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 SEPTEMBER 30, 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 - 6,399,816 outstanding as of November 11, 2005.


                                       1
<PAGE>

                          21ST CENTURY HOLDING COMPANY

                                      INDEX

PART I: FINANCIAL INFORMATION                                          PAGE

ITEM 1

Financial Statements (Unaudited)

Consolidated Balance Sheets
    as of September 30, 2005
    and December 31, 2004............................................... 4

Consolidated Statements of Operations
    for the nine months ended September 30, 2005
    and 2004............................................................ 5

Consolidated Cash Flow Statements
    for the nine months ended September 30, 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.............. 35

ITEM 4

Controls and Procedures ................................................ 35

PART II: OTHER INFORMATION

ITEM 1

Legal Proceedings....................................................... 37

ITEM 4

Submission of Matters to a Vote of Security Holders..................... 37

ITEM 5

Entry into Material Definitive Agreements............................... 38

ITEM 6

Exhibits ............................................................... 39

Signatures.............................................................. 40

Exhibits

      Exhibit 31.1 Certification of Chief Executive Officer Pursuant
      to Section 302 of the SARBANES-OXLEY Act.......................... 41

      Exhibit 31.2 Certification of Chief Financial Officer
      Pursuant to Section 302 of the SARBANES-OXLEY Act................. 42


                                       2
<PAGE>

      Exhibit 32.1 Certification of Chief Executive Officer Pursuant
      to Section 906 of the SARBANES-OXLEY Act.......................... 43

      Exhibit 32.2 Certification of Chief Financial Officer Pursuant
      to Section 906 of the SARBANES-OXLEY Act.......................... 44


                                       3
<PAGE>

PART I: FINANCIAL INFORMATION
ITEM 1

                          21ST CENTURY HOLDING COMPANY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             September 30, 2005    December 31, 2004
                                                             ------------------    -----------------
<S>                                                          <C>                   <C>
                                     ASSETS

Investments
  Fixed maturities, available for sale, at fair value        $       76,886,274    $      69,587,030
  Equity securities                                                  16,899,476           14,795,143
                                                             ------------------    -----------------
    Total investments                                                93,785,750           84,382,173
                                                             ------------------    -----------------

Cash and cash equivalents                                             1,465,466            6,127,706
Receivable for investments sold                                       1,450,000                   --
Finance contracts, net of allowance for credit losses of
  $433,356 in 2005 and $475,788 in 2004, and net of
  unearned finance charges of $383,210 in 2005 and
  $453,487 in 2004                                                    7,570,143            8,289,356
Prepaid reinsurance premiums                                             72,746            5,510,379
Premiums receivable, net of allowance for credit losses of
  $81,979 and $541,851, respectively                                  6,186,474            6,024,913
Reinsurance recoverable, net                                         20,702,811           25,488,956
Deferred policy acquisition costs                                     8,507,210            6,957,168
Income taxes recoverable                                                859,174            7,915,424
Deferred income taxes                                                 3,068,170            3,656,076
Property, plant and equipment, net                                    3,967,353            4,272,733
Goodwill, net                                                                --              153,546
Other assets                                                          6,189,294            4,822,942
                                                             ------------------    -----------------
         Total assets                                        $      153,824,591    $     163,601,372
                                                             ==================    =================

             LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and LAE                                        $       36,128,129    $      46,570,679
Unearned premiums                                                    57,961,219           50,152,711
Premiums deposits                                                     1,947,560            1,871,683
Revolving credit outstanding                                             78,104            2,148,542
Bank overdraft                                                        3,283,046           14,832,698
Funds held under reinsurance treaties                                 1,568,872                   --
Subordinated debt                                                    11,875,000           16,875,000
Deferred income from sale of agency operations                        2,028,450            2,500,000
Accounts payable and accrued expenses                                 2,531,671            3,673,324
                                                             ------------------    -----------------
         Total liabilities                                          117,402,051          138,624,637
                                                             ------------------    -----------------
Commitments and contingencies
Shareholders' equity:
  Common stock, $0.01 par value. Authorized 37,500,000
    shares; issued 7,090,565 and 6,744,791 shares,
    respectively; Outstanding 6,393,716 and
    6,047,942, respectively                                              70,906               67,448
  Additional paid-in capital                                         29,556,539           26,310,147
  Accumulated other comprehensive (deficit)                          (1,223,763)            (504,972)
  Retained earnings                                                   9,798,503              883,757
  Treasury stock, 696,849 shares, at cost                            (1,779,645)          (1,779,645)
                                                             ------------------    -----------------
    Total shareholders' equity                                       36,422,540           24,976,735
                                                             ------------------    -----------------
    Total liabilities and shareholders' equity               $      153,824,591    $     163,601,372
                                                             ==================    =================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                              Three Months Ended                 Nine Months Ended
                                                        ------------------------------    ------------------------------
                                                        September 30,    September 30,    September 30,    September 30,
                                                             2005             2004             2005             2004
                                                        -------------    -------------    -------------    -------------
<S>                                                     <C>              <C>              <C>              <C>
Revenue:
  Gross premiums written                                $  25,355,235    $  24,301,800    $  86,815,187    $  73,929,571
  Gross premiums ceded                                     (7,188,343)      (3,525,315)     (12,142,786)      (5,549,725)
                                                        -------------    -------------    -------------    -------------

    Net premiums written                                   18,166,892       20,776,485       74,672,401       68,379,846
                                                        -------------    -------------    -------------    -------------

  Increase (Decrease) in prepaid reinsurance premiums          72,745          760,823       (5,437,633)      (5,334,921)
  Decrease (Increase) in unearned premiums                  2,462,575          156,954       (7,808,508)     (14,342,263)
                                                        -------------    -------------    -------------    -------------

    Net change in prepaid reinsurance premiums
      and unearned premiums                                 2,535,320          917,777      (13,246,141)     (19,677,184)
                                                        -------------    -------------    -------------    -------------

    Net premiums earned                                    20,702,212       21,694,262       61,426,260       48,702,662
  Finance revenue                                             807,778          784,584        2,849,989        2,824,568
  Managing general agent fees                                 558,883          501,225        1,811,576        1,488,405
  Net investment income                                       972,302          839,641        2,776,098        2,141,686
  Net realized investment gains                                    --           80,959          285,033          261,386
  Other income                                                614,393          148,595        1,018,774          539,300
                                                        -------------    -------------    -------------    -------------
    Total revenue                                          23,655,568       24,049,266       70,167,730       55,958,007
                                                        -------------    -------------    -------------    -------------

Expenses:
  Loss and LAE                                             13,275,690       42,292,556       32,494,462       56,385,548
  Operating and underwriting expenses                       1,607,749        3,363,823        5,396,561        5,816,459
  Salaries and wages                                        1,600,716        1,623,134        4,759,417        4,391,306
  Interest expense                                            313,962          186,902        1,123,893          631,824
  Policy acquisition costs, net of amortization             3,920,679        2,521,738       10,968,721        4,645,906
                                                        -------------    -------------    -------------    -------------

    Total expenses                                         20,718,796       49,988,154       54,743,054       71,871,043

Income (loss) from continuing operations before
  provision (benefit) for income tax expense                2,936,772      (25,938,887)      15,424,676      (15,913,036)
Provision (benefit) for income tax expense                  1,084,054       (9,337,258)       5,762,741       (5,677,392)
                                                        -------------    -------------    -------------    -------------
    Net income (loss) from continuing operations            1,852,718      (16,601,629)       9,661,935      (10,235,644)

Discontinued operations:
  Income (loss) from discontinued operations
    (including gain on disposal of $1,630,000
    and $0, respectively)                                          --         (540,496)       1,630,000         (173,857)
  Provision (benefit) for income tax expense                       --         (195,867)         595,396          (62,028)
                                                        -------------    -------------    -------------    -------------
    Income (loss) from discontinued operations                     --         (344,629)       1,034,604         (111,829)
                                                        -------------    -------------    -------------    -------------

    Net income (loss)                                   $   1,852,718    $ (16,946,258)   $  10,696,539    $ (10,347,473)
                                                        =============    =============    =============    =============

Basic net income (loss) per share from
  continuing operations                                 $        0.29    $       (2.80)   $        1.56    $       (1.77)
                                                        =============    =============    =============    =============

Basic net income (loss) per share from
  discontinued operations                               $          --    $       (0.06)   $        0.17    $       (0.02)
                                                        =============    =============    =============    =============

Basic net income (loss) per share                       $        0.29    $       (2.86)   $        1.73    $       (1.79)
                                                        =============    =============    =============    =============

Fully diluted net income (loss) per share from
  continuing operations                                 $        0.28    $       (2.80)   $        1.48    $       (1.77)
                                                        =============    =============    =============    =============

Fully diluted net income (loss) per share from
discontinued operations                                 $          --    $       (0.06)   $        0.16    $       (0.02)
                                                        =============    =============    =============    =============

Fully diluted net income (loss) per share               $        0.28    $       (2.86)   $        1.64    $       (1.79)
                                                        =============    =============    =============    =============

Weighted average number of common shares
  outstanding                                               6,384,386        5,925,952        6,189,040        5,786,803
                                                        =============    =============    =============    =============
Weighted average number of common shares
  outstanding (assuming dilution)                           6,589,257        6,279,826        6,533,575        6,248,663
                                                        =============    =============    =============    =============

Dividends declared per share                            $        0.08    $        0.08    $        0.24    $        0.24
                                                        =============    =============    =============    =============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                            Nine months ended September 30,
                                                                                                 2005            2004
                                                                                             ------------    ------------
<S>                                                                                          <C>             <C>
Cash flow from operating activities:
  Net income (loss)                                                                          $ 10,696,539    $(10,347,473)

