UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | Quarterly report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the Quarterly Period ended September 30, 2009.



| ̈ | 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 000-28249





AMERINST INSURANCE GROUP, LTD.

(Exact Name of Registrant as Specified in its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|BERMUDA                                                        |  | 98-0207447                          
|(State or other jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                                                                                        |  |           
|------------------------------------------------------------------------------------------------------- |  | ----------
|c/o Cedar Management Limited 25 Church Street, Continental Building P.O. Box HM
1601, Hamilton, Bermuda |  | HMGX      
|(Address of Principal Executive Offices)                                                                |  | (Zip Code)

(441) 296-3973

(Telephone number)





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 shorter 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 has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    YES   ̈    NO  x.

As of November 2, 2009, the registrant had 995,253 common shares, $1.00 par value per share, outstanding.









---

Introductory Note

Caution Concerning Forward-Looking Statements

Certain statements contained in this Form 10-Q, or otherwise made by our officers, including statements related to our future performance, ability to create and implement a new business plan, and our
outlook for our businesses and respective markets, projections, statements of our managements plans or objectives, forecasts of market trends and other matters, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and contain information relating to us that is based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. The words expect,
believe, may and similar expressions as they relate to us or our management are intended to identify forward-looking statements. Such statements reflect our managements current views with respect to future events and
are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those reflected in any forward-looking statements. Our actual future results may differ materially from those set forth in our
forward-looking statements. Factors that might cause such actual results to differ materially from those reflected in any forward-looking statements include, but are not limited to the factors discussed in detail in Item 2,
Managements Discussion and Analysis of Financial Condition and Results of Operations in this form 10-Q, as well as:



| |  |  | the occurrence of catastrophic events with a frequency or severity exceeding the Companys expectations;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | a decrease in the level of demand for reinsurance or an increase in the supply of reinsurance capacity;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the successful creation and implementation of the Companys new business plan;
| | - |  | ------------------------------------------------------------------------------



| |  |  | a worsening of the current global economic market conditions and global credit crisis and changing rates of inflation and other economic conditions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | actual losses and loss expenses exceeding the Companys loss reserves, which are necessarily based on the actuarial and statistical projections of
ultimate losses;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the legal or regulatory environments in which we operate; and
| | - |  | ------------------------------------------------------------------------



| |  |  | other risks, including those risks identified in any of our other filings with the Securities and Exchange Commission.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary
statements that are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our managements analysis only as of the date they are made. We undertake no obligation to release
publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



2



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Part IFINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, expressed in U.S. dollars)



|                                                                                                        |  |                        |            |   |                       |   |            |  
|------------------------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | --------------------- | - | ---------- | -
|                                                                                                        |  | As ofSeptember 30,2009 |            |   | As ofDecember 31,2008 |  
|ASSETS                                                                                                  |  |                        |            |   |                       |   |            |  
|INVESTMENTS                                                                                             |  |                        |            |   |                       |   |            |  
|Fixed maturity investments, at fair value (amortized cost $6,900,716 and $28,471,984)                   |  | $                      | 7,113,250  |   |                       | $ | 29,130,756 |  
|Equity securities, at fair value (cost $10,695,568 and $14,831,578)                                     |  |                        | 16,763,890 |   |                       |   | 16,904,168 |  
|                                                                                                        |  |                        |            |   |                       |   |            |  
|TOTAL INVESTMENTS                                                                                       |  |                        | 23,877,140 |   |                       |   | 46,034,924 |  
|Cash and cash equivalents                                                                               |  |                        | 6,377,846  |   |                       |   | 887,107    |  
|Restricted cash and cash equivalents                                                                    |  |                        | 691,544    |   |                       |   | 316,841    |  
|Assumed reinsurance premiums receivable                                                                 |  |                        |           |   |                       |   | 352,085    |  
|Funds deposited with a reinsurer                                                                        |  |                        | 113,381    |   |                       |   | 113,382    |  
|Accrued investment income                                                                               |  |                        | 212,782    |   |                       |   | 330,794    |  
|Deferred policy acquisition costs                                                                       |  |                        |           |   |                       |   | 1,044,347  |  
|Prepaid expenses and other assets                                                                       |  |                        | 201,083    |   |                       |   | 228,435    |  
|                                                                                                        |  |                        |            |   |                       |   |            |  
|TOTAL ASSETS                                                                                            |  | $                      | 31,473,776 |   |                       | $ | 49,307,915 |  
|                                                                                                        |  |                        |            |   |                       |   |            |  
|                                                                                                        |  |                       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                    |  |                        |            |   |                       |   |            |  
|                                                                                                        |  |                       
|LIABILITIES                                                                                             |  |                        |            |   |                       |   |            |  
|Unpaid losses and loss adjustment expenses                                                              |  | $                      | 852,351    |   |                       | $ | 24,416,157 |  
|Unearned premiums                                                                                       |  |                        |           |   |                       |   | 3,619,371  |  
|Reinsurance balances payable                                                                            |  |                        | 128,144    |   |                       |   |           |  
|Accrued expenses and other liabilities                                                                  |  |                        | 602,064    |   |                       |   | 516,143    |  
|                                                                                                        |  |                        |            |   |                       |   |            |  
|TOTAL LIABILITIES                                                                                       |  |                        | 1,582,559  |   |                       | $ | 28,551,671 |  
|                                                                                                        |  |                        |            |   |                       |   |            |  
|                                                                                                        |  |                       
|STOCKHOLDERS EQUITY                                                                                    |  |                        |            |   |                       |   |            |  
|Common shares, $1 par value, 2009 and 2008: 2,000,000 shares authorized, 995,253 issued and outstanding |  |                        | 995,253    |   |                       |   | 995,253    |  
|Additional paid-in capital                                                                              |  |                        | 6,287,293  |   |                       |   | 6,287,293  |  
|Retained earnings                                                                                       |  |                        | 21,545,757 |   |                       |   | 15,757,104 |  
|Accumulated other comprehensive income                                                                  |  |                        | 6,280,856  |   |                       |   | 2,731,362  |  
|Shares held by Subsidiary (256,611 and 250,035 shares) at cost                                          |  |                        | (5,217,942 | ) |                       |   | (5,014,768 | )
|                                                                                                        |  |                        |            |   |                       |   |            |  
|TOTAL STOCKHOLDERS EQUITY                                                                              |  |                        | 29,891,217 |   |                       |   | 20,756,244 |  
|                                                                                                        |  |                        |            |   |                       |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                              |  | $                      | 31,473,776 |   |                       | $ | 49,307,915 |  
|                                                                                                        |  |                        |            |   |                       |   |            |  

