect         653,931         212,707
                                   ------------    ------------
Pro forma net income               $  5,166,349    $  2,711,300
                                   ============    ============
Net income per share
As reported - Basic                $       0.95    $       0.52
As reported - Diluted              $       0.89    $       0.48
Pro forma - Basic                  $       0.84    $       0.48
Pro forma - Diluted                $       0.79    $       0.45

      Additional stock option awards are anticipated in future years.

      The weighted average fair value for new options granted during the three
months ending March 31, 2005, estimated on the date of grant using the
Black-Scholes option-pricing model was $20.00. In connection with the sale of
Express Tax Service, Inc. and EXPRESSTAX Franchise Corporation on January 1,
2005, 105,000 Incentive Stock Options under the 2002 Stock Option plan were
cancelled and reissued as Non-Qualified Stock Options. The weighted average fair
value of options granted during 2004 as estimated on the date of grant using the
Black-Scholes option-pricing model was $6.13 to $18.26 in 2004. The fair value
of options granted is estimated on the date of grant using the following
assumptions:

                                 March 31, 2005        December 31, 2004
                                 --------------        -----------------
Dividend yield                   2.33% to 2.41%         2.24% to 3.19%
Expected volatility             95.82% to 96.76%       96.76% to 103.20%
Risk-free interest rate          3.34% to 3.86%         2.13% to 3.25%
Expected life (in years)          2.60 to 2.63           2.60 to 3.60

      Summary information about the Company's stock options outstanding at March
31, 2005:


                                       16
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>

                                                                                  Weighted
                                                             Weighted Average      Average
                          Range of           Outstanding at    Contractual        Exercise   Exercisable at
                       Exercise Price        March 31, 2005  Periods in Years       Price    March 31, 2005
                       --------------        --------------  ----------------       -----    --------------
<C>                  <C>                        <C>               <C>            <C>             <C>
1998 Plan            $      6.67                140,850           2.74           $    6.67       110,850
2001 Franchise Plan  $ 6.67 to $9.17             15,000           3.21           $    9.17        15,000
2002 Plan            $ 8.33 - $20.00            799,059           2.63           $   10.80       474,809
</TABLE>

(9)   SUBORDINATED DEBT

      On July 31, 2003, we completed a private placement of our 6% Senior
Subordinated Notes (the "July 2003 Notes"), which were offered and sold to
accredited investors as units consisting of one July 2003 Note with a principal
amount of $1,000 and warrants (the "2003 Warrants") to purchase shares of our
Common Stock. We sold an aggregate of $7.5 million of July 2003 Notes in this
placement, which resulted in proceeds to us (net of placement agent fees of
$450,724 and offering expenses of $110,778) of $6,938,498.

      The July 2003 Notes pay interest at the annual rate of 6%, are
subordinated to senior debt of the Company, and mature on July 31, 2006.
Quarterly payments of principal and interest due on the July 2003 Notes may be
made in cash or, at our option, in shares of our Common Stock. If paid in shares
of Common Stock, the number of shares to be issued shall be determined by
dividing the payment due by 95% of the weighted-average volume price for the
Common Stock on Nasdaq as reported by Bloomberg for the 20 consecutive trading
days preceding the payment date.

      The 2003 Warrants issued in this placement to the purchasers of the July
2003 Notes and to the placement agent in the offering, J. Giordano Securities
Group ("J. Giordano"), each entitle the holder to purchase 3/4 of one share of
our Common Stock at an exercise price of $12.74 per whole share (as adjusted for
the Company's three-for-two stock split) until July 31, 2006. The total number
of shares issuable upon exercise of 2003 Warrants issued to the purchasers of
the July 2003 Notes and to J. Giordano totaled 507,491. GAAP requires that
detachable warrants be valued separately from debt and included in paid-in
capital. Based on the terms of the purchase agreement with the investors in the
private placement, management believes that the July 2003 Warrants had zero
value at the date of issuance.

      On September 30, 2004, we completed a private placement of 6% Senior
Subordinated Notes due September 30, 2007 (the "September 2004 Notes"). These
notes were offered and sold to accredited investors as units consisting of one
September 2004 Note with a principal amount of $1,000 and warrants to purchase
shares of our Common Stock (the "2004 Warrants"), the terms of which are similar
to our July 2003 Notes and 2003 Warrants, except as described below. We sold an
aggregate of $12.5 million of units in this placement, which resulted in
proceeds (net of placement agent fees of $700,000 and offering expenses of
$32,500) to us of $11,767,500.

      The September 2004 Notes pay interest at the annual rate of 6%, mature on
September 30, 2007, and rank pari passu in terms of payment and priority to the
July 2003 Notes. Quarterly payments of principal and interest due on the
September 2004 Notes, like the July 2003 Notes, may be made in cash or, at our
option, in shares of our Common Stock. If paid in shares of Common Stock, the
number of shares to be issued shall be determined by dividing the payment due by
95% of the weighted-average volume price for the Common Stock on Nasdaq as
reported by Bloomberg for the 20 consecutive trading days preceding the payment
date.

      The 2004 Warrants issued to the purchasers of the September 2004 Notes and
to the placement agent in the offering, J. Giordano, each entitle the holder to
purchase one share of our Common Stock at an exercise price of $12.75 per share
and will be exercisable until September 30, 2007. The number of shares issuable
upon exercise of the 2004 Warrants issued to purchasers equaled $12.5 million
divided by the exercise price of the warrants, and totaled 980,392. The number
of shares issuable upon exercise of the 2004 Warrants issued to J. Giordano
equaled $500,000 divided by the exercise price of the warrants, and totaled
39,216. GAAP requires that detachable warrants be valued separately from debt
and included in paid-in capital. Based on the terms of the purchase agreement
with the investors in the private placement, management believes that the
September 2004 Warrants had zero value at the date of issuance.