  Adjustments to reconcile net income (loss) to net cash provided by operating activities:
    Amortization of investment (discount) premium, net                                           (167,113)        134,507
    Depreciation and amortization of property plant and equipment, net                            345,868         355,217
    Gain from sale of discontinued operations                                                  (1,630,000)             --
    Net realized investment gains                                                                 339,267          80,959
    Common Stock issued for interest on Notes                                                     315,625         281,250
    Provision for credit losses, net                                                              455,699         707,051
    (Recovery) of provision for uncollectible premiums receivable                                (366,824)        (66,824)
    Recognition of deferred income from sale of franchises                                             --        (131,647)
    Sale of equity in subsidiary                                                                 (255,079)             --
  Changes in operating assets and liabilities:
    Premiums receivable                                                                           205,263       1,551,468
    Prepaid reinsurance premiums                                                                5,437,633       5,334,921
    Due from reinsurers, net                                                                    4,786,145     (23,463,843)
    Income taxes recoverable                                                                    7,056,250      (6,377,438)
    Deferred income tax expense                                                                   587,906      (1,351,182)
    Policy acquisition costs, net of amortization                                              (1,550,042)     (5,275,089)
    Goodwill                                                                                      153,546              --
    Finance contracts receivable                                                                  263,514       1,349,872
    Other assets                                                                               (1,842,798)        517,935
    Unpaid losses and loss adjustment expenses                                                (10,442,550)     52,083,422
    Unearned premiums                                                                           7,808,508      14,342,263
    Premium deposits                                                                               75,877       1,903,918
    Funds held under reinsurance treaties                                                       1,568,872       9,108,429
    Bank overdraft                                                                            (11,549,652)             --
    Accounts payable and accrued expenses                                                      (1,141,653)         80,750
                                                                                             ------------    ------------
Net cash provided by operating activities                                                      11,150,801      40,818,466
                                                                                             ------------    ------------

Cash flow (used in) investing activities:
  Proceeds from sale of investment securities available for sale                               59,047,951      45,474,173
  Purchases of investment securities available for sale                                       (69,288,240)    (88,685,210)
  Receivable (Payable) for investments sold (purchased)                                        (1,450,000)      1,993,689
  Collection of mortgage loans                                                                         --         137,571
  Purchases of property and equipment                                                            (148,954)       (146,012)
  Proceeds from sale of discontinued operations                                                 1,630,000              --
  Proceeds from sale of assets                                                                     59,128              --
                                                                                             ------------    ------------
Net cash (used in) investing activities                                                       (10,150,115)    (41,225,789)
                                                                                             ------------    ------------

Cash flow (used in) provided by financing activities:
  Subordinated debt                                                                            (3,764,584)     12,500,000
  Exercised stock options                                                                       1,698,809       2,722,562
  Dividends paid                                                                               (1,526,713)     (1,417,784)
  Purchases of treasury stock                                                                          --          (2,197)
  Revolving credit outstanding                                                                 (2,070,438)     (2,817,265)
                                                                                             ------------    ------------

Net cash (used in) provided by financing activities                                            (5,662,926)     10,985,316
                                                                                             ------------    ------------
Net (decrease) increase in cash and cash equivalents                                           (4,662,240)     10,577,993
Cash and cash equivalents at beginning of period                                                6,127,706       6,770,169
                                                                                             ------------    ------------
Cash and cash equivalents at end of period                                                   $  1,465,466    $ 17,348,162
                                                                                             ============    ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                            Nine months ended September 30,
(continued)                                                                                      2005            2004
                                                                                             ------------    ------------
<S>                                                                                          <C>             <C>
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
    Interest                                                                              $       499,855    $    160,148
                                                                                             ============    ============
    Income taxes                                                                          $            --    $  2,095,000
                                                                                             ============    ============
  Non-cash investing and finance activities:
    Accrued dividends payable                                                             $       448,195    $    438,720
                                                                                             ============    ============
    Retirement of subordinated debt by Common Stock issuance                              $     1,666,667    $  1,875,000
                                                                                             ============    ============
    Stock issued to pay interest on subordinated debt                                     $       315,625    $    281,250
                                                                                             ============    ============
</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 (Amendments No. 1 and No.
2) 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 and  commercial  automobile  insurance  and
commercial  general liability  insurance in Florida as an admitted  carrier.  In
addition,  American  Vehicle is  authorized  to  underwrite  commercial  general
liability insurance in Georgia, Kentucky and Virginia as a surplus lines carrier
and in Texas,  Louisiana and Alabama as an admitted carrier.  We anticipate that
underwriting  will begin in  Kentucky,  Alabama and Virginia 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, South Carolina and Arkansas.

      During the nine months ended September 30, 2005, 61.0%,  19.6%,  19.0% and
0.4% of the premium we  underwrote  were for  homeowners'  property and casualty
insurance,   commercial  general  liability   insurance,   personal   automobile
insurance, and mobile home property and casualty insurance, respectively. During
the nine months ended September 30, 2004,  63.8%,  13.2%,  21.4% and 1.6% of the
premium we  underwrote  were for  homeowners'  property and casualty  insurance,
commercial  general liability  insurance,  personal  automobile  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 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.  ("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 companies' net written premium,  policy fee income of $25
per policy and other  administrative fees from the marketing of other 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 the Company'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.

<TABLE>
<CAPTION>
                                       For the three months               For the nine months
                                        ended September 30,               ended September 30,
                                  ------------------------------    -------------------------------
                                       2005            2004              2005             2004
                                  -------------   --------------    --------------   --------------
<S>                               <C>             <C>               <C>              <C>
Net Income as reported            $   1,852,718   $  (16,946,258)   $   10,696,539   $  (10,347,473)
Compensation, net of tax effect         132,308        6,171,950           932,007        6,714,508
                                  -------------   --------------    --------------   --------------
Pro forma net income              $   1,720,410   $  (23,118,208)   $    9,764,532   $  (17,061,981)
                                  =============   ==============    ==============   ==============

Net income per share
As reported - Basic               $        0.29   $        (2.86)   $         1.73   $        (1.79)
As reported - Diluted             $        0.28   $        (2.86)   $         1.64   $        (1.79)
Pro forma - Basic                 $        0.27   $        (3.90)   $         1.58   $        (2.95)
Pro forma - Diluted               $        0.26   $        (3.90)   $         1.49   $        (2.95)
</TABLE>

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 nine
months ending September 30, 2005,  estimated on the date of grant was $18.00. 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:

                           September 30, 2005   September 30, 2004
                           ------------------   ------------------
Dividend yield               2.33% to 2.43%       2.24% to 3.19%
Expected volatility         49.85% to 96.76%    99.65% to 103.20%
Risk-free interest rate      3.34% to 4.17%       2.13% to 3.60%
Expected life (in years)      2.56 to 2.63         3.00 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 debt.

      (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
decide 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 8.22%
and 7.45% for the nine months ended September 30, 2005 and 2004, respectively.

      Outstanding  borrowings under the Revolving  Agreement as of September 30,
2005 were approximately $0.08 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 nine months
ended  September 30, 2005 and September 30, 2004 totaled  approximately  $69,000
and $150,000, 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 conducted the Final  Settlement  Hearing on July 26, 2005,
and approved the  settlement.  We anticipate  our active  involvement  with this
matter to be  concluded.  We reserved and charged  against  fourth  quarter 2003
earnings $600,000 for the potential settlement and associated costs.

      In 2000 and 2001  respectively,  two  class  action  lawsuits  were  filed
against an unaffiliated  insurance  company for which our subsidiary,  Assurance
MGA, was the managing  general agent.  These lawsuits were seeking  compensatory
damages  in an  undisclosed  amount  based on  allegations  of unfair  practices
involving the  computation of interest due the  policyholder  in connection with
automobile  premium  refunds.  The  unaffiliated  company  has  contested  these
lawsuits over the last several years.  Negotiations relative to this matter have
been ongoing and in July 2005 the parties  reached an agreement  wherein we have
paid  $240,000 to resolve the  underlying  actions in these suits subject to our
contractual duties with respect to the unaffiliated  company. We believe that we
will be  successful  in our  efforts  to enjoin  others to  participate  in this
settlement;  however we are unable to quantify  the  participation  of others at
this time. Accordingly, we charged against second quarter 2005 earnings $240,000
for this action.

      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 our written premiums by
line  of  business  to  total  premiums  written   statewide  by  all  insurers.
Participation may result in assessments  against us. No related assessments have
been incurred by either insurance company through the date of this 10-Q.


                                       11
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      During its regularly  scheduled  meeting on August 17, 2005,  the Board of
Governors of Citizens Property  Insurance  Corporation  "Citizens"  determined a
2004 plan year deficit existed in the High Risk Account.  The Board decided that
a $515  million  Regular  Assessment  is in the best  interest of  Citizens  and
consistent  with Florida  Statutes.  On this basis,  the Board  certified  for a
Regular  Assessment.  Federated  National's  participation  in  this  assessment
totaled $2.0  million.  Provisions  contained in our excess of loss  reinsurance
policies  provide for their  participation  totaling $1.6  million.  Pursuant to
Section  627.3512,  Florida  Statutes,  insurers  are  permitted  to recoup  the
assessment  by adding a  surcharge  to  policies  in an amount not to exceed the
amount  paid  by the  insurer  to  Citizens.  Federated  National  is  currently
underwriting the recoupment in connection with this assessment.  As noted above,
Federated  National is entitled to recoup this  assessment,  and will  subrogate
$1.6 million to our reinsurers.

      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.  Federated  National and American Vehicle were assessed $44,350
and $1,615,  respectively  by the JUA Plan based on its July 2005 Cash  Activity
Report.