See the accompanying notes to the unaudited condensed consolidated financial
statements.



3



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AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS, COMPREHENSIVE INCOME (LOSS)

AND RETAINED EARNINGS

(Unaudited, expressed in U.S. dollars)



|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|------------------------------------------------------------------------------------------- |  | ----------------------------- | ---------- | - | ----------------------------- | - | ---------- | ------------------------------ |  | - | ------------------------------ | - |  | - | ---------- | -
|                                                                                            |  | Nine MonthsEnded Sept 30,2009 |            |   | Nine MonthsEnded Sept 30,2008 |   |            | Three MonthsEnded Sept 30,2009 |  |   | Three MonthsEnded Sept 30,2008 |  
|REVENUE                                                                                     |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Net premiums earned                                                                         |  | $                             | 3,227,147  |   |                               | $ | 6,230,098  |                                |  | $ | 171,272                        |   |  | $ | 2,061,362  |  
|Net investment income                                                                       |  |                               | 671,789    |   |                               |   | 1,112,680  |                                |  |   | 64,463                         |   |  |   | 346,360    |  
|Net realized gain (loss) on investments                                                     |  |                               | 1,864,139  |   |                               |   | (1,835,788 | )                              |  |   | 1,780,292                      |   |  |   | (865,735   | )
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|TOTAL REVENUE                                                                               |  |                               | 5,763,075  |   |                               |   | 5,506,990  |                                |  |   | 2,016,027                      |   |  |   | 1,541,987  |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|LOSSES AND EXPENSES                                                                         |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Losses and loss adjustment (recoveries) expenses                                            |  |                               | (3,623,591 | ) |                               |   | 4,376,600  |                                |  |   | (434,372                       | ) |  |   | 1,458,546  |  
|Policy acquisition costs                                                                    |  |                               | 859,364    |   |                               |   | 1,774,739  |                                |  |   | 1,713                          |   |  |   | 594,485    |  
|Operating and management expenses                                                           |  |                               | 2,076,398  |   |                               |   | 1,763,053  |                                |  |   | 650,262                        |   |  |   | 511,121    |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|TOTAL LOSSES AND EXPENSES                                                                   |  |                               | (687,829   | ) |                               |   | 7,914,392  |                                |  |   | 217,603                        |   |  |   | 2,564,152  |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|NET INCOME (LOSS)                                                                           |  | $                             | 6,450,904  |   |                               | $ | (2,407,402 | )                              |  | $ | 1,798,424                      |   |  | $ | (1,022,165 | )
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|OTHER COMPREHENSIVE INCOME (LOSS)                                                           |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Net unrealized holding gains (losses) arising during the period                             |  |                               | 5,413,633  |   |                               |   | (4,810,130 | )                              |  |   | 3,627,205                      |   |  |   | (2,012,764 | )
|Reclassification adjustment for (gains) losses included in net income (loss)                |  |                               | (1,864,139 | ) |                               |   | 1,835,788  |                                |  |   | (1,780,292                     | ) |  |   | 865,735    |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|OTHER COMPREHENSIVE INCOME (LOSS)                                                           |  |                               | 3,549,494  |   |                               |   | (2,974,342 | )                              |  |   | 1,846,913                      |   |  |   | (1,147,029 | )
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|COMPREHENSIVE INCOME (LOSS)                                                                 |  | $                             | 10,000,398 |   |                               | $ | (5,381,744 | )                              |  | $ | 3,645,337                      |   |  | $ | (2,169,194 | )
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|RETAINED EARNINGS, BEGINNING OF PERIOD                                                      |  | $                             | 15,757,104 |   |                               | $ | 17,064,401 |                                |  | $ | 20,060,633                     |   |  | $ | 15,327,108 |  
|Net income (loss)                                                                           |  |                               | 6,450,904  |   |                               |   | (2,407,402 | )                              |  |   | 1,798,424                      |   |  |   | (1,022,165 | )
|Dividends                                                                                   |  |                               | (662,251   | ) |                               |   | (673,514   | )                              |  |   | (313,300                       | ) |  |   | (321,458   | )
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|RETAINED EARNINGS, END OF PERIOD                                                            |  | $                             | 21,545,757 |   |                               | $ | 13,983,485 |                                |  | $ | 21,545,757                     |   |  | $ | 13,983,485 |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Per share amounts                                                                           |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Net income (loss) basic and diluted                                                         |  | $                             | 8.69       |   |                               | $ | (3.22      | )                              |  | $ | 2.43                           |   |  | $ | (1.37      | )
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Dividends                                                                                   |  | $                             | 0.94       |   |                               | $ | 0.94       |                                |  | $ | 0.47                           |   |  | $ | 0.47       |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  
|Weighted average number of shares outstanding for the entire period (for basic and diluted) |  |                               | 741,930    |   |                               |   | 747,443    |                                |  |   | 739,996                        |   |  |   | 745,839    |  
|                                                                                            |  |                               |            |   |                               |   |            |                                |  |   |                                |   |  |   |            |  