                                       17
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

         The terms of the 2004 Warrants provide for adjustment of the exercise
price and the number of shares issuable thereunder upon the occurrence of
certain events typical for private offerings of this type.

         As indicated on the table below, we paid, pursuant to the terms of the
July 2003 Notes and in accordance with the contractual computations, the
quarterly payments of principal and interest due in shares of our Common Stock.

Quarterly payment due date       2005            2004
--------------------------   ------------    ------------
January 31,                        55,537          54,014
April 30,                                          53,729
July 31,                                           49,965
October 31,                            --          69,200
                             ------------    ------------

Total common stock issued          55,537         226,908
                             ============    ============

      As indicated on the table below, we paid, pursuant to the terms of the
September 2004 Notes and in accordance with the contractual computations, the
quarterly payments of principal and interest due in shares of our Common Stock.

Quarterly payment due date        2005
--------------------------        ----
January 31,                       103,870
April 30,
July 31,
October 31,                            --
                             ------------

Total common stock issued         103,870
                             ============

      The Company retains the privilege of repaying these notes in cash or by
the issuance of common stock. Historically, we have made our quarterly
installment payments by issuing common stock. Our next regularly scheduled
payment of principal and interest in connection with these notes was due on
April 30, 2005 and was paid in cash.

      For the July 2003 Notes, the quarterly principal and interest payments
totaling approximately $0.7 million per payment are due quarterly for three
years with the last installment due on July 31, 2006. The scheduled loan
payments for the next three years are as follows:

               For the period
               --------------
Year ending December 31, 2005    $  2,500,000
Year ending December 31, 2006       1,875,000
                                 ------------

                        Total    $  4,375,000
                                 ============

      For the September 2004 Notes, the quarterly principal and interest
payments, totaling approximately $1.2 million per payment, are due quarterly for
three years with the last installment due on September 30, 2007. The scheduled
loan payments for the next three years are as follows:

               For the period
               --------------
Year ending December 31, 2005    $  4,166,668
Year ending December 31, 2006       4,166,668
Year ending December 31, 2007       4,166,664
                                 ------------

                                 $ 12,500,000
                                 ============


                                       18
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

(10)  DISCONTINUED OPERATIONS

      The Company completed the transaction contemplated by the Stock Purchase
and Redemption Agreement dated January 3, 2005 with Express Tax Service, Inc.,
("Express Tax"), Robert J. Kluba and Robert H. Taylor. The Company was the
beneficial and record owner of 80% of the issued and outstanding stock of
Express Tax, which in turn owned 100% of the issued and outstanding stock of
EXPRESSTAX Franchise Corporation ("EXPRESSTAX"). Mr. Kluba was the President and
a director of Express Tax and EXPRESSTAX, and the owner of the remaining 20% of
the issued and outstanding stock of Express Tax. The sale of the assets closed
on January 13, 2005 with an effective date of January 1, 2005. For more
information, see Note 24, "Discontinued Operations".

      The Company received at closing a cash payment of $311,351, which
reflected the purchase price of $660,000 for all of the Company's common stock
in Express Tax, less $348,649 representing intercompany receivables owed to
Express Tax by the Company. The Company also received a payment of $1,200,000 in
exchange for the Company's agreement not to compete with the current business of
Express Tax and EXPRESSTAX for five years following the closing. The Company's
investment in its subsidiary totaled $230,000.

      In connection with the transaction, the Company has extended the
expiration dates for the 75,000 outstanding stock options previously granted to
Mr. Kluba and the 30,000 outstanding stock options previously granted to Mr.
Kluba's wife, such that 80% of such stock options shall expire, if not
exercised, on the first anniversary date of the closing and the remaining 20% of
such stock options shall expire on the second anniversary date of the closing;
none of these options shall be exercisable for the six-month period following
the closing.


                                       19
<PAGE>

                          21st Century Holding Company
                Management's Discussion and Analysis of Financial
                        Condition and Results of Operations

General information about 21st Century Holding Company can be found at
www.21stcenturyholding.com. We make our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to these
reports filed or furnished pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 available free of charge on our web site, as soon as
reasonably practicable after they are electronically filed with the SEC.

Item 2

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Forward-Looking Statements

      Statements in this report or in documents that are incorporated by
reference that are not historical fact are forward-looking statements that 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,
without limitation, uncertainties related to estimates, assumptions and
projections generally; inflation and other changes in economic conditions
(including changes in interest rates and financial markets); pricing competition
and other initiatives by competitors; ability to obtain regulatory approval for
requested rate changes and the timing thereof; legislative and regulatory
developments; the outcome of litigation pending against us, including the terms
of any settlements; risks related to the nature of our business; dependence on
investment income and the composition of our investment portfolio; the adequacy
of our liability for loss and loss adjustment expense; insurance agents; claims
experience; ratings by industry services; catastrophe losses; reliance on key
personnel; weather conditions (including the severity and frequency of storms,
hurricanes, tornadoes and hail); changes in driving patterns and loss trends;
acts of war and terrorist activities; courts decisions and trends in litigation
and health care and auto repair costs; and other matters described from time to
time by us in this report, and our other filings with the SEC.

      You are cautioned not to place reliance on these forward-looking
statements, which are valid only as of the date they were made. The Company
undertakes no obligation to update or revise any forward-looking statements to
reflect new information or the occurrence of unanticipated events or otherwise.
In addition, readers should be aware that GAAP prescribes when a company may
reserve for particular risks, including litigation exposures. Accordingly,
results for a given reporting period could be significantly affected if and when
a reserve is established for a major contingency. Reported results may therefore
appear to be volatile in certain accounting periods.