(5) COMPREHENSIVE INCOME

      For the  three  and  nine  months  ended  September  30,  2005  and  2004,
comprehensive income consisted of the following:

<TABLE>
<CAPTION>
                                                  Three months                    Nine months
                                               ended September 30,            ended September 30,
                                           ---------------------------    ---------------------------
                                               2005           2004            2005           2004
                                           -----------    ------------    -----------    ------------
<S>                                        <C>            <C>             <C>            <C>
Net income                                 $ 1,852,718    $(16,946,258)   $ 10,696,539   $(10,347,473)
Change in net unrealized gain (loss)
  on investments available for sale           (860,601)      1,772,140     (1,139,339)       (169,579)
                                           -----------    ------------    -----------    ------------

Comprehensive income, before tax               992,117     (15,174,118)     9,557,200     (10,517,052)
Income tax benefit (expense) related
  to items of other comprehensive income       321,308        (661,633)       433,672          69,036
                                           -----------    ------------    -----------    ------------
Comprehensive income                       $ 1,313,425    $(15,835,751)   $ 9,990,872    $(10,448,016)
                                           ===========    ============    ===========    ============
</TABLE>


(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 property
and casualty,  and commercial  general liability lines of 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.


                                       12
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      Information  regarding  components  of  operations  for the three and nine
months ended September 30, 2005 and 2004 follows:

<TABLE>
<CAPTION>
                                                       Three months                      Nine months
                                                     ended September 30,             ended September 30,
                                                ----------------------------    ----------------------------
                                                    2005            2004            2005            2004
                                                ------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>             <C>
Total revenue
  Insurance segment                             $ 25,093,314    $ 29,895,089    $ 73,911,721    $ 63,733,337
  Financing segment                                  630,549         594,540       2,217,415       2,118,732
  All other segments                                 599,602         828,804       1,408,856       2,841,346
                                                ------------    ------------    ------------    ------------
    Total operating segments                      26,323,465      31,318,433      77,537,992      68,693,415
  Intercompany eliminations                       (2,608,647)     (2,208,240)     (7,311,012)     (6,210,254)
                                                ------------    ------------    ------------    ------------
    Total revenues                              $ 23,714,818    $ 29,110,193    $ 70,226,980    $ 62,483,161
                                                ------------    ------------    ------------    ------------

Earnings (loss) before income taxes
  Insurance segment                             $  2,502,165    $(26,233,910)   $ 16,210,870    $(16,876,549)
  Financing segment                                  452,470         213,266       1,027,920         800,027
  All other segments                                 (17,863)         81,757      (1,814,114)        163,486
                                                ------------    ------------    ------------    ------------
    Total earnings (loss) before income taxes   $  2,936,772    $(25,938,887)   $ 15,424,676    $(15,913,036)
                                                ============    ============    ============    ============
</TABLE>

Information  regarding  total assets as of  September  30, 2005 and December 31,
2004 follows:

                               September 30, 2005    December 31, 2004
                               ------------------    -----------------
Total assets
  Insurance segment            $      143,757,620    $     134,894,764
  Financing segment                     7,817,422            8,536,786
  All other segments                    6,165,309           15,460,463
                               ------------------    -----------------
    Total operating segments          157,740,351          158,892,013

  Intercompany eliminations            (3,915,760)           4,709,359
                               ------------------    -----------------
    Total assets               $      153,824,591    $     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  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.

      For the  2005-2006  hurricane  season,  the excess of loss  treaties  will
insure us for approximately $64.0 million,  with the Company retaining the first
$3.0  million  of loss  and LAE.  The  treaties  have a one  full  reinstatement
provision for each excess layer with 100% additional  premium as to time and pro
rata to amount. In addition,  we purchased from the private sector Reinstatement
Premium  Protection  which  will  reimburse  the  Company  100%  of the  cost of
reinstatement  for the second event.  Unused  coverage from the first two events
carries  forward to events  beyond the  second,  in  conjunction  with a lowered
attachment  point  (as  explained  below)  afforded  by  the  Florida  Hurricane
Catastrophe Fund ("FHCF").

      In addition to the excess of loss reinsurance  policies (described above),
we continue to  participate in the FHCF to protect our interest in the insurable
risks  associated with our homeowner and mobile home owner  insurance  products.
For the first two events,  FHCF coverage begins after the Company's retention of
$3.0 million and its excess of loss reinsures  retention of approximately  $43.0
million.


                                       13
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      Maximum  coverage  afforded  from the  combined  policies  of our FHCF and
excess of loss  policies in effect for  varying  dates from June 1, 2005 to June
30, 2006 total  approximately  $209.0  million.  FHCF will retain  approximately
$145.0  million,  our excess of loss  reinsurance  policies  will  retain  $64.0
million,  and the Company will retain the first $3 million of  insurable  losses
for two events.  For events beyond the second  largest,  FHCF coverage  attaches
after the  Company  and its excess of loss  reinsures  collective  retention  of
approximately  $15.0 million.  Additionally,  unused coverage from our excess of
loss reinsurance treaties may be carried forward.

      As a result of the loss and LAE  incurred in  connection  with  Hurricanes
Dennis,  Katrina and Rita, the Company  expects  Hurricane  Katrina is the first
reinsurable event, as illustrated in the accompanying table.

                            Gross    Reinsurance    Net
Hurricane                   Losses   Recoveries    Losses
-------------------------   ------   -----------   ------
                                (Dollars in Millions)
Dennis (July 10, 2005)      $  2.9   $        --   $  2.9
Katrina (August 25, 2005)     14.6          11.6      3.0
Rita (September 20, 2005)      0.1            --      0.1
                            ------   -----------   ------
Total Loss Estimate         $ 17.6   $      11.6   $  6.0
                            ======   ===========   ======


      For the 2004-2005 hurricane season, the excess of loss treaties insured us
for $24  million,  while the Company  retained the first $10 million of loss and
LAE. The treaties had a provision which,  for a prepaid premium,  insured us for
another $24 million of loss and LAE for subsequent occurrences while the Company
retained  the first $10 million in loss and LAE. As a result of the loss and LAE
incurred in  connection  with the  Hurricanes  Charley and Frances,  the Company
exhausted its recoveries of $48 million under the terms of these treaties.

      Maximum  coverage  afforded  from the  combined  policies  of our FHCF and
excess of loss  policies in effect for  varying  dates from June 1, 2004 to June
30, 2005 totaled approximately $200.0 million, during which time we retained 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 as illustrated in the accompanying table.

                              Gross    Reinsurance    Net
Hurricane                     Losses   Recoveries    Losses
---------------------------   ------   -----------   ------
                                 (Dollars in Millions)
Charley (August 13, 2004)     $ 58.1   $      48.1   $ 10.0
Frances (September 3, 2004)     48.7          38.7     10.0
Ivan (September 14, 2004)       18.5            --     18.5
Jeanne (September 25, 2004)     12.4            --     12.4
                              ------   -----------   ------
Total Loss Estimate           $137.7   $      86.8   $ 50.9
                              ======   ===========   ======


      Furthermore,  as a  result  of the  2004  hurricanes,  we  incurred  a net
reinstatement  reinsurance  premium of $5.0 million that was  amortized  through
operations from the reinstatement date of August 13, 2004 to June 30, 2005.

      In August  and  September  2004,  the State of  Florida  experienced  four
hurricanes,  Charley,  Frances,  Ivan and Jeanne.  Federated  National  incurred
significant losses relative to its homeowners' and mobile homeowners'  insurance
lines   of   business.    Approximately    8,900    policyholders   have   filed
hurricane-related  claims  totaling an  estimated  $138.0  million,  of which we
estimate that our share of the costs  associated  with these  hurricanes will be
approximately  $50.9  million,  net  of  reinsurance  recoveries  and  amortized
reinstatement premiums.


                                       14
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      The excess of loss treaties also insured 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.

      Reinsurance  is ceded  under  separate  contracts  or  "treaties"  for the
separate  lines of  business  underwritten  and terms of  coverage.  The Company
collectively  ceded $12.1 million and ($1.0) million in premiums written for the
nine months ended  September  30, 2005 and 2004,  respectively.  During the nine
months ended September 30, 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
were AM Best rated "A"  (Excellent)  or better at the inception of our policies.
Subsequent to the inception of our treaties,  two of the participants  have been
downgraded by AM Best to "B" (Fair) or better.  The Company does not  anticipate
credit quality issues to arise from the downgrading of these  participants,  and
accordingly has not established a credit allowance.

      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 to engage only  reinsurers  that have an A.M. Best
rating of "A" or better remains unchanged.

      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 directors, 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
September 30, 2005 and December 31, 2004, we had outstanding exercisable options
to purchase 123,650 and 198,275 shares, respectively.

      In 2001, we  implemented a franchisee  stock option plan that provided for
the granting of stock options to individuals  purchasing  Company owned agencies
which were then converted to franchised agencies. The purpose of the plan was 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 September 30, 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 September  30, 2005 and December 31,  2004,  we had  outstanding  exercisable
options to purchase 758,808 and 906,300 shares, respectively.


                                       15
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      Activity in the  Company's  stock option plans for the period from January
1, 2004 to September 30, 2005, is summarized below:

<TABLE>
<CAPTION>
                                           1998 Plan          2001 Franchisee Plan         2002 Plan
                                    ----------------------   ---------------------   ---------------------
                                                 Weighted                Weighted                 Weighted
                                                  Average                 Average                 Average
                                                  Option                  Option                   Option
                                    Number of    Exercise    Number of   Exercise    Number of    Exercise
                                     Shares        Price      Shares       Price      Shares       Price
                                    ---------    ---------   ---------   ---------   ---------    --------
<S>                                 <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    $  17.83
Exercised                            (193,755)   $    6.67     (24,960)  $    6.67    (136,300)   $   9.16
Cancelled                             (16,500)   $    6.67          --                 (74,250)   $  10.50
                                    ---------                ---------               ---------

Outstanding at December 31, 2004      198,275    $    6.67      15,000   $    9.17     906,300    $  10.80
Granted                                    --                       --                 125,000    $  10.58
Exercised                             (74,625)   $    6.67          --                (111,742)   $   9.22
Cancelled                                  --                       --                (160,750)   $  11.08
                                    ---------                ---------               ---------

Outstanding at September 30, 2005     123,650    $    6.67      15,000   $    9.17     758,808    $  10.94
                                    =========                =========               =========
</TABLE>


      Options outstanding as of September 30, 2005 are exercisable as follows:

<TABLE>
<CAPTION>
                                  1998 Plan          2001 Franchisee Plan        2002 Plan
                            ---------------------   ---------------------   --------------------
                                        Weighted                Weighted                Weighted
                                         Average                 Average                Average
                                         Option                  Option                  Option
                            Number of   Exercise    Number of   Exercise    Number of   Exercise
Options Exercisable at:      Shares       Price      Shares       Price      Shares      Price
                            ---------   ---------   ---------   ---------   ---------   --------
<S>                         <C>         <C>         <C>         <C>         <C>         <C>
  September 30, 2005           95,900   $    6.67      15,000   $    6.67     491,908   $   9.22
  December 31, 2005                --                      --                   8,800   $   9.22
  December 31, 2006            27,750   $    6.67          --                  88,750   $   9.22
  December 31, 2007                --                      --                  88,750   $   9.22
  December 31, 2008                --                      --                  44,800   $   9.22
  December 31, 2009                --                      --                  32,800   $   9.22
  Thereafter                       --                      --                   3,000   $   9.22
                            ---------               ---------               ---------
Total options exercisible     123,650                  15,000                 758,808
                            =========               =========               =========
</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.