See the accompanying notes to the unaudited condensed consolidated financial
statements.



4



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AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, expressed in U.S. dollars)



|                                                       |  |                               |             |   |                               |   |             |  
|------------------------------------------------------ |  | ----------------------------- | ----------- | - | ----------------------------- | - | ----------- | -
|                                                       |  | Nine MonthsEnded Sept 30,2009 |             |   | Nine MonthsEnded Sept 30,2008 |  
|OPERATING ACTIVITIES                                   |  |                               |             |   |                               |   |             |  
|Net Cash (Used in) Provided by Operating Activities    |  | $                             | (18,939,601 | ) |                               | $ | 716,874     |  
|                                                       |  |                               |             |   |                               |   |             |  
|INVESTING ACTIVITIES                                   |  |                               |             |   |                               |   |             |  
|Movement in restricted cash and cash equivalents       |  |                               | (374,703    | ) |                               |   | 370,193     |  
|Purchases of investments                               |  |                               | (11,828,311 | ) |                               |   | (22,312,623 | )
|Proceeds from sales of investments                     |  |                               | 36,401,295  |   |                               |   | 17,800,486  |  
|Proceeds from maturities of fixed maturity investments |  |                               | 1,097,484   |   |                               |   | 3,800,000   |  
|                                                       |  |                               |             |   |                               |   |             |  
|Net Cash Provided by (Used in) Investing Activities    |  |                               | 25,295,765  |   |                               |   | (341,944    | )
|                                                       |  |                               |             |   |                               |   |             |  
|FINANCING ACTIVITIES                                   |  |                               |             |   |                               |   |             |  
|Purchase of shares by subsidiary, net                  |  |                               | (203,174    | ) |                               |   | (129,154    | )
|Dividends paid                                         |  |                               | (662,251    | ) |                               |   | (673,514    | )
|                                                       |  |                               |             |   |                               |   |             |  
|Net Cash Used in Financing Activities                  |  |                               | (865,425    | ) |                               |   | (802,668    | )
|                                                       |  |                               |             |   |                               |   |             |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   |  |                               | 5,490,739   |   |                               |   | (427,738    | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         |  | $                             | 887,107     |   |                               | $ | 1,778,798   |  
|                                                       |  |                               |             |   |                               |   |             |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD               |  | $                             | 6,377,846   |   |                               | $ | 1,351,060   |  
|                                                       |  |                               |             |   |                               |   |             |  



5



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AMERINST INSURANCE GROUP, LTD.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2009

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by AmerInst Insurance Group, Ltd. (AmerInst)
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (Commission), and reflect all adjustments consisting of normal recurring accruals, which are, in the opinion of management, necessary for a
fair presentation of the results of operations for the periods shown. These statements are condensed and do not incorporate all the information required under accounting principles generally accepted in the United States (U.S. GAAP) to
be included in a full set of financial statements. It is suggested that these condensed statements be read in conjunction with the audited consolidated financial statements at and for the year ended December 31, 2008 and notes thereto, included
in AmerInsts Annual Report on Form 10-K for the year then ended.