Overview

      We are an insurance holding company, which, through our subsidiaries and
our contractual relationships with our independent agents, control substantially
all aspects of the insurance underwriting, distribution and claims process. We
are authorized to underwrite personal automobile insurance, commercial general
liability insurance, homeowners' property and casualty insurance and mobile home
property and casualty insurance in various states with various lines of
authority through our wholly owned subsidiaries, Federated National Insurance
Company ("Federated National") and American Vehicle Insurance Company ("American
Vehicle").

      Federated National is authorized to underwrite personal automobile
insurance, homeowners' property and casualty insurance and mobile home property
and casualty insurance in Florida as an admitted carrier. American Vehicle is
authorized to underwrite personal automobile insurance and commercial general
liability insurance in Florida as an admitted carrier. American Vehicle is also
authorized to underwrite homeowners' property and casualty insurance and
commercial general liability insurance in Louisiana as an admitted carrier. In
addition, American Vehicle is authorized to underwrite commercial general
liability insurance in Georgia as a surplus lines carrier and in Texas as an
admitted carrier. American Vehicle is authorized as a surplus lines carrier for
commercial general liability insurance in Kentucky and Alabama, and we
anticipate that underwriting will begin in these states in the near future.
American Vehicle operations in Florida, Georgia and Louisiana are on-going.
American Vehicle operations in Texas, Alabama and Kentucky are expected to begin
this year. American Vehicle has pending applications, in various stages of
approval, to be authorized as a surplus lines carrier in the states of
California and Virginia.


                                       20
<PAGE>

                          21st Century Holding Company
                Management's Discussion and Analysis of Financial
                        Condition and Results of Operations

      During the three month ended March 31, 2005, 30.0%, 52.0%, 17.1% and .9%
of the policies we underwrote were for homeowners' property and casualty
insurance, personal automobile insurance, commercial general liability
insurance, and mobile home property and casualty insurance, respectively. During
the year ended December 31, 2004, 62.0%, 24.1%, 12.4 % and 1.5% of the policies
we underwrote were for homeowners' property and casualty insurance, personal
automobile insurance, commercial general liability insurance, and mobile home
property and casualty insurance, respectively.

      We market and distribute our own and third-party insurers' products and
our other services primarily in Central and South Florida, through contractual
relationships with approximately 1,500 independent agents and a select number of
general agents.

      Assurance MGA, a wholly owned subsidiary, acts as Federated National's and
American Vehicle's exclusive managing general agent. Assurance MGA currently
provides all underwriting policy administration, marketing, accounting and
financial services to Federated National and American Vehicle, and participates
in the negotiation of reinsurance contracts. Assurance MGA generates revenue
through a 6% commission fee from the insurance company's net written premium,
policy fee income of $25 per policy and other administrative fees from the
marketing of companies' products through the Company's distribution network. The
6% commission fee from Federated National and American Vehicle was made
effective January 1, 2005. Assurance MGA plans to establish relationships with
additional carriers and add additional insurance products in the future.

      Our business, results of operations and financial condition are subject to
fluctuations due to a variety of factors. Abnormally high severity or frequency
of claims in any period could have a material adverse effect on our business,
results of operations and financial condition. Also, if our estimated
liabilities for unpaid losses and LAE are less than actual losses and LAE, we
will be required to increase reserves with a corresponding reduction in our net
income in the period in which the deficiency is identified.

      We operate in a highly competitive market and face competition from both
national and regional insurance companies, many of whom are larger and have
greater financial and other resources, have better A.M. Best ratings and offer
more diversified insurance coverage. Our competitors include other companies
which market their products through agents, as well as companies which sell
insurance directly to their customers. Large national writers may have certain
competitive advantages over agency writers, including increased name
recognition, increased loyalty of their customer base and reduced policy
acquisition costs. We may also face competition from new or temporary entrants
in our niche markets. In some cases, such entrants may, because of inexperience,
desire for new business or other reasons, price their insurance below ours.
Although our pricing is inevitably influenced to some degree by that of our
competitors, we believe that it is generally not in our best interest to compete
solely on price. We instead tend to compete on the basis of underwriting
criteria, our distribution network and superior service to our independent
agents and insureds. We compete with respect to automobile insurance in Florida
with more than 100 companies, which underwrite personal automobile insurance.
Comparable companies which compete with us in the personal automobile insurance
market include U.S. Security Insurance Company, United Automobile Insurance
Company, Direct General Insurance Company and Security National Insurance
Company, as well as major insurers such as Progressive Casualty Insurance
Company. Comparable companies which compete with us in the homeowners' market
include Florida Family Insurance Company, Florida Select Insurance Company,
Atlantic Preferred Insurance Company and Vanguard Insurance Company. Comparable
companies which compete with us in the commercial general liability insurance
market include Century Surety Insurance Company, Atlantic Casualty Insurance
Company, Colony Insurance Company, Nautilus Insurance Company and
Burlington/First Financial Insurance Companies. Competition could have a
material adverse effect on our business, results of operations and financial
condition.

      Our executive offices are located at 3661 West Oakland Park Boulevard,
Suite 300, Lauderdale Lakes, Florida and our telephone number is (954) 581-9993.


                                       21
<PAGE>

                          21st Century Holding Company
                Management's Discussion and Analysis of Financial
                        Condition and Results of Operations

Analysis of Financial Condition
As of March 31, 2005 as Compared to December 31, 2004

      Investments

      Investments decreased $4.4 million, or 5.2%, to $80.0 million as of March
31, 2005, as compared to $84.4 million as of December 31, 2004. The modest
decrease is associated with the settlement of hurricane related claims.