                                       16
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                       For the three months               For the nine months
                                        ended September 30,               ended September 30,
                                  ------------------------------    -------------------------------
                                       2005            2004              2005             2004
                                  -------------   --------------    --------------   --------------
<S>                               <C>             <C>               <C>              <C>
Net Income as reported            $   1,852,718   $  (16,946,258)   $   10,696,539   $  (10,347,473)
Compensation, net of tax effect         132,308        6,171,950           932,007        6,714,508
                                  -------------   --------------    --------------   --------------
Pro forma net income              $   1,720,410   $  (23,118,208)   $    9,764,532   $  (17,061,981)
                                  =============   ==============    ==============   ==============
Net income per share
As reported - Basic               $        0.29   $        (2.86)   $         1.73   $        (1.79)
As reported - Diluted             $        0.28   $        (2.86)   $         1.64   $        (1.79)
Pro forma - Basic                 $        0.27   $        (3.90)   $         1.58   $        (2.95)
Pro forma - Diluted               $        0.26   $        (3.90)   $         1.49   $        (2.95)
</TABLE>


      Additional stock option awards are anticipated in future years.

      The weighted  average fair value for new options  granted  during the nine
months ending September 30, 2005,  estimated on the date of grant was $18.00. 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:

                           September 30, 2005   September 30, 2004
                           ------------------   ------------------
Dividend yield               2.33% to 2.43%       2.24% to 3.19%
Expected volatility         49.85% to 96.76%    99.65% to 103.20%
Risk-free interest rate      3.34% to 4.17%       2.13% to 3.60%
Expected life (in years)      2.56 to 2.63         3.00 to 3.60


      Summary  information  about the  Company's  stock options  outstanding  at
September 30, 2005:

<TABLE>
<CAPTION>
                                                             Weighted Average      Weighted
                         Range of         Outstanding at       Contractual         Average         Exercisable at
                      Exercise Price    September 30, 2005   Periods in Years   Exercise Price   September 30, 2005
                      ---------------   ------------------   ----------------   --------------   ------------------
<S>                   <C>               <C>                  <C>                <C>              <C>
1998 Plan                       $6.67              123,650               2.69            $6.67               95,900
2001 Franchise Plan    $6.67 to $9.17               15,000               3.21            $9.17               15,000
2002 Plan              $8.33 - $20.00              758,808               2.56           $10.94              491,908
</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  594,421.  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.


                                       17
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

      During the third  quarter of 2005,  the Company  purchased  and intends to
retire 300,000  shares of its' Warrants in connection  with our July 2003 Notes.
The Warrants were  separately  traded under the symbol  TCHCW.  The Company paid
$0.80 per share for a total of $240,000.

      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 total
number  of  shares  issuable  upon  exercise  of  2004  Warrants  issued  to the
purchasers of the September  2004 Notes and to J.  Giordano  totaled  1,019,608.
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.

      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     2003
--------------------------   ------   -------   ------
January 31,                  55,537    54,014       --
April 30,                        --    53,729       --
July 31,                         --    49,965       --
October 31,                      --    69,200   61,792
                             ------   -------   ------
Total common stock issued    55,537   226,908   61,792
                             ======   =======   ======


      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.


                                       18
<PAGE>

                          21st Century Holding Company
                   Notes to Consolidated Financial Statements

Quarterly payment due date     2005
--------------------------   -------
January 31,                  103,870
April 30,                         --
July 31,                          --
October 31,                       --
                             -------
Total common stock issued    103,870
                             =======


      For the July 2003 Notes,  the quarterly  principal  and interest  payments
totaling  approximately  $0.6  million per payment are due  quarterly  for three
years with the last  installment  due on July 31, 2006. The scheduled  principal
loan payments for the next two years are as follows:

For the period
-------------------------------------
Three months ending December 31, 2005   $  625,000
Year ending December 31, 2006            1,875,000
                                        ----------
    Total                               $2,500,000
                                        ==========


      For the  September  2004  Notes,  the  quarterly  principal  and  interest
payments, totaling approximately $1.0 million per payment, are due quarterly for
three years with the last  installment  due on September 30, 2007. The scheduled
principal loan payments for the next three years are as follows:

For the period
-------------------------------------
Three months ending December 31, 2005   $1,041,667
Year ending December 31, 2006            4,166,667
Year ending December 31, 2007            4,166,666
                                        ----------
  Total                                 $9,375,000
                                        ==========


      The Company  retains the  privilege of repaying  these notes in cash or by
the issuance of common stock.  Through our January 31, 2005 payment, we made our
quarterly  installment  payments by issuing common stock. Our April 30, 2005 and
July 31, 2005 scheduled payments of principal and interest were made in cash, as
was our next regularly scheduled payment due October 31, 2005.

(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 stock closed on
January 13, 2005 with an effective date of January 1, 2005.

      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  relating to losses from the seven  hurricanes  that occurred in the
current  fiscal  year  and  fiscal  2004 and  other  estimates,  assumption  and
projections  contained  in this 10-Q;  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;  court 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 and 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 and  commercial  automobile  insurance  and
commercial  general liability  insurance in Florida as an admitted  carrier.  In
addition,  American  Vehicle is  authorized  to  underwrite  commercial  general
liability insurance in Georgia, Kentucky and Virginia as a surplus lines carrier
and in Texas,  Louisiana and Alabama as an admitted carrier.  We anticipate that
underwriting  will begin in  Kentucky,  Alabama and Virginia 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, South Carolina and Arkansas.

      During the nine months ended September 30, 2005, 61.0%,  19.6%,  19.0% and
0.4% of the premium we  underwrote  were for  homeowners'  property and casualty
insurance,   commercial  general  liability   insurance,   personal   automobile
insurance, and mobile home property and casualty insurance, respectively. During
the nine months ended September 30, 2004,  63.8%,  13.2%,  21.4% and 1.6% of the
premium we  underwrote  were for  homeowners'  property and casualty  insurance,
commercial  general liability  insurance,  personal  automobile  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.  We also offer  premium  financing to our own and
third-party insureds through our wholly owned subsidiary, Federated Premium.


                                       20
<PAGE>

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

      We market and distribute our own and  third-party  insurers'  products and
our other services primarily in Florida, through contractual  relationships with
a network of  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  companies' net written  premium,
policy  fee  income of $25 per  policy  and other  administrative  fees from the
marketing  of other  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.

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.


                                       21
<PAGE>

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

      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 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.

      Using the  various  complex  actuarial  methods and  different  underlying
assumptions, our actuaries produce a number of point estimates for each class of
business.  After reviewing the  appropriateness  of the underlying  assumptions,
management  selects the carried  reserve for each class of  business.  We do not
calculate a range of loss reserve estimates. Ranges are not a true reflection of
the  potential  volatility  between  carried  loss  reserves  and  the  ultimate
settlement  amount of losses  incurred prior to the balance sheet date.  This is
due to the fact  that  ranges  are  developed  based on known  events  as of the
valuation  date  whereas the  ultimate  disposition  of losses is subject to the
outcome of events and circumstances that were unknown as of the valuation date.

      Among the numerous factors that contribute to the inherent  uncertainty in
the process of establishing loss reserves are the following:

      o     Changes  in the  market and  inflation  rate for goods and  services
            related to covered  damages  such as  medical  care and home  repair
            costs,

      o     Changes in the judicial environment  regarding the interpretation of
            policy provisions relating to the determination of coverage,

      o     Changes in the general  attitude of juries in the  determination  of
            liability and damages,

      o     Legislative actions,

      o     Changes in our  estimates  of the number  and/or  severity of claims
            that  have  been  incurred  but not  reported  as of the date of the
            financial statements,

      o     Changes in our underwriting standards, and

      o     Any changes in our claim handling procedures.

      We establish and evaluate unpaid loss reserves using  recognized  standard
statistical  loss  development  methods and  techniques.  Each component of loss
reserves is affected by the expected  frequency and average  severity of claims.
Such amounts are analyzed using statistical techniques on historical claims data
and adjusted when  appropriate  to reflect  perceived  changes in loss patterns.
Data is analyzed by policy  coverage,  jurisdiction of loss,  reporting date and
occurrence  date,  among other  factors.  A brief  discussion of each  component
follows.

      Average reserve amounts are established for automobile claims prior to the
development of an individual case reserve. Average reserve amounts are driven by
the estimated average severity per claim and the number of new claims opened.

      For other than automobile  lines,  claims  adjusters  generally  establish
individual  claim case loss and LAE reserve  estimates  as soon as the  specific
facts and merits of each claim can be  evaluated.  Case  reserves  represent the
amounts that in the judgment of the adjusters are reasonably expected to be paid
in the future to completely  settle the claim,  including  expenses.  Individual
case reserves are revised as more information becomes known.