Critical Accounting Policies

The Companys critical accounting policies are discussed in Managements Discussion and Analysis of Financial Condition and Results
of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2008.

Entry into Agency Agreement

Effective September 25, 2009, AmerInst Professional Services, Limited (APSL), a Delaware corporation and
wholly-owned subsidiary of AmerInst Mezco, Ltd., which is a wholly-owned subsidiary of AmerInst, entered into an agency agreement (the Agency Agreement) with The North River Insurance Company, United States Fire Insurance Company,
Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (collectively, C&F) pursuant to which C&F appointed APSL as its exclusive agent for the
purposes of soliciting, underwriting, quoting, binding, issuing, cancelling, non-renewing and endorsing accountants professional liability and lawyers professional liability insurance coverage within the 50 states of the United States
and the District of Columbia. The initial term of the Agency Agreement is for four years with automatic one year renewals. No underwriting activity has occurred through September 30, 2009.

Entry into Reinsurance Agreement

On September 25, 2009, AmerInsts wholly-owned subsidiary, AmerInst Insurance Company, Ltd. (AMIC Ltd.) entered into a professional liability quota share agreement (the Reinsurance Agreement) with C&F
pursuant to which C&F agrees to cede and AMIC Ltd. agrees to accept as reinsurance a fifty percent (50%) quota share of C&Fs liability under insurance written by APSL on behalf of C&F and classified by C&F as
accountants professional liability and lawyers professional liability, subject to AMIC Ltd. surplus limitations. The initial term of the Reinsurance Agreement is for four years with automatic one year renewals. No underwriting activity
has occurred through September 30, 2009.

Historical Relationship with CNA

On January 5, 2009, AMIC Ltd. received written notice from CNA Financial Corporation (CNA) that CNA did not intend to renew
the reinsurance program encompassed by the AmerInst Insurance Company Limited Accountants Professional Liability Treaty and the Value Plan Policies Accountants Professional Liability Quota Share Treaty (the Reinsurance Treaties). The
reinsurance activity of AMIC Ltd. historically depended primarily upon these agreements with CNA. In 2008, the business relationship with CNA accounted for over 95% of AmerInsts net premiums earned.

On May 15, 2009, AMIC Ltd. and CNA entered into a Commutation and Release Agreement (Commutation Agreement) whereby:



| |  |  | AMIC Ltd. paid to CNA $20,550,000 on May 22, 2009;
| | - |  | --------------------------------------------------



| |  |  | CNA released and discharged AMIC Ltd. from any claims or liabilities whatsoever under, arising out of, or in any way related to past Reinsurance
Treaties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | AMIC Ltd. released and discharged CNA from any claims or liabilities whatsoever under, arising out of, or in any way related to the past Reinsurance
Treaties;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All rights, duties, liabilities, and obligations of AMIC Ltd. and CNA under the current Reinsurance Treaties were discharged;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | The 2009 Reinsurance Treaties were rescinded and terminated retroactive to their inception; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | The 2009 Reinsurance Treaties were voided as though they never existed.
| | - |  | -----------------------------------------------------------------------

The Company has reduced its estimated liability for unpaid losses and loss adjustment expenses by approximately $5,400,000 to reflect the
impact of the Commutation Agreement.



6



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Included in net income for the nine months ended September 30, 2009 is earned premium
of approximately $2,800,000, losses and loss adjustment expenses and policy acquisition costs of approximately $2,000,000 and $800,000, respectively, relating to the commuted treaties. Since the Commutation Agreement rescinded and terminated the
2009 Reinsurance Treaties retroactive to their inception, such treaties are not recorded in these unaudited condensed consolidated financial statements.

Historical Relationship with CAMICO

On June 1, 2009, AMIC Ltds
reinsurance contract with CAMICO Mutual Insurance Company (CAMICO) expired and we decided not to renew the contract and permitted it to expire pursuant to its terms. In 2008, the business relationship with CAMICO accounted for
approximately 5% of AmerInsts net premiums earned. However, we remain potentially liable for claims related to coverage through May 31, 2009.

VSC Payment

On July 22, 2009, the Company received a payment of
$500,891 from Virginia Surety Company (VSC) in satisfaction of certain recoveries not previously remitted by VSC under retrocession contracts between the Company and VSC for the years 1989-1993. The $500,891 payment was recorded as a
decrease in losses and loss adjustment expenses. The Company and VSC are in dispute with respect to over $500,000 in additional recoveries, fees and interest, which the Company currently expects to resolve via arbitration.