      Financial Accounting Standards ("FAS") number 115 addresses accounting and
reporting for (a) investments in equity securities that have readily
determinable fair values and (b) all investments in debt securities. FAS 115
requires that these securities be classified in three categories and given
specific accounting treatment as follows:

                                 Classification

Held-to-maturity
      Debt securities with the intent and ability to hold to maturity

Trading securities
      Debt and equity securities bought and held primarily for sale in the near
      term

Available-for-sale
      Debt and equity securities not classified as held-to-maturity or trading
      securities

                              Accounting Treatment

Amortized cost

Fair value, with unrealized holding gains and losses included in operations

Fair value, with unrealized holding gains and losses excluded from earnings and
reported as a separate component of shareholders' equity, namely "Other
Comprehensive Income"


                                       22
<PAGE>

                          21st Century Holding Company

      Below is a summary of unrealized gains and (losses) at March 31, 2005 and
December 31, 2004 by category.

                                               Unrealized Gains and (Losses)
                                               -----------------------------
                                              March 31, 2005  December 31, 2004
                                              --------------  -----------------
Fixed maturities:
  U.S. government obligations and agencies    $   (683,162)    $   (582,310)
  Obligations of states and political
    subdivisions                                     1,557           (4,501)
                                              ------------     ------------
                                                  (681,605)        (586,811)
                                              ------------     ------------
Corporate securities:
  Communications                                    42,455           23,299
  Financial                                       (111,542)         (11,220)
  Other                                            (21,061)          64,377
                                              ------------     ------------
                                                   (90,148)          76,456
                                              ------------     ------------
Equity securities:
  Common stocks                                   (788,578)        (312,410)
                                              ------------     ------------

Total unrealized gains and (losses)            $(1,560,33)     $   (822,765)
                                              ============     ============

      For further detail, see "Liquidity and Capital Resources," below and
"Quantitative and Qualitative Disclosure about Market Risk" under Item 3 below.

      Prepaid Reinsurance Premiums

      Prepaid reinsurance premiums decreased $2.7 million, or 48.6%, to $2.8
million as of March 31, 2005, as compared to $5.5 million as of December 31,
2004. The decline is due to the amortization of prepaid reinsurance premiums
associated with our homeowner's book of business.

      Premiums Receivable, Net of Allowance for Credit Losses

      Premiums receivable, net of allowance for credit losses, increased $2.1
million, or 35.2%, to $8.1 million as of March 31, 2005, as compared to $6.0
million as of December 31, 2004. The largest component of the increase relates
to our expanding commercial general liability insurance business for which
premiums receivable increased $1.5 million, or 714%, to $1.7 million as of March
31, 2005, as compared to $.2 million as of December 31, 2004.

      Income Taxes Recoverable

      Income taxes recoverable decreased $4.1 million, or 51.4%, to $3.8 million
as of March 31, 2005, as compared to $7.9 million as of December 31, 2004. The
decline is due to the receipt of income taxes recoverable and utilization of
operating loss carryforwards.

      Deferred Acquisition Costs

      Deferred acquisition costs increased $.7 million, or 10.7%, to $7.7
million as of March 31, 2005, as compared to $7.0 as of December 31, 2004. For
the three months ending March 31, 2005, commission expense and commissions
income, were approximately $6.9 million and expenses connected with the writing
of premiums such as salaries and premium taxes, net of policy fees, totaled
approximately $0.8 million. Deferred policy acquisition costs, increased
primarily due to a $0.8 million increase in deferred commission expenses. The
increase in deferred commission expenses primarily related to the increase in
lines of insurance other than automobile, which are not subject to quota-share
agreements. Also contributing to the increased acquisition costs is the 2004
sale of our captive agencies, wherein our cost of acquiring policies from those
agencies will no longer be eliminated under the principles of consolidation.


                                       23
<PAGE>

                          21st Century Holding Company

      Unpaid Losses and LAE

      Unpaid losses and LAE decreased $19.8 million, or 42.5%, to $26.8 million
as of March 31, 2005, as compared to $46.6 million as of December 31, 2004. The
decline in unpaid losses and LAE relates to our payment patterns relative to the
settling of hurricane related claims.

      Factors that affect unpaid losses and LAE include the estimates made on a
claim-by-claim basis known as "case reserves" coupled with bulk estimates known
as "incurred but not reported" (IBNR). Periodic estimates by management of the
ultimate costs required to settle all claim files are based on the Company's
analysis of historical data and estimations of the impact of numerous factors
such as (i) per claim information; (ii) company and industry historical loss
experience; (iii) legislative enactments, judicial decisions, legal developments
in the awarding of damages, and changes in political attitudes; and (iv) trends
in general economic conditions, including the effects of inflation. Management
revises its estimates based on the results of its analysis. This process assumes
that past experience, adjusted for the effects of current developments and
anticipated trends, is an appropriate basis for estimating the ultimate
settlement of all claims. There is no precise method for subsequently evaluating
the impact of any specific factor on the adequacy of the reserves, because the
eventual redundancy or deficiency is affected by multiple factors. For further
discussion, see "Loss and LAE" below.

      Unearned Premiums

      Unearned premiums increased by $5.7 million, or 11.3%, to $55.8 million as
of March 31, 2005, as compared to $50.1 million as of December 31, 2004. The
increase was due to a $1.4 million increase in unearned homeowner's insurance
premiums, a $2.8 million increase in unearned automobile premiums, and a $1.5
million increase in unearned commercial general liability premiums. These
changes reflect our continued growth along all lines of business.