      For  unreported  claims,   incurred  but  not  reported  ("IBNR")  reserve
estimates  are  calculated  by first  projecting  the ultimate  number of claims
expected  (reported  and  unreported)  for each  significant  coverage  by using
historical quarterly and monthly claim counts, to develop age-to-age projections
of the ultimate counts by accident quarter.  Reported claims are subtracted from
the  ultimate  claim  projections  to  produce  an  estimate  of the  number  of
unreported  claims. The number of unreported claims is multiplied by an estimate
of the average cost per  unreported  claim to produce the IBNR  reserve  amount.
Actuarial techniques are difficult to apply reliably in certain situations, such
as to new  legal  precedents,  class  action  suits,  long-term  claimants  from
personal  injury  protection  coverage  or  recent  catastrophes.  Consequently,
supplemental IBNR reserves for these types of events may be established.


                                       22
<PAGE>

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

New Accounting Pronouncements

      The material set forth in Item 1, Part I, "Financial Statements - Note 2 -
Summary of Significant  Accounting  Policies and Practices" of this Form 10-Q is
incorporated herein by reference.

Recent Events

      Beginning in June and continuing through late October of 2005, Florida was
once again  affected  by several  hurricanes.  Florida  was the only state where
Federated  National  had  homeowner  insurance  policies  in force.  Significant
efforts have been employed in order to determine  the extent of claim  frequency
and  severity  for each  hurricane  as they relate to our  in-force  homeowners'
policies in the affected  areas.  Estimations of ultimate gross losses have been
formulated  based upon  computer  modeling,  provided  by our  reinsurers,  that
geographically  maps the address of our risks to the storm paths and  respective
intensity.

      The table below is a summary of each storms  projected effect on Federated
National.

                            * Estimated   Gross    Reinsurance    Net
Hurricane                   Claim Count   Losses   Recoveries    Losses
-------------------------   -----------   ------   -----------   ------
                                      (Dollars in Millions)
Arlene (June 7, 2005)                --   $   --   $        --   $   --
Dennis (July 10, 2005)              325      2.9            --      2.9
Katrina (August 25, 2005)         2,100     14.6          11.6      3.0
Rita (September 20, 2005)            20      0.1            --      0.1
Wilma (October 24, 2005)          9,000     95.0          92.0      3.0

* As of this reporting date

      Based on  projections  from our  reinsurers  for the ultimate gross losses
from  Hurricanes  Katrina and Wilma,  we anticipate  that our retention  will be
approximately  $15.0  million with  coverage  that  extends up to  approximately
$165.0 million for events beyond  Hurricane  Wilma;  these limits are subject to
change based on the ultimate costs of these storms.

      Effective as of November 10, 2005, Richard Widdicombe has agreed to resign
as the  Company's  Chief  Executive  Officer and  Director.  Mr.  Widdicombe  is
resigning  for  personal  reasons and does not have any  disagreements  with the
Company.  Mr.  Widdicombe  and the Company intend to enter into a separation and
release  agreement,  which will  provide for Mr.  Widdicombe  to remain with the
Company for another month to oversee the  transition to the new Chief  Executive
Officer.

      Effective as of November 10, 2005, Edward Lawson, the Company's  President
and former Chief Executive Officer,  will resume the position of Chief Executive
Officer, as well as retaining his current duties.

Analysis of Financial Condition

As of September 30, 2005 as Compared to December 31, 2004

      As of  September  30,  2005,  our  shareholders  equity was $36.4  million
compared  to  $25.0  million  as of  December  31,  2004.  The  increase  in our
shareholder's equity is primarily attributable to the changes discussed below.

      Total Investments

      Total Investments increased $9.4 million, or 11.1%, to $93.8 million as of
September 30, 2005,  as compared to $84.4  million as of December 31, 2004.  The
increase  is  primarily  a result  of our  investment  of the  proceeds  from an
increase in written insurance premiums.


                                       23
<PAGE>

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

      Financial  Accounting  Standards ("SFAS") No. 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:

<TABLE>
<CAPTION>
Classification                                  Accounting Treatment
--------------                                  --------------------
<S>                                             <C>
Held-to-maturity (Fixed maturities)             Amortized cost
  Debt securities with the intent and ability
  to hold to maturity

Trading securities (Corporate securities)       Fair value, with unrealized holding gains and losses included
  Debt and equity  securities  bought and       in operations
  held primarily for sale in the near term

Available-for-sale (Equity securities)          Fair  value,  with  unrealized   holding  gains  and  losses
  Debt and equity  securities not classified    excluded from earnings and reported as a separate  component
  as  held-to-maturity  or trading securities   of shareholders' equity, namely "Other Comprehensive Income"
</TABLE>


                             24
<PAGE>

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

      Below is a summary of unrealized  gains and (losses) at September 30, 2005
and December 31, 2004 by category.

<TABLE>
<CAPTION>
                                                           Unrealized Gains and (Losses)
                                                     ---------------------------------------
                                                     September 30, 2005    December 31, 2004
                                                     ------------------    -----------------
<S>                                                  <C>                   <C>
Fixed maturities:
  U.S. government obligations and agencies                    $(827,432)           $(582,309)
  Obligations of states and political subdivisions             (103,656)              (4,501)
                                                     ------------------    -----------------
                                                               (931,088)            (586,810)
                                                     ------------------    -----------------

Corporate securities:
  Communications                                                  9,353               23,299
  Financial                                                     (78,683)             (11,220)
  Other                                                         (14,471)              64,377
                                                     ------------------    -----------------
                                                                (83,801)              76,456
                                                     ------------------    -----------------

Equity securities:
  Preferred stocks                                                   --                   --
  Common stocks                                                (947,214)            (312,410)
                                                     ------------------    -----------------
                                                               (947,214)            (312,410)
                                                     ------------------    -----------------
Total unrealized gains and (losses)                         $(1,962,103)           $(822,764)
                                                     ==================    =================
</TABLE>


      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 $5.4 million,  or 98.7%,  to $01
million as of September 30, 2005, as compared to $5.5 million as of December 31,
2004. The decline is due to our payment patterns and the amortization of prepaid
reinsurance premiums associated with our homeowners' book of business.

      Reinsurance Recoverable, net

      Reinsurance  Recoverable,  net decreased $4.8 million,  or 18.8%, to $20.7
million as of September  30, 2005,  as compared to $25.5  million as of December
31, 2004. The decrease is  attributable  to cash payments in connection with the
settlement  of loss  and LAE as they  relate  to  costs  recoverable  under  our
reinsurance agreements.

      Deferred Acquisition Costs

      Deferred  acquisition  costs  increased  $1.5 million,  or 22.3%,  to $8.5
million as of September  30, 2005,  as compared to $7.0 as of December 31, 2004.
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.

      Income Taxes Recoverable

      Income taxes recoverable decreased $7.0 million, or 89.2%, to $0.9 million
as of September  30, 2005,  as compared to $7.9 million as of December 31, 2004.
The decline is primarily due to the utilization of operating loss carry-forwards
and current profitable operations.

      Other Assets

      Other  assets  increased  $1.4  million,  or 28.0%,  to $6.2 million as of
September  30, 2005,  as compared to $4.8  million as of December 31, 2004.  The
increase is primarily due to Federated  National's  statutory approval to recoup
the Citizens assessment by adding a surcharge to homeowner insurance policies in
an amount  limited to the  assessment.  For further  discussion see Footnote (4)
Commitments and Contingencies.


                                       25
<PAGE>

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

      Unpaid Losses and LAE

      Unpaid losses and LAE decreased $10.5 million,  or 22.4%, to $36.1 million
as of September  30, 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.  Case reserves  totaled $17.5 million
and $31.2 million,  and IBNR reserves totaled $18.6 million and $15.4 million as
of September 30, 2005 and December 31, 2004, respectively.

      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 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 $7.8 million, or 15.6%, to $58.0 million as
of September 30, 2005, as compared to $50.2 million as of December 31, 2004. The
increase was due to a $6.9 million  increase in unearned  homeowner's  insurance
premiums,  a ($0.4) million decrease in unearned mobile home insurance premiums,
a ($2.4) million decrease in unearned  automobile  premiums,  and a $3.7 million
increase  in unearned  commercial  general  liability  premiums.  These  changes
reflect our continued  growth along our  homeowners'  and  commercial  liability
lines of business.

      Bank Overdraft

      Bank overdraft decreased by $11.5 million, or 77.9%, to $3.3 million as of
September 30, 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  cash
disbursements are presented to the bank for payment.

Results of Operations

Three  Months  Ended  September  30,  2005 as  Compared  to Three  Months  Ended
September 30, 2004

      Gross Premiums Written

      Gross premiums written  increased $1.1 million,  or 4.3%, to $25.4 million
for the three months ended  September 30, 2005, as compared to $24.3 million for
the  comparable  period in 2004.  The following  table  denotes  gross  premiums
written by major product line.

                              Three months ended September 30,
                         --------------------------------------------
                                 2005                    2004
                         --------------------    --------------------
Automobile               $ 3,628,316    14.31%   $ 4,045,748    16.64%
Homeowners'               16,219,886    63.97%    16,564,249    68.16%
Commercial liability       5,451,419    21.50%     3,389,017    13.95%
Mobile home owners'           55,614     0.22%       302,786     1.25%
                         -----------   ------    -----------   ------
Gross written premiums   $25,355,235   100.00%   $24,301,800   100.00%
                         ===========   ======    ===========   ======


                                       26
<PAGE>

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

      The Company's efforts to expand its commercial liability line of insurance
products is coming to fruition as reflected by increased  premium  sales of $5.5
million for the three months ended  September  30, 2005 compared to $3.4 million
for the same period in the prior year.  Furthermore,  these policies  reflect an
increased  percentage of the Company's total gross premiums written,  increasing
to 21.5% of total  premium  sales in the three months ended  September  30, 2005
compared to 14.0% in the same period of fiscal 2004.