New Accounting Pronouncements  Accounting Standards Adopted

On September 15, 2009, the Company adopted Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 105, Generally Accepted Accounting
Principles (ASC 105 or The Codification). ASC 105 is a replacement to FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles, (SFAS 162) which became effective on
November 13, 2008, and identified the sources of accounting principles and the framework for selecting the principles used in preparing financial statements in conformity with U.S. GAAP. It also arranged these sources of U.S. GAAP in a
hierarchy for users to apply. ASC 105 provides for a single source of authoritative U.S. GAAP recognized by the FASB to be applied to nongovernmental entities in the preparation of financial statements. The Codification carries the same level of
authority and supersedes SFAS 162 and all other accounting and reporting standards. The U.S. GAAP hierarchy has been modified to include two levels of U.S. GAAP: authoritative and non-authoritative.

In May 2009, the Company adopted the provisions of the FASB ASC Topic 855, Subsequent Events (ASC 855), which
requires the disclosure of the date after the balance sheet date but before financial statements are issued or available to be issued through which an entity has evaluated subsequent events and the basis for that date, that is, whether the date
represents the date the financial statements were issued or were available to be issued. ASC 855 also alerts all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements
being presented. We evaluated subsequent events to November 13, 2009, the date the accompanying financial statements were issued.

On April 1, 2009, the Company adopted the provisions of the FASB ASC 820-10-35, Fair Value Measurements and Disclosures- Overall -Subsequent Measurement (ASC 820-10-35), ASC 825-10-50, Financial
Instruments  Overall  Disclosure(ASC 825-10-50), and ASC 320-10-35, Investments  Debt and Equity Securities  Overall  Subsequent Measurement (ASC 320-10-35) intended to provide
additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities.

ASC
820-10-35 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms what the objective of fair value measurement is to reflect how much an asset would be sold for
in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has
become inactive and in determining fair values when markets have become inactive.

ASC 825-10-50 enhances consistency in
financial reporting by increasing the frequency of fair value disclosures. The guidance relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. Prior to issuing this
standard, fair values for these assets and liabilities were only disclosed annually. ASC 825-10-50 now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those
financial instruments not measured on the balance sheet at fair value.

ASC 320-10-35 provides additional guidance designed to
create greater clarity and consistency in accounting for and presenting impairment losses on securities. The guidance is intended to bring greater consistency to the timing of impairment



7



---

recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in
comprehensive income remains at fair value. ASC 320-10-35 also requires increased and more timely disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses.

The adoption of these provisions did not have a material impact on the Companys consolidated financial statements.

The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated
financial statements, or do not apply to its operations.

Segment Information

AmerInst has three operating segments: 1) reinsurance activity, 2) RINITS, its insurance financing product, which is in the marketing
phase of development, and 3) insurance activity under the Agency Agreement. The insurance segment was identified as a new segment effective September 25, 2009 following the finalization of the Agency Agreement between APSL and C&F.

The results for the reinsurance activity were as follows:



|                                                                                                                                                                                                                                                                          |  |                              |            |   |                              |   |            |                               |  |                               |           |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---------------------------- | - | ---------- | ----------------------------- |  | ----------------------------- | --------- |  | - | ---------- | -
|                                                                                                                                                                                                                                                                          |  | Nine MonthsEndedSept 30,2009 |            |   | Nine MonthsEndedSept 30,2008 |   |            | Three MonthsEndedSept 30,2009 |  | Three MonthsEndedSept 30,2008 |          
|Revenues                                                                                                                                                                                                                                                                  |  | $                            | 5,763,075  |   |                              | $ | 5,506,990  |                               |  | $                             | 2,016,027 |  | $ | 1,541,987  |  
|Total losses and expenses                                                                                                                                                                                                                                                 |  |                              | (1,210,213 | ) |                              |   | 7,551,208  |                               |  |                               | 12,667    |  |   | 2,441,059  |  
|Segment income (loss)                                                                                                                                                                                                                                                     |  |                              | 6,973,288  |   |                              |   | (2,044,218 | )                             |  |                               | 2,003,360 |  |   | (899,072   | )
|                                                                                                                                                                                                                                                                         
|The RINITS segment offers a mechanism to securitize insurance and reinsurance risk, involving property, casualty, life and health
lines of insurance. This segment as of September 30, 2009, had generated no revenue. Operating and management expenses are as follows: | 
|                                                                                                                                                                                                                                                                          |  |                              |            |  
|                                                                                                                                                                                                                                                                          |  | Nine MonthsEndedSept 30,2009 |            |   | Nine MonthsEndedSept 30,2008 |   |            | Three MonthsEndedSept 30,2009 |  | Three MonthsEndedSept 30,2008 |          
|Operating and management expensessegment loss                                                                                                                                                                                                                            |  | $                            | 158,222    |   |                              | $ | 363,184    |                               |  | $                             | 27,503    |  | $ | 123,093    |  
|                                                                                                                                                                                                                                                                         
|The insurance segment offers accountants professional liability and lawyers professional liability insurance coverage. This
segment as of September 30, 2009, had generated no revenue. Operating and management expenses are as follows:                               | 
|                                                                                                                                                                                                                                                                          |  |                              |            |  
|                                                                                                                                                                                                                                                                          |  | Nine MonthsEndedSept 30,2009 |            |   | Nine MonthsEndedSept 30,2008 |   |            | Three MonthsEndedSept 30,2009 |  | Three MonthsEndedSept 30,2008 |          
|Operating and management expensessegment loss                                                                                                                                                                                                                            |  | $                            | 364,162    |   |                              | $ |           |                               |  | $                             | 177,433   |  | $ |           |  
|                                                                                                                                                                                                                                                                         
|The combined total net income (loss) for these segments is as follows:                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                                                          |  |                              |            |  
|                                                                                                                                                                                                                                                                          |  | Nine MonthsEndedSept 30,2009 |            |   | Nine MonthsEndedSept 30,2008 |   |            | Three MonthsEndedSept 30,2009 |  | Three MonthsEndedSept 30,2008 |          
|Total net income (loss)                                                                                                                                                                                                                                                   |  | $                            | 6,450,904  |   |                              | $ | (2,407,402 | )                             |  | $                             | 1,798,424 |  | $ | (1,022,165 | )