      Bank Overdraft

      Bank overdraft decreased by $3.8 million, or 25.8%, to $11.0 million as of
March 31, 2005, as compared to $14.8 million as of December 31, 2004. Bank
overdraft relates to hurricane-related loss and LAE disbursements paid but not
yet presented for payment by the policyholder or vendor. The decrease relates to
our payment patterns in relationship to the rate at which those disbursements
are presented to the bank for payment.

Results of Operations
Three Months Ended March 31, 2005 as Compared to Three Months Ended March 31,
2004

      Gross Premiums Written

      Gross premiums written increased $12.3 million, or 68.9%, to $30.1 million
for the three months ended March 31, 2005, as compared to $17.8 million for the
comparable period in 2004. The following table denotes gross premiums written by
major product line.

                                      Three months ended March 31,
                                      ----------------------------
                              2005                       2004
                              ----                       ----
Automobile                $  9,018,245      30.0%    $  8,288,649      46.5%
Homeowners'                 15,658,236      52.0%       6,523,324      36.6%
Commercial liability         5,155,762      17.1%       2,558,559      14.4%
Mobile home owners'            264,801       0.9%         447,194       2.5%
                          ------------    ------     ------------    ------
Gross written premiums    $ 30,097,044     100.0%    $ 17,817,726     100.0%
                          ============    ======     ============    ======

As noted above, the Company's efforts to expand to lines of insurance products
other than automobile insurance are coming to fruition.

      Gross Premiums Ceded

      Gross premiums ceded increased $2.8 million to a debit balance of ($2.9)
million for the three months ended March 31, 2005, as compared to a debit
balance of ($.1) million for the three months ended March 31, 2004. The change
is associated with our increased homeowner's premium volume.


                                       24
<PAGE>

                          21st Century Holding Company

      The gross premiums ceded for the three months ended March 31, 2004
reflects a reclassification of $0.8 million of reinsurance costs that were
previously classified as other operating and underwriting expenses.

      Decrease in Prepaid Reinsurance Premiums

      The decrease in prepaid reinsurance premiums was ($2.7) million for the
three months ended March 31, 2005, as compared to ($3.8) million for the three
months ended March 31, 2004. The increased charge against written premium is
primarily associated with the cost of reinsurance in connection with our home
owners' and mobile home owners' line of property and casualty insurance.

      (Increase) in Unearned Premiums

      The (increase) in unearned premiums was ($5.7) million as of March 31,
2005, as compared to ($1.7) million as of March 31, 2004. The change was due to
a $1.4 million increase in unearned homeowner's insurance premiums, a $2.8
million increase in unearned automobile premiums, and a $1.5 million increase in
unearned commercial liability premiums. These changes reflect our continued
growth along all lines of business. For further discussion, see "Unearned
Premiums" above.

      Net Investment Income

      Net investment income increased by $0.4 million, or 69.1%, to $0.9 million
for the three months ended March 31, 2005, as compared to $0.5 million for the
same three-month period ended March 31, 2004. The increase in investment income
is primarily a result of the additional amounts of invested assets. Also
affecting our net investment income was a modest increase in overall yield to
4.35% for the three months ended March 31, 2005 as compared to a yield of 3.82%
for the three months ending March 31, 2004.

      Net Realized Investment Gains

      Net realized investment gains increased by $0.04 million, or 30.8% to
$0.16 million for the three months ended March 31, 2005, as compared to $0.12
million for the three months ended March 31, 2004. The table below depicts the
gains by investment category.

                                                    Net Realized Gains (Losses)
                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                        2005           2004
                                                     ----------     ----------
Fixed maturities:
   U.S. government obligations and agencies          $ (131,066)    $   35,050
   Obligations of states and political subdivisions         (43)          (100)
                                                     ----------     ----------
                                                       (131,109)        34,950
                                                     ----------     ----------
Corporate securities:
   Communications                                            --             --
   Financial                                              9,995           (219)
   Other                                                     --             --
                                                          9,995           (219)
                                                     ----------     ----------
Equity securities:
      Preferred stocks                                                      --
      Common stocks                                     280,637         87,188
                                                     ----------     ----------
                                                        280,637         87,188
                                                     ----------     ----------

         Total net realized gains                    $  159,523     $  121,919
                                                     ==========     ==========


                                       25
<PAGE>

                          21st Century Holding Company

      Loss and LAE

      Loss and LAE increased by $0.4 million, or 6.7%, to $6.9 million for the
three months ended March 31, 2005, as compared to $6.5 million as of March 31,
2004. The modest increase is due, in part, to a charge to first quarter 2005
earnings of $1.5 million, net of reinsurance recoveries of $10.3 million,
stemming from the four hurricanes that occurred in August and September of 2004
that was partially offset by the impact of the improved automobile loss
experience. Management continues to revise our estimates of the ultimate
financial impact of these storms. The revisions to our estimates are based on
our analysis of subsequent information that we receive regarding various
factors, including: (i) per claim information; (ii) company and industry
historical loss experience; (iii) legislative enactments, judicial decisions,
legal developments in the awarding of damages, and changes in political
attitudes; and (iv) trends in general economic conditions, including the effects
of inflation. Management revises its estimates based on the results of its
analysis. This process assumes that past experience, adjusted for the effects of
current developments and anticipated trends, is an appropriate basis for
estimating the ultimate settlement of all claims. There is no precise method for
subsequently evaluating the impact of any specific factor on the adequacy of the
reserves, because the eventual redundancy or deficiency is affected by multiple
factors.

      Our loss ratio, as determined in accordance with GAAP, for the three-month
period ended March 31, 2005 was 36.69% compared with 49.78% for the same period
in 2004. The table below reflects the loss ratios by product line.