      The Company's  sale of auto insurance  policies is relatively  steady with
premiums  relatively  constant  at $3.6  million  for  the  three  months  ended
September  30, 2005  compared to $4.0 million in the same period of fiscal 2004,
despite the sale of the  Company's  captive  agents who handled most of the auto
insurance  policies.  In 2004, the Company made a conscious decision to decrease
its sale of mobile home policies and  consequently,  its sales of these policies
have  decreased to $0.06  million in the three months ended  September 30, 2005,
representing 0.22% of total premiums written.

      The  Company's  sale of  homeowners'  policies is  relatively  steady with
premiums  relatively  constant  at $16.2  million  for the  three  months  ended
September  30, 2005 compared to $16.6 million in the same period of fiscal 2004.
The modest decrease of $0.4 million in our homeowners'  gross premium written is
due  primarily to the decrease in the number of insurable  risks,  offset by the
Company's rate increase of 23.1% that was affected December 1, 2004.

      Gross Premiums Ceded

      Gross premiums ceded increased $3.6 million,  or 103.9% to a debit balance
of $7.2 million for the three months ended  September 30, 2005, as compared to a
credit  balance of $1.5 million for the three months ended  September  30, 2004.
The change is associated with our increased  homeowner's  premium volume and our
reinsurance costs.

      Increase in Prepaid Reinsurance Premiums

      The  increase in prepaid  reinsurance  premiums  was $.07  million for the
three months ended September 30, 2005, as compared to $.80 million for the three
months ended September 30, 2004. The increased charge against written premium is
primarily  associated  with the  timing  of our  reinsurance  payments  measured
against the term of the underlying reinsurance policies.

      Decrease in Unearned Premiums

      The decrease in unearned  premiums  was $2.5  million as of September  30,
2005,  as compared to $0.2  million as of September  30,  2004.  The decrease in
unearned  premiums of $2.5  million as of  September  30, 2005 was due to a $0.3
million  decrease in unearned  homeowners'  insurance  premiums,  a $0.2 million
decrease in mobile home owners' insurance  premiums,  a $2.5 million decrease in
unearned  automobile  premiums,  and a ($0.5)  million  (increase)  in  unearned
commercial liability premiums.  These changes reflect our continued growth along
our  homeowners'  and  commercial  liability  lines  of  business.  For  further
discussion, see "Unearned Premiums" above.

      Net Investment Income

      Net investment income increased by $0.2 million, or 15.8%, to $1.0 million
for the three months ended  September  30, 2005, as compared to $0.8 million for
the same three-month period ended September 30, 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
4.37% for the three  months ended  September  30, 2005 as compared to a yield of
3.99% for the three months ending September 30, 2004.

      Net Realized Investment Gains

      Net realized  investment gains decreased by $0.08 million, or 100% to $0.0
million for the three months  ended  September  30,  2005,  as compared to $0.08
million for the three months ended  September 30, 2004.  The table below depicts
the gains by investment category.


                                       27
<PAGE>

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

                                                          Net Realized
                                                         Gains (Losses)
                                                          Three Months
                                                      Ended September 30,
                                                     ----------------------
                                                        2005         2004
                                                     ---------    ---------
Fixed maturities:
  U.S. government obligations and agencies           $      --    $ (32,116)
  Obligations of states and political subdivisions          --      (10,450)
                                                     ---------    ---------
                                                            --      (42,566)
                                                     ---------    ---------

Corporate securities:
  Other                                                     --           --
                                                     ---------    ---------
                                                            --           --
                                                     ---------    ---------

Equity securities:
  Preferred stocks                                          --          (56)
  Common stocks                                             --      123,581
                                                     ---------    ---------
                                                            --      123,525
                                                     ---------    ---------

Total net realized gains                             $      --    $  80,959
                                                     =========    =========


      Loss and LAE

      Loss and LAE decreased by $29.0  million,  or 68.6%,  to $13.3 million for
the three months ended  September  30, 2005,  as compared to $42.3 million as of
September 30, 2004.  The decrease is due primarily to the Company's  reinsurance
retention philosophy in connection with the frequency and severity stemming from
the three  hurricanes  that occurred in July,  August and September of 2005, and
the four  hurricanes  that  occurred in August and  September of 2004 which were
partially offset by the impact of the improved automobile loss experience due to
management's  efforts to migrate from  predominately  liability only policies to
full-coverage  type  automobile  policies.  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.

      The table below  reflects a charge to the third  quarter 2005  earnings of
$6.0 million, net of reinsurance recoveries of $11.6 million,  stemming from the
three hurricanes that occurred in July, August and September of 2005.

                            Gross    Reinsurance    Net
Hurricane                   Losses   Recoveries    Losses
-------------------------   ------   -----------   ------
                                (Dollars in Millions)
Dennis (July 10, 2005)      $  2.9   $        --   $  2.9
Katrina (August 25, 2005)     14.6          11.6      3.0
Rita (September 20, 2005       0.1            --      0.1
                            ------   -----------   ------
Total Loss Estimate         $ 17.6   $      11.6   $  6.0
                            ======   ===========   ======


      The table below  reflects a charge to the third  quarter 2005  earnings of
$0.7 million, net of reinsurance  recoveries of $1.9 million,  stemming from the
four hurricanes that occurred in August and September of 2004.


                                       28
<PAGE>

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

                        Gross     Reinsurance    Net
Hurricane               Losses    Recoveries    Losses
---------------------   ------    -----------   ------
                             (Dollars in Millions)
Charley (August 13)     $  0.9    $       0.9   $   --
Frances (September 3)      1.0            1.0       --
Ivan (September 14)        0.7             --      0.7
Jeanne (September 25)     (0.0)            --     (0.0)
                        ------    -----------   ------
Total Loss Estimate     $  2.6    $       1.9   $  0.7
                        ======    ===========   ======


      Our loss ratio, as determined in accordance with GAAP, for the three-month
period ended  September  30, 2005 was 64.13%  compared with 209.06% for the same
period in 2004. The table below reflects the loss ratios by product line.

                      Three months ended
                         September 30,
                       ----------------
                        2005      2004
                       ------    ------
Automobile              54.90%   108.31%
Homeowners'             99.49%   308.04%
Commercial liability     6.83%     9.86%
All lines               64.13%   209.06%


      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

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

      Interest Expense

      Interest expense increased by $0.1 million,  or 68.0%, to $0.3 million for
the three months ended  September  30, 2005, as compared to $0.2 million for the
three  months ended  September  30,  2004.  The increase in interest  expense is
attributed to the September 30, 2004 "Notes".

      Deferred Policy Acquisition Costs, Net of Amortization

      Amortization  of  deferred  policy  acquisition  costs  increased  by $1.4
million,  or 55.5%,  to $3.9 million for the three months  ended  September  30,
2005,  as compared to $2.5 million as of September  30,  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  amortization  of deferred  policy  acquisition  costs is
primarily  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.

      Provision (Benefit) for Income Tax Expense

      The provision for income tax expense  increased by $10.4 million,  to $1.1
million for the three months ended  September  30, 2005, as compared to a ($9.3)
million  benefit for the three months ended  September  30, 2004.  The effective
rate for income tax expense is 36.9% for the three  months ended  September  30,
2005, as compared to 36.0% 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 from continuing operations.


                                       29
<PAGE>

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

Results of Operations

Nine Months Ended  September 30, 2005 as Compared to Nine Months Ended September
30, 2004

      Gross Premiums Written

      Gross premiums written increased $12.9 million, or 17.4%, to $86.8 million
for the nine months ended  September  30, 2005, as compared to $73.9 million for
the  comparable  period in 2004.  The following  table  denotes  gross  premiums
written by major product line.

                                Nine months ended September 30,
                         ---------------------------------------------
                                 2005                    2004
                         --------------------    ---------------------
Automobile               $16,475,811    18.97%   $15,824,075    21.40%
Homeowners'               52,978,565    61.03%    47,131,793    63.76%
Commercial liability      16,977,589    19.56%     9,762,932    13.20%
Mobile home owners'          383,222     0.44%     1,210,771     1.64%
                         -----------   ------    -----------   ------
Gross written premiums   $86,815,187   100.00%   $73,929,571   100.00%
                         ===========   ======    ===========   ======


      As noted above, the Company's efforts to expand commercial liability lines
of  insurance  products  are coming to fruition,  while  maintaining  automobile
production  subsequent  to the sale of our  captive  agents and our  intentional
decline in the mobile home market.  Additionally,  the $5.9 million  increase in
our  homeowners'  gross premium written is due to the Company's rate increase of
23.1% that was affected  December 1, 2004,  offset by the decrease in the number
of those same risks, as evidenced by the $472, or 37.5%, increase in our average
premium per policy to $1,730 as of September 30, 2005,  compared to $1,258 as of
September 30, 2004.

      Gross Premiums Ceded

      Gross  premiums ceded  increased $6.6 million,  or 118.8% to $12.1 million
for the nine months ended  September 30, 2005, as compared to credit  balance of
$1.0  million  for the nine  months  ended  September  30,  2004.  The change is
associated  with our  increased  homeowners'  insurance  premium  volume and our
reinsurance costs.

      (Decrease) in Prepaid Reinsurance Premiums

      The (decrease) in prepaid reinsurance  premiums was ($5.4) million for the
nine months ended September 30, 2005, as compared to ($5.3) million for the nine
months ended September 30, 2004. The decreased charge against written premium is
primarily  associated  with the  timing  of our  reinsurance  payments  measured
against the term of the underlying reinsurance policies.

      (Increase) in Unearned Premiums

      The (increase) in unearned premiums was ($7.8) million as of September 30,
2005, as compared to ($14.3)  million as of September 30, 2004. The increase was
due to a $6.9 million increase in unearned  homeowners'  insurance  premiums,  a
($0.4) million decrease in unearned  mobile-home  insurance  premiums,  a ($2.4)
million decrease in unearned automobile premiums, and a $3.7 million increase in
unearned  commercial  general  liability  premiums.  These  changes  reflect our
continued  growth  along  our  homeowners'  and  commercial  liability  lines of
business.