8



---

Fair Value of Investments

In accordance with the Fair Value Measurements and Disclosures Topic of the ASC, the following table shows the fair value of the
Companys investments and where in the fair value hierarchy the fair value measurements are included as of September 30, 2009.



|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | --------------- | - | ---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- | ---------- | ---------------------------------------------------------------------------------------------------------- | - | --------- |  | - | --------- | -
|                                                                                                                                                                                                           |  |                |            |                 |   | Fair value measurement using:                              | 
|                                                                                                                                                                                                           |  | Carryingamount |            | Total fairvalue |   | Quoted pricesin activemarkets foridentical assets(Level 1) |  | Significant otherobservable inputs(Level 2)                                                                |            | Significantunobservable inputs(Level 3)                                                                    |  
|U.S. government agency securities:                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Mortgage-backed securities                                                                                                                                                                                 |  | $              |           |                 | $ |                                                           |  | $                                                                                                          |           |                                                                                                            | $ |          |  | $ |          |  
|Non-mortgage-backed securities                                                                                                                                                                             |  |                | 2,329,440  |                 |   | 2,329,440                                                  |  |                                                                                                            |            |                                                                                                            |   | 2,329,440 |  |   |           |  
|Obligations of state and political subdivisions                                                                                                                                                            |  |                | 4,254,762  |                 |   | 4,254,762                                                  |  |                                                                                                            |            |                                                                                                            |   | 4,254,762 |  |   |           |  
|Corporate securities                                                                                                                                                                                       |  |                | 529,048    |                 |   | 529,048                                                    |  |                                                                                                            |            |                                                                                                            |   | 529,048   |  |   |           |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Total fixed maturity investments                                                                                                                                                                           |  |                | 7,113,250  |                 |   | 7,113,250                                                  |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Equity securities (other than hedge fund)                                                                                                                                                                  |  |                | 15,441,246 |                 |   | 15,441,246                                                 |  |                                                                                                            | 15,441,246 |                                                                                                            |   |           |  |   |           |  
|Hedge fund                                                                                                                                                                                                 |  |                | 1,322,644  |                 |   | 1,322,644                                                  |  |                                                                                                            |            |                                                                                                            |   |           |  |   | 1,322,644 |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Total equity securities                                                                                                                                                                                    |  |                | 16,763,890 |                 |   | 16,763,890                                                 |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Total investments                                                                                                                                                                                          |  | $              | 23,877,140 |                 | $ | 23,877,140                                                 |  | $                                                                                                          | 15,441,246 |                                                                                                            | $ | 7,113,250 |  | $ | 1,322,644 |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|                                                                                                                                                                                                          
|The following is a reconciliation of the beginning and ending balance of investments using significant unobservable inputs (Level 3) for
the three months ended September 30, 2009 and September 30, 2008. | 
|                                                                                                                                                                                                           |  |                |            |                 |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  | Fair valuemeasurement usingsignificantunobservableinputs (Level
3)hedge fundThree MonthsendedSept 30, 2009 |            | Fair valuemeasurement usingsignificantunobservable inputs(Level
3)hedge fundThree MonthsendedSept 30, 2008 |  
|Balance classified as Level 3, beginning of period                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            | $ | 1,253,618 |  | $ | 1,460,570 |  
|Total gains or losses included in earnings:                                                                                                                                                                |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|Net realized gains                                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|Change in fair value of hedge fund investments                                                                                                                                                             |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   | 69,026    |  |   | (71,113   | )
|Purchases or sales                                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|Transfers in and/or out of Level 3                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Ending balance, end of period                                                                                                                                                                              |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            | $ | 1,322,644 |  | $ | 1,389,457 |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|                                                                                                                                                                                                          
|The following is a reconciliation of the beginning and ending balance of investments using significant unobservable inputs (Level 3) for
the nine months ended September 30, 2009 and September 30, 2008.  | 
|                                                                                                                                                                                                           |  |                |            |                 |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  | Fair valuemeasurement usingsignificantunobservableinputs (Level 3)hedge
fundNine MonthsendedSept 30, 2009  |            | Fair valuemeasurement usingsignificantunobservable inputs(Level 3)
hedgefundNine Months endedSept 30, 2008 |  
|Balance classified as Level 3, beginning of period                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            | $ | 1,152,548 |  | $ | 1,487,266 |  
|Total gains or losses included in earnings:                                                                                                                                                                |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|Net realized gains                                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|Change in fair value of hedge fund investments                                                                                                                                                             |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   | 170,096   |  |   | (97,809   | )
|Purchases or sales                                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|Transfers in and/or out of Level 3                                                                                                                                                                         |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |          |  |   |          |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  
|Ending balance, end of period                                                                                                                                                                              |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            | $ | 1,322,644 |  | $ | 1,389,457 |  
|                                                                                                                                                                                                           |  |                |            |                 |   |                                                            |  |                                                                                                            |            |                                                                                                            |   |           |  |   |           |  