                                            Three months ended March 31,
                                          --------------------------------
                                              2005                2004
                                          ------------        ------------
Automobile                                       53.94%              80.55%
Homeowners'                                      25.11%              23.40%
Commercial liability                             25.89%              18.50%
Mobile homeowners'                             1990.00%              31.96%
All lines                                        36.69%              49.78%

      Losses and LAE, our most significant expense, represent actual payments
made and changes in estimated future payments to be made to or on behalf of our
policyholders, including expenses required to settle claims and losses.
Management revises its estimates based on the results of its analysis of
estimated future payments to be made. This process assumes that past experience,
adjusted for the effects of current developments and anticipated trends, is an
appropriate basis for predicting future events. We attribute the "All Lines"
decrease in the loss ratio primarily to the increasingly significant operational
contributions made by our lines of insurance other than automobile.

      For further discussion, see the Note 7 to the Consolidated Financial
Statements included under Part I, Item 1, of this Report.

      Salaries and Wages

      Salaries and wages increased $0.2 million, or 10.9%, to $1.6 million for
the three months ended March 31, 2005, as compared to $1.4 million for the three
months ended March 31, 2004. Management believes that the increase in salaries
and wages is consistent with retaining quality management and increased premium
production.

      Furthermore, the Company is now benefiting from economies of scale; as a
result gross premiums written increased $12.3 million for the three months ended
March 31, 2005, as compared to the comparable period in 2004, during which time
salaries and wages increased $0.2 million.

      Amortization of Deferred Policy Acquisition Costs

      Amortization of deferred policy acquisition costs increased by $3.4
million to $3.8 million for the three months ended March 31, 2005, as compared
to $0.4 million as of March 31, 2004. Amortization of deferred policy
acquisition costs consists of the actual policy acquisition costs, including
commissions, payroll and premium taxes, less commissions earned on reinsurance
ceded and policy fees earned.

      The increase in policy acquisition costs relates to our increased premium
volume and decreased reliance on quota share reinsurance in connection with our
automobile line of insurance. The increase is also attributable to the sale of
our captive agencies in December of 2004, wherein our cost of acquiring policies
from those agencies will no longer be eliminated under the principles of
consolidation.


                                       26
<PAGE>

                          21st Century Holding Company

      Provision for Income Tax Expense

      The provision for income tax expense increased by $.4 million, or 200.0%,
to $.6 million for the three months ended March 31, 2005, as compared to $.2
million for the three months ended March 31, 2004. The effective rate for income
tax expense is 36.5% for the three months ended March 31, 2005, as compared to
37.0% for the same three-month period in 2004. The increase in the estimated
income tax provision is primarily associated with the increase in pre-tax
income.

Liquidity and Capital Resources

      Our primary sources of capital during the three months ended March 31,
2005 were revenues generated from operations, including our investment income
and net realized investment gains from our portfolios, sale of our interests in
Express Tax and EXPRESSTAX receipt of income taxes recoverable, and borrowings
under the Revolving Agreement, as described below. Because we are a holding
company, we are largely dependent upon fees from our subsidiaries for cash flow.

      For the three months ended March 31, 2005 and 2004, operations generated
(used) net operating cash flow of $(8.2) million and $7.3 million, respectively.
During the three months ended March 31, 2005, gross cash flow from operations
generated approximately $23.5 million, due to a $5.7 million increase in
unearned premiums; a $4.1 million decrease in income taxes recoverable; a $2.7
million decrease in prepaid reinsurance premiums; a $2.2 million decrease in due
from reinsurers, net; a $1.0 million increase in premium deposits; a $0.7
million decrease in deferred income tax expense; a $0.4 million increase in the
provision for credit losses, net; $0.3 million of common stock issued for
interest on debt; $0.2 million in net realized investment gains; $0.2 million in
goodwill; a $0.1 million decrease in other assets; and $0.1 million in
depreciation and amortization.; all in conjunction with net income of $5.8
million.

      Operations for the three months ended March 31, 2005 used $31.7 million of
gross cash flow primarily due to a $19.8 million decrease in unpaid losses and
LAE; a $3.8 million decrease in bank overdrafts; a $1.8 million increase to
finance contracts receivable; a $1.7 million increase in premiums receivable;
$1.6 million in connection with our sale of discontinued operations; a $1.5
million decrease in accounts payable and accrued expenses; a $0.7 million
increase to policy acquisition costs, net of amortization; a $0.4 million
decrease to the provision for uncollectible premiums receivable; a $0.3 million
decrease in the equity of the subsidiary sold; and $0.1 million in amortization
of investment premiums, net.

      Subject to catastrophic occurrences, net operating cash flow is currently
expected to be positive in both the short-term and the reasonably foreseeable
future.

      In addition, our investment portfolio is highly liquid as it consists
almost entirely of readily marketable securities. Cash flow provided by net
investing activities was $5.4 million for the three months ended March 31, 2005,
as we generated $81.2 million from the sale of investment securities available
for sale, used $77.4 million to purchase investment securities available for
sale, and generated $1.6 million in connection with our sale of discontinued
operations.

      Net cash generated from financing activities was $0.4 million for the
three months ended March 31, 2005. The source of cash from financing activities
is primarily reflected by the receipt of proceeds from exercised stock options
totaling $1.0 million, $0.5 million paid in dividends and $0.1 million used to
reduce revolving credit outstanding.