      Net Investment Income

      Net investment income increased by $0.7 million, or 29.6%, to $2.8 million
for the nine months ended  September  30, 2005,  as compared to $2.1 million for
the same nine-month  period ended September 30, 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  comparatively  flat overall yield of
3.12% for the nine months ended September 30, 2005 and 3.13% for the nine months
ending September 30, 2004.


                                       30
<PAGE>

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

      Net Realized Investment Gains

       Net realized  investment  gains  increased by $0.03  million,  or 9.1% to
$0.29 million for the nine months ended September 30, 2005, as compared to $0.26
million for the nine months ended  September  30, 2004.  The table below depicts
the gains by investment category.

                                                           Net Realized
                                                          Gains (Losses)
                                                        Nine Months Ended
                                                          September 30,
                                                     ----------------------
                                                        2005         2004
                                                     ---------    ---------
Fixed maturities:
  U.S. government obligations and agencies           $(131,066)   $  30,397
  Obligations of states and political subdivisions         (43)     (10,566)
                                                     ---------    ---------
                                                      (131,109)      19,831
                                                     ---------    ---------
Corporate securities:
  Financial                                                 --         (219)
  Other                                                 31,521           --
                                                     ---------    ---------
                                                        31,521         (219)
                                                     ---------    ---------
Equity securities:
  Preferred stocks                                                      (56)
  Common stocks                                        384,621      241,830
                                                     ---------    ---------
                                                       384,621      241,774
                                                     ---------    ---------

Total net realized gains                             $ 285,033    $ 261,386
                                                     =========    =========


      Loss and LAE

      Loss and LAE decreased by $23.9  million,  or 42.4%,  to $32.5 million for
the nine months ended  September  30, 2005,  as compared to $56.4  million as of
September 30, 2004.  The decrease is due primarily to the Company's  reinsurance
retention philosophy in connection with the frequency and severity stemming from
the three  hurricanes  that occurred in July,  August and September of 2005, and
the four  hurricanes  that  occurred in August and  September of 2004 which were
partially offset by the impact of the improved automobile loss experience due to
management's  efforts to migrate from  predominately  liability only policies to
full-coverage  type  automobile  policies.  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.

      The  table  below  reflects  a charge to  current  year  earnings  of $6.0
million, net of reinsurance recoveries of $11.6 million, stemming from the three
hurricanes that occurred in July, August and September of 2005.

                            Gross    Reinsurance    Net
Hurricane                   Losses   Recoveries    Losses
-------------------------   ------   -----------   ------
                               (Dollars in Millions)
Dennis (July 10, 2005)      $  2.9   $        --   $  2.9
Katrina (August 25, 2005)     14.6          11.6      3.0
Rita (September 20, 2005       0.1            --      0.1
                            ------   -----------   ------
Total Loss Estimate         $ 17.6   $      11.6   $  6.0


                                       31
<PAGE>

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

      The  table  below  reflects  a charge to  current  year  earnings  of $7.4
million, net of reinsurance recoveries of $52.90 million, stemming from the four
hurricanes that occurred in August and September of 2004.

                        Gross    Reinsurance    Net
Hurricane               Losses   Recoveries    Losses
---------------------   ------   -----------   ------
                            (Dollars in Millions)
Charley (August 13)     $ 13.8   $      13.8   $   --
Frances (September 3)     11.1          11.1       --
Ivan (September 14)        4.8            --      4.8
Jeanne (September 25)      2.6            --      2.6
                        ------   -----------   ------
Total Loss Estimate     $ 32.3   $      24.9   $  7.4


      Our loss ratio,  as determined in accordance with GAAP, for the nine-month
period ended  September  30, 2005 was 53.76%  compared with 115.78% for the same
period in 2004. The table below reflects the loss ratios by product line.

                      Nine months ended
                        September 30,
                       ---------------
                        2005     2004
                       -----    ------
Automobile             60.64%    90.31%
Homeowners'            64.18%   165.29%
Commercial liability   17.00%    17.70%
All lines              53.76%   115.78%


      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.

      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  $0.4 million,  or 8.4%, to $4.8 million for
the nine months ended  September  30, 2005,  as compared to $4.4 million for the
nine months ended September 30, 2004.  Management  believes that the increase in
salaries and wages is consistent with retaining quality management and increased
premium production.

      Interest Expense

      Interest expense increased by $0.5 million,  or 77.9%, to $1.1 million for
the nine months ended  September  30, 2005,  as compared to $0.6 million for the
nine months  ended  September  30,  2004.  The  increase in interest  expense is
attributed to the September 30, 2004 "Notes".

      Deferred Policy Acquisition Costs, Net of Amortization

      Amortization  of  deferred  policy  acquisition  costs  increased  by $6.4
million,  or 136.1%,  to $11.0  million for the nine months ended  September 30,
2005,  as compared to $4.6 million as of September  30,  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  amortization  of deferred  policy  acquisition  costs is
primarily  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.


                                       32
<PAGE>

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

      Provision (Benefit) for Income Tax Expense

      The  provision  for income tax expense  increased by $11.5 million to $5.8
million for the nine months ended  September  30, 2005,  as compared to a ($5.7)
million benefit for the nine months ended September 30, 2004. The effective rate
for income tax expense is 37.4% for the nine months ended September 30, 2005, as
compared to 35.7% for the same  nine-month  period in 2004.  The increase in the
estimated  income tax  provision  is primarily  associated  with the increase in
pre-tax income from continuing operations.

Liquidity and Capital Resources

      Our primary  sources of capital during the nine months ended September 30,
2005 were revenues  generated from  operations,  decreased  prepaid  reinsurance
premiums,  realized income tax recoveries and increased unearned premiums.  Also
contributing  to our  liquidity was the sale of our interests in Express Tax and
EXPRESSTAX,  and  exercised  employee  stock  options.  Because we are a holding
company, we are largely dependent upon fees from our subsidiaries for cash flow.

      For the  nine  months  ended  September  30,  2005  and  2004,  operations
generated  net  operating   cash  flow  of  $11.2  million  and  $40.8  million,
respectively.  During the nine months ended September 30, 2005,  gross cash flow
from operations  generated  approximately  $40.1 million,  due to a $7.8 million
increase  in  unearned  premiums;  a  $7.1  million  decrease  in  income  taxes
recoverable;  a $5.4 million decrease in prepaid  reinsurance  premiums;  a $4.8
million  decrease  in due from  reinsurers,  net; a $1.6  increase in funds held
under  reinsurance  treaties;  a $0.6  million  decrease in deferred  income tax
expense; a $0.4 million increase in the provision for credit losses, net; a $0.3
million decrease to finance contracts  receivable;  $0.3 million of common stock
issued for interest on debt; $0.3 million in net realized  investment gains; and
$0.3 million in depreciation and amortization;  $0.2 million in goodwill; a $0.2
million  decrease in premiums  receivable;  a $0.1  million  increase in premium
deposits; all in conjunction with net income of $10.7 million.

      Operations for the nine months ended September 30, 2005 used $28.9 million
of gross cash flow primarily due to a $11.5 million decrease in bank overdrafts;
a $10.4  million  decrease in unpaid  losses and LAE; $1.6 million in connection
with our sale of  discontinued  operations;  a $1.8  million  increase  in other
assets; a $1.1 million decrease in accounts payable and accrued expenses; a $1.6
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 $0.2  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  used  in net
investing  activities was $10.2 million for the nine months ended  September 30,
2005,  as we generated  $59.0  million and used $69.3  million from the maturity
several times over of our very short  municipal  portfolio,  and generated  $1.6
million in connection with our sale of discontinued operations. Other changes to
cash flow from  investing  activities  included a $1.5  million  receivable  for
investments sold; $0.1 million used to purchase property and equipment, and $0.1
million proceeds from the sale of assets.

      Net cash  used for  financing  activities  was $5.7  million  for the nine
months ended September 30, 2005. The uses of cash for financing  activities were
primarily $1.5 million paid in dividends,  $2.1 million used to reduce revolving
credit  outstanding,  and $3.8 million used to reduce  subordinated  debt.  Cash
provided by financing  activities  includes $1.7 million from exercised employee
stock options.

      Federated Premium's  operations are funded by the Revolving loan agreement
with  FlatIron  Funding.  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.


                                       33
<PAGE>

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

      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
decide 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.

      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 8.22%
and 7.45% for the nine months ended September 30, 2005 and 2004, respectively.

      Outstanding  borrowings under the Revolving  Agreement as of September 30,
2005 were approximately $76,000.  Outstanding borrowings as of December 31, 2004
were  approximately $2.1 million.  Outstanding  borrowings in excess of the $2.0
million  credit limits totaled  approximately  $150,000 as of December 31, 2004.
The excess amount was  permissible by reason of a  compensating  cash balance of
approximately  $160,000  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 nine months ended September 30, 2005 and September 30, 2004 totaled
approximately $69,000 and $150,000, 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  September  30,  2005 were  approximately  $9.3  million  and $20.4
million,  respectively, and their statutory net income for the nine months ended
September 30, 2005 were $1.5 million and $3.2 million, respectively.

      As of  September  30,  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 the same direction or with the same magnitude as
the inflationary effect on the cost of paying losses and LAE.


                                       34
<PAGE>

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

      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.