      Federated Premium's operations are funded by the Revolving Agreement with
FlatIron. The Revolving Agreement is structured as a sale of contracts
receivable under a sale and assignment agreement with WPAC (a wholly-owned
subsidiary of FlatIron), which gives WPAC the right to sell or assign these
contracts receivable. Federated Premium, which services these contracts, has
recorded transactions under the Revolving Agreement as secured borrowings.
During September 2004, we negotiated a new revolving loan agreement in which the
maximum credit commitment available to us was reduced at our request to $2.0
million with built-in options to incrementally increase the maximum credit
commitment up $4.0 million over the next three years. Pursuant to our loan
agreement, if the A.M. Best rating of Federated National falls below a "C," or
if the financial condition of American Vehicle, as determined by our lender (in
its sole and absolute discretion) suffers a material adverse change, then under
the terms of our loan agreement, policies written by that subsidiary will no
longer be eligible collateral, causing our available credit to be reduced if we
do not have other collateral qualifying as eligible collateral. As of December
31, 2004, policies written by Federated National were not considered by our
lender to be eligible collateral. In March 2005, our lender agreed to permit
policies written by Federated National to be eligible collateral and agreed to
increase our total available credit by $0.5 million from $2.0 million to $2.5
million. We currently believe that this higher available credit limit will be
sufficient based on our current operations. If policies written by our insurance
subsidiaries again do not qualify as eligible collateral under our loan
agreement and we are not able to obtain working capital from our operations or
other sources, then we would have to restrict our growth and, possibly, our
operations. We believe that this available credit is sufficient based on our
current operations.


                                       27
<PAGE>

                          21st Century Holding Company

      The amounts of WPAC's advances are subject to availability under a
borrowing base calculation, with maximum advances outstanding not to exceed the
maximum credit commitment. The annual interest rate on advances under the
Revolving Agreement is the prime rate plus additional interest varying from
1.25% to 3.25% based on the prior month's ratio of contracts receivable related
to insurance companies with an A. M. Best rating of B or lower, to total
contracts receivable. For the three months ended March 31, 2005, our effective
interest rate was 6.94% as compared to 5.59% as of March 31, 2004.

      Outstanding borrowings under the Revolving Agreement as of March 31, 2005
were approximately $2.0 million. Outstanding borrowings as of December 31, 2004
were approximately $2.1. Outstanding borrowings in excess of the $2.0 million
credit limits totaled $148,542 as of December 31, 2004. The excess amount was
permissible by reason of a compensating cash balance of $156,095 for December 31
2004, that was held for the benefit of WPAC and was included in other assets.
Interest expense on this revolving credit line for the three months ended March
31, 2005 and March 31, 2004 totaled approximately $36,000 and $57,000,
respectively.

      As an alternative to premium finance, we offer direct billing in
connection with our automobile program, where the insurance company accepts from
the insured, as a receivable, a promise to pay the premium, as opposed to
requiring the full amount of the policy, either directly from the insured or
from a premium finance company. The advantage of direct billing a policyholder
by the insurance company is that we are not reliant on our credit facility, but
remain able to charge and collect interest from the policyholder.

      We believe that our current capital resources, including the net proceeds
from the Express Tax sale, together with cash flow from operations, will be
sufficient to meet currently anticipated working capital requirements. There can
be no assurances, however, that such will be the case.

      Federated National's and American Vehicle's statutory capital surplus
levels as of March 31, 2005 were approximately $11.7 million and $17.0 million,
respectively, and their statutory net income (loss) for the three months ended
March 31, 2005 were $3.9 million and $0.02 million, respectively.

      As of March 31, 2005 and December 31, 2004, we did not have any
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as "structured finance" or "special purpose"
entities, which were established for the purpose of facilitating
off-balance-sheet arrangements or other contractually narrow or limited
purposes. As such, management believes that we currently are not exposed to any
financing, liquidity, market or credit risks that could arise if we had engaged
in transactions of that type requiring disclosure herein.

Impact of Inflation and Changing Prices

      The consolidated financial statements and related data presented herein
have been prepared in accordance with GAAP, which requires the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary assets and liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant impact on the
Company's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or with the same magnitude
as the inflationary effect on the cost of paying losses and LAE.

      Insurance premiums are established before the Company knows the amount of
loss and LAE and the extent to which inflation may affect such expenses.
Consequently, we attempt to anticipate the future impact of inflation when
establishing rate levels. While we attempt to charge adequate premiums, we may
be limited in raising its premium levels for competitive and regulatory reasons.
Inflation also affects the market value of our investment portfolio and the
investment rate of return. Any future economic changes which result in prolonged
and increased levels of inflation could cause increases in the dollar amount of
incurred loss and LAE and thereby materially adversely affect future liability
requirements.


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<PAGE>

                          21st Century Holding Company

Item 3

Quantitative and Qualitative Disclosures about Market Risk

      Information related to quantitative and qualitative disclosures about
market risk was included under Item 7a, "Quantitative and Qualitative
Disclosures about Market Risk", in our Annual Report on Form 10-K/A (Amendment
No. 1) for the year ended December 31, 2004. No material changes have occurred
in market risk since this information was disclosed except as discussed below.

      Our investment portfolio is available for sale and is carried at fair
value. Gains that represent securities with a fair value in excess of amortized
cost, and losses (amortized cost is in excess of fair value) that are deemed
temporary by management are recorded in shareholders' equity in accumulated
other comprehensive income. Losses that are deemed other than temporary by
management, are recorded as net realized losses in the consolidated statement of
operations. A summary of the investment portfolio as of March 31, 2005 follows:

<TABLE>
<CAPTION>
                                                                                         Unrealized Gain
                                         Amortized Cost                Fair Value            (Loss)
                                         --------------                ----------            ------
Fixed maturities:
<S>                               <C>               <C>       <C>               <C>        <C>
   U.S. government obligations
      and agencies                $ 53,245,723      65.27%    $ 52,562,561      65.70%     $   (683,162)
   Obligations of states and
      political subdivisions         7,789,338       9.55%       7,790,896       9.73%            1,558
                                  ------------     ------     ------------     ------      ------------
                                    61,035,061      74.82%      60,353,457      75.43%         (681,604)
                                  ------------     ------     ------------     ------      ------------

Corporate securities:
   Communications                      522,348       0.64%         564,803       0.71%           42,455
   Financial                         5,049,107       6.19%       4,937,565       6.17%         (111,542)
   Other                             3,390,004       4.16%       3,368,942       4.21%          (21,062)
                                  ------------     ------     ------------     ------      ------------
                                     8,961,459      10.99%       8,871,310      11.09%          (90,149)
                                  ------------     ------     ------------     ------      ------------

Equity securities:
   Preferred stocks                         --       0.00%              --       0.00%               --
   Common stocks                    11,572,363      14.19%      10,783,785      13.48%         (788,578)
                                  ------------     ------     ------------     ------      ------------
                                    11,572,363      14.19%      10,783,785      13.48%         (788,578)
                                  ------------     ------     ------------     ------      ------------
Total fixed, corporate and
equity securities                 $ 81,568,883     100.00%    $ 80,008,552     100.00%     $ (1,560,331)
                                  ============     ======     ============     ======      ============

</TABLE>

      As of March 31, 2005, there were no concentrations greater than 5% of
total investments in any single investment other than United States government
obligations.

Item 4

Controls and Procedures

      Evaluation of Disclosure Controls and Procedures. An evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures within 90 days of this report was carried out by the Company
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures have been designed and are
being operated in a manner that provides reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. Nevertheless,
the controls system, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.


                                       29
<PAGE>

                          21st Century Holding Company

      Changes in Internal Controls. Subsequent to the date of the most recent
evaluation of the Company's internal controls, there were no significant changes
in the Company's internal controls or in other factors that could significantly
affect the internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Part II: OTHER INFORMATION

Item 1

Legal Proceedings

      We are involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on our
consolidated financial position, results of operations, or liquidity.

      In June 2000, a lawsuit was filed against us, our directors and our
executive officers seeking compensatory damages in an undisclosed amount on the
basis of allegations that our amended registration statement dated November 4,
1998 was inaccurate and misleading concerning the manner in which we recognized
ceded insurance commission income, in violation of Sections 11 and 15 of the
Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934. The lawsuit was filed in the United States District Court for the
Southern District of New York. The plaintiff class purportedly includes
purchasers of our common stock between November 5, 1998 and August 13, 1999. The
Court granted the plaintiffs class status.

      Specifically, the plaintiffs alleged that we recognized ceded commission
income on a written basis, rather than amortized on a pro rata basis. The
plaintiffs alleged that this was contrary to the Statement of Financial
Accounting Concepts Nos. 1, 2 and 5. We believe, however, that the lawsuit was
without merit and we have vigorously defended the action, because we reasonably
relied upon outside subject matter experts to make these determinations at the
time. We have also since accounted for ceded commission on a pro rata basis and
have done so since these matters were brought to our attention in 1998.
Nevertheless, we have also continued to actively participate in settlement
negotiations with the plaintiffs and have agreed to settle the case for
$525,000. The Court has issued a Preliminary Order approving the settlement and
the full amount was funded in February 2005. Notices have been sent to class
members and the Court has set the Final Settlement Hearing fro July 26, 2005. We
anticipate our active involvement with this matter to be concluded.

      We had reserved and charged against forth quarter 2003 earnings $600,000
for the potential settlement and associated costs

      As an admitted carrier in the State of Florida, we are required to
participate in certain insurer solvency pools under Florida Statutes Section
631.57(3) (a). Participation in these pools is based on the Company's written
premiums by line of business to total premiums written statewide by all
insurers. Participation may result in assessments against us.

      Federated National and American Vehicle are also required to participate
in an insurance apportionment plan under Florida Statutes Section 627.351, which
is referred to as a Joint Underwriting Association Plan ("JUA Plan"). The JUA
Plan provides for the equitable apportionment of any profits realized, or losses
and expenses incurred, among participating motor vehicle insurers. In the event
of an underwriting deficit incurred by the JUA Plan which is not recovered
through the policyholders in the JUA Plan, such deficit shall be recovered from
the companies participating in the JUA Plan in the proportion that the net
direct written premiums of each such member during the preceding calendar year
bear to the aggregate net direct premiums written in this state by all members
of the JUA Plan. No assessments by have been incurred by either insurance
company through the date of this 10-Q.


                                       30
<PAGE>

                          21st Century Holding Company

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3

Defaults Upon Senior Securities

None

Item 4

Submission of Matters to a Vote of Security Holders

None

Item 5

Other Information

      Effective March 1, 2005, Federated National sold its interest in the
Lauderdale Lakes property to the Company at the property's net-book value of
approximately $2.9 million.

Item 6

Exhibits

      31.1. Certification of Chief Executive Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act.

      31.2  Certification of Chief Financial Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act.

      32.1  Certification of Chief Executive Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act.

      32.2  Certification of Chief Financial Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act.


                                       31
<PAGE>

                          21st Century Holding Company

Signatures

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                    21st CENTURY HOLDING COMPANY


                                    By: /s/ Richard A. Widdicombe
                                        ------------------------------
                                        Richard A. Widdicombe,
                                        Chief Executive Officer


                                        /s/ James G. Jennings III
                                        ------------------------------
                                        James G. Jennings III,
                                        Chief Financial Officer

Date: May 16, 2005


                                       32