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  (Amendments
No. 1 and No. 2) 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  September  30, 2005
follows:

<TABLE>
<CAPTION>
                                                                                                          Unrealized
                                                                                                             Gain
                                                         Amortized Cost             Fair Value              (Loss)
                                                     ---------------------    ---------------------     -----------
<S>                                                  <C>            <C>       <C>            <C>        <C>
Fixed maturities:
  U.S. government obligations and agencies           $53,600,864     55.98%   $52,773,432     56.28%    $  (827,432)
  Obligations of states and political subdivisions    16,055,533     16.77%    15,951,877     17.00%       (103,656)
                                                     -----------    ------    -----------    ------     -----------
                                                      69,656,397     72.75%    68,725,309     73.28%       (931,088)
                                                     -----------    ------    -----------    ------     -----------

Corporate securities:
  Communications                                         259,942      0.27%       269,295      0.28%          9,353
  Financial                                            4,032,698      4.21%     3,954,015      4.22%        (78,683)
  Other                                                3,952,126      4.13%     3,937,655      4.20%        (14,471)
                                                     -----------    ------    -----------    ------     -----------
                                                       8,244,766      8.61%     8,160,965      8.70%        (83,801)
                                                     -----------    ------    -----------    ------     -----------

Equity securities:
  Preferred stocks                                     5,425,000      5.67%     5,425,000      5.79%             --
  Common stocks                                       12,421,690     12.97%    11,474,476     12.23%       (947,214)
                                                     -----------    ------    -----------    ------     -----------
                                                      17,846,690     18.64%    16,899,476     18.02%       (947,214)
                                                     -----------    ------    -----------    ------     -----------

Total fixed, corporate and equity securities         $95,747,853    100.00%   $93,785,750    100.00%    $(1,962,103)
                                                     ===========    ======    ===========    ======     ===========
</TABLE>


      As of September 30, 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.

      We  carried  out  an  evaluation  required  by the  1934  Act,  under  the
supervision and with the  participation of our principal  executive  officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934
Act,  as of the  end of the  period  covered  by  this  report.  Based  on  this
evaluation,  our principal  executive  officer and principal  financial  officer
concluded  that  our  disclosure  controls  and  procedures  were  effective  in
providing reasonable assurance that material information required to be included
in our periodic SEC reports is made known to them in a timely manner. Management
does not expect that our  disclosure  controls  and  procedures  will prevent or
detect all error and fraud. Any control system,  no matter how well designed and
operated, is based upon certain assumptions and can provide only reasonable, not
absolute,  assurance that its objectives will be met. Further,  no evaluation of
controls can provide absolute assurance that misstatements due to error or fraud
will not occur or that all control issues and instances of fraud, if any, within
the Company have been detected.


                                       35
<PAGE>

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

      Changes in Internal Controls.

      There have not been any changes in our  internal  control  over  financial
reporting  during  our  fiscal  quarter  ended  September  30,  2005  that  have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.


                                       36
<PAGE>

                          21st Century Holding Company

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.

      For a  description  of all  legal  proceedings,  please  see Note 4 to the
consolidated financial statements included in Part 1, Item 1, of this report.

Item 4

Submission of Matters to a Vote of Security Holders

      Our annual meeting of shareholders was held on August 9, 2005. Proxies for
the meeting were solicited pursuant to Regulation 14A of the Securities Exchange
Act of 1934 and there was no solicitation in opposition to that of management.

      All of  management's  nominees  for  directors  as  listed  in  the  proxy
statement  were  elected.  Carl Dorf and Charles B. Hart,  Jr.,  were elected as
Class III directors to serve until the Annual Shareholder's Meeting held in 2008
or until their  successors are elected and  qualified.  The number of votes cast
for each nominee is as follows:

                                                 Shares Voted       Votes
                                                    "FOR"        Withheld
                                                    -----        --------
Carl Dorf                                        5,858,633        42,181
Charles B. Hart, Jr.                             5,858,633        42,181

      The  proposal to  authorize  the  possible  issuance of 20% or more of the
Company's  common stock in connection with the Company's 2004 private  placement
of its senior  subordinated  notes and warrants to purchase shares of its common
stock was ratified and approved by the following votes:

                           Shares Voted   hares Voted    Shares        Broker
                           "FOR"          "AGAINST"   "ABSTAINING"   "NON-VOTE"
                           -----          ---------   ------------   ----------
                          2,503,129        160,402        9,451       3,228,822

      The  proposal to authorize  the issuance of 3,500 shares of the  Company's
common  stock to its Chief  Executive  Officer was  ratified and approved by the
following votes:

                        Shares Voted       Shares Voted     Shares      Broker
                           "FOR"          "AGAINST"   "ABSTAINING"   "NON-VOTE"
                           -----          ---------   ------------   ----------

                          2,102,962        559,890         10,130     3,228,822

      The  proposal to approve  the  appointment  of DeMeo Young  McGrath as the
Company's  independent auditors for the fiscal year ended December 31, 2004, was
ratified by the following votes:

                    Shares Voted       Shares Voted      Shares     Broker
                       "FOR"          "AGAINST"       "ABSTAINING"  "NON-VOTE"
                       -----          ---------       ------------  ----------
                        5,856,863       39,336           4,615           990

Item 5

Other Events

Entry into Material Definitive Agreements

      On August 9, 2005, Federated National signed a reimbursement contract with
the State Board of  Administration  of Florida,  which  administers  the Florida
Hurricane  Catastrophic  Fund.  This  reinsurance  policy  provides  coverage in
connection  with homeowner  losses  associated  with  catastrophic  events.  The
premium for the policy is  estimated  at $6.4  million with two payments of $1.7
million due July 1, 2005 and October 1, 2005 and a final payment due in December
2005.  This agreement  will apply to any losses which  occurred  between June 1,
2005 and May 31, 2006.

      On August  30,  2005,  Federated  National  signed  an excess  catastrophe
reinsurance contract with certain underwriters, as set-forth in the table below,
which covers homeowner losses associated with catastrophic  events.  The cost of
the  contract  totalled  approximately  $14.4  million,   payable  in  quarterly
installments of approximately $3.6 million beginning July 1, 2005.

<TABLE>
<CAPTION>
                                                Layer 1          Layer 2          Layer 3           Layer 4
                                               $2,000,000       $5,000,000       $25,000,000       $32,300,000
Reinsurer                                    xs $3,000,000    xs $5,000,000    xs $10,000,000    xs $35,000,000
                                             -------------    -------------    --------------    --------------
<S>                                          <C>              <C>              <C>               <C>
Platinum Underwriters Reinsurance, Inc.              29.00%            0.00%             0.00%             0.00%
Alea North America Insurance Company                  0.00%           10.00%             0.00%             7.50%
American Re Broker Market                             0.00%            0.00%             0.00%            15.50%
DaVinci Reinsurance Limited, Bermuda                 15.00%           15.00%            15.00%            10.00%
Renaissance Reinsurance Limited, Bermuda             20.00%           15.00%            15.00%            10.00%
Rosemont Reinsurance Limited, Bermuda                 5.00%            5.00%             5.00%             5.00%
PXRE Reinsurance Limited, Bermuda                    15.00%           10.00%            10.00%             8.00%
Ace Tempest Reinsurance Limited, Bermuda              0.00%           29.00%            24.00%            15.00%
Amlin Underwriting LTD, Syndicate 2001               16.00%           16.00%            16.00%            16.00%
Cathedral Underwriting LTD, Syndicate 2010            0.00%            0.00%             5.00%             3.00%
Axa Re, Paris                                         0.00%            0.00%            10.00%            10.00%
</TABLE>


      The insurance  provides for coverage in various layers.  Coverage with the
first and  second  excess  layers  becomes  effective  on June 16,  2005 and the
remaining  third and fourth excess  layers become  effective on July 1, 2005 and
remain in force through June 30, 2006.

      On August  30,  2005,  Federated  National  entered  into a  Reinstatement
Premium Protection reinsurance contract with certain underwriters,  as set-forth
in the table below,  which covers homeowner losses  associated with catastrophic
events. The cost of the contract totalled approximately $4.4 million, payable in
quarterly installments of approximately $1.1 million beginning July 1, 2005.

<TABLE>
<CAPTION>
                                                Layer 1          Layer 2          Layer 3           Layer 4
                                               $2,000,000       $5,000,000       $25,000,000       $32,300,000
Reinsurer                                    xs $3,000,000    xs $5,000,000    xs $10,000,000    xs $35,000,000
                                             -------------    -------------    --------------    --------------
<S>                                             <C>              <C>              <C>               <C>
Ace Tempest Reinsruance Limited, Bermuda              0.00%          100.00%           100.00%           100.00%
DaVinci Reinsurance Limited, Bermuda                 40.00%            0.00%             0.00%             0.00%
Renaissance Reinsurance Limited, Bermuda             60.00%            0.00%             0.00%             0.00%
</TABLE>


      The insurance  provides for coverage in various layers.  Coverage with the
first and  second  excess  layers  becomes  effective  on June 16,  2005 and the
remaining  third and fourth excess  layers become  effective on July 1, 2005 and
remain in force through June 30, 2006.

Item 5

Other Events

Entry into Material Definitive Agreements

      On August 9, 2005,  Federated  National signed a reimbursement  contract
with the State Board of  Administration  of  Florida,  which  administers  the
Florida  Hurricane   Catastrophic   Fund.  This  reinsurance  policy  provides
coverage in connection  with homeowner  losses  associated  with  catastrophic
events.  The  premium for the policy is  estimated  at $6.4  million  with two
payments  of $1.7  million  due July 1, 2005 and  October  1, 2005 and a final
payment due in December  2005.  This  agreement will apply to any losses which
occurred between June 1, 2005 and May 31, 2006.

      On August 30,  2005,  Federated  National  signed an excess  catastrophe
reinsurance  contract  with  certain  underwriters,  as set-forth in the table
below, which covers homeowner losses associated with catastrophic events.


Item 6

Exhibits

10.1      Reimbursement Contract,  dated August 8, 2005, effective as of June 1,
          2005 by and between Federated National Insurance Company, Inc. and the
          Florida Hurricane Catastrophe Fund *

10.2      Excess Catastrophe  Reinsurance  Contract dated August 30, 2005 issued
          to  Federated  National  Insurance  Company  and  certain  Subscribing
          Reinsurer(s) executing the Agreement *

10.3      Reinstatement Premium Protection Reinsurance Contract dated August 30,
          2005  issued to  Federated  National  Insurance  Company  and  certain
          Subscribing Reinsurer(s) executing the Agreement *

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

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

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

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

Items 2 and 3 are not applicable and have been omitted.

*     Filed herewith



                                       37
<PAGE>

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

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/ Edward J. Lawson
                                 ------------------------------------------
                                 Edward J. Lawson, Chief Executive Officer

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

Date: November 14, 2005


                                       38