9



---

Upon the adoption of ASC 320 effective April 1, 2009, the Company changed its quarterly
process for assessing whether declines in the fair value of its fixed maturity investments represented impairments that are other-than-temporary. The process now includes reviewing each fixed maturity investment that is impaired and determining: (1)
if the Company has the intent to sell the fixed maturity investment or (2) if it is more likely than not that the Company will be required to sell the fixed maturity investment before its anticipated recovery; and (3) assessing whether a credit loss
exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the fixed maturity investment are less than the amortized cost basis of the investment.

The Company had no planned sales of its fixed maturity investment classified as available-for-sale as at September 30, 2009. In assessing
whether it is more likely than not that the Company will be required to sell a fixed maturity investment before its anticipated recovery, the Company considers various factors including its future cash flow requirements, legal and regulatory
requirements, the level of its cash, cash equivalents, short term investments and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the three months ended September 30, 2009, the Company
did not recognize any other-than-temporary impairments due to required sales.

In evaluating credit losses, the Company
considers a variety of factors in the assessment of a fixed maturity investment including: (1) the time period during which there has been a significant decline below cost; (2) the extent of the decline below cost and par; (3) the potential for the
fixed maturity investment to recover in value; (4) an analysis of the financial condition of the issuer; (5) the rating of the issuer; and (6) failure of the issuer of the fixed maturity investment to make scheduled interest or principal payments.

If we conclude a security is other-than-temporarily impaired, we write down the amortized cost of the security to fair value,
with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations. Gross unrealized losses on the investment portfolio as of September 30, 2009 amounted to $4,421 compared to $33,016 as of December 31,
2008. This decrease was mainly attributable to fixed income and equity securities which we determined were not other than temporarily impaired. The Company has the intent and ability to hold these securities either to maturity or until the fair
value recovers above the adjusted cost. The change in unrealized losses from these securities were not as a result of credit, collateral or structural issues. As a result of the decline in fair value below cost, the Company recorded a total
other-than-temporary impairment charge of $847,889 and $1,289,285 on 28 and 27 equity securities during the nine months ended September 30, 2009 and 2008, respectively.

INVESTMENTS

The cost or amortized cost, gross unrealized holding gains and
losses, and estimated fair value of investments in fixed maturity investments, by major security type, and equity securities at September 30, 2009 and December 31, 2008 is as follows:



|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|------------------------------------------------ |  | -------------------- | ---------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ----------
|                                                 |  | Cost orAmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|September 30, 2009                               |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Fixed maturity investments:                      |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Obligations of states and political subdivisions |  | $                    | 4,080,658  |                      | $ | 176,650               |  | $ | (2,546              | ) |  | $ | 4,254,762 
|Corporate debt securities                        |  |                      | 507,896    |                      |   | 21,152                |  |   |                    |   |  |   | 529,048   
|U.S. government agency securities                |  |                      | 2,312,162  |                      |   | 19,153                |  |   | (1,875              | ) |  |   | 2,329,440 
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Total fixed maturity investments                 |  |                      | 6,900,716  |                      |   | 216,955               |  |   | (4,421              | ) |  |   | 7,113,250 
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Equity securities                                |  |                      | 9,695,568  |                      |   | 5,745,678             |  |   |                    |   |  |   | 15,441,246
|Hedge fund                                       |  |                      | 1,000,000  |                      |   | 322,644               |  |   |                    |   |  |   | 1,322,644 
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Total equity securities                          |  |                      | 10,695,568 |                      |   | 6,068,322             |  |   |                    |   |  |   | 16,763,890
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Total investments                                |  | $                    | 17,596,284 |                      | $ | 6,285,277             |  | $ | (4,421              | ) |  | $ | 23,877,140
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|                                                 |  |                      |            |                     
|                                                 |  | Cost orAmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|December 31, 2008                                |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Fixed maturity investments:                      |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Obligations of states and political subdivisions |  | $                    | 20,940,760 |                      | $ | 559,499               |  | $ | (4,992              | ) |  | $ | 21,495,267
|U.S. government agency securities                |  |                      | 7,531,224  |                      |   | 104,265               |  |   |                    |   |  |   | 7,635,489 
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Total fixed maturity investments                 |  |                      | 28,471,984 |                      |   | 663,764               |  |   | (4,992              | ) |  |   | 29,130,756
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Equity securities                                |  |                      | 13,831,578 |                      |   | 1,948,066             |  |   | (28,024             | ) |  |   | 15,751,620
|Hedge fund                                       |  |                      | 1,000,000  |                      |   | 152,548               |  |   |                    |   |  |   | 1,152,548 
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Total equity securities                          |  |                      | 14,831,578 |                      |   | 2,100,614             |  |   | (28,024             | ) |  |   | 16,904,168
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           
|Total investments                                |  | $                    | 43,303,562 |                      | $ | 2,764,378             |  | $ | (33,016             | ) |  | $ | 46,034,924
|                                                 |  |                      |            |                      |   |                       |  |   |                     |   |  |   |           



10



---

The gross unrealized loss on investments at September 30, 2009 is categorized as
follows:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ------- | ---------------- | ------------------- | ------ | ------------------- | ----- | ---------------- | --------- |  | ------------------- | ------- | ---------------- |  | - | --------- |  | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 12 months or greater |         |                  | Less than 12 months |        |                     | Total |                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | EstimatedFair Value  |         | UnrealizedLosses |                     |        | EstimatedFair Value |       | UnrealizedLosses |           |  | EstimatedFair Value |         | UnrealizedLosses | 
|September 30, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Fixed maturity investments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Obligations of states and political subdivisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $                    |        |                  | $                   |       |                     |       | $                | 522,454   |  | $                   | (1,875  | )                |  | $ | 522,454   |  | $ | (1,875  | )
|Corporate debt securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|U.S. government agency securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                      |        |                  |                     |       |                     |       |                  | 998,125   |  |                     | (2,546  | )                |  |   | 988,125   |  |   | (2,546  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Total fixed maturity investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |        |                  |                     |       |                     |       |                  | 1,520,579 |  |                     | (4,421  | )                |  |   | 1,520,579 |  |   | (4,421  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Equity securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|Hedge fund                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Total equity securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Total investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | $                    |        |                  | $                   |       |                     |       | $                | 1,520,579 |  | $                   | (4,421  | )                |  | $ | 1,520,579 |  | $ | (4,421  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|As of September 30, 2009, there were approximately 3 securities in an unrealized loss position
with an estimated fair value of $1,520,579. Of these securities, there are no securities that have been in an unrealized loss position for 12 months or greater. As of September 30, 2009, none of these securities were considered to be other than
temporarily impaired. The unrealized losses from these securities were not a result of credit, collateral or structural issues.  The gross unrealized loss on investments at December 31, 2008 is categorized as follows: | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 12 months or greater |         |                  | Less than 12 months |        |                     | Total |                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | EstimatedFair Value  |         | UnrealizedLosses |                     |        | EstimatedFair Value |       | UnrealizedLosses |           |  | EstimatedFair Value |         | UnrealizedLosses | 
|December 31, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Fixed maturity investments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Obligations of states and political subdivisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $                    |        |                  | $                   |       |                     |       | $                | 1,718,215 |  | $                   | (4,992  | )                |  | $ | 1,718,215 |  | $ | (4,992  | )
|Corporate debt securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|U.S. government agency securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Total fixed maturity investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |        |                  |                     |       |                     |       |                  | 1,718,215 |  |                     | (4,992  | )                |  |   | 1,718,215 |  |   | (4,992  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Equity securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                      | 105,959 |                  |                     | (5,635 | )                   |       |                  | 935,013   |  |                     | (22,389 | )                |  |   | 1,040,972 |  |   | (28,024 | )
|Hedge fund                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                      |        |                  |                     |       |                     |       |                  |          |  |                     |        |                  |  |   |          |  |   |        |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Total equity securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                      | 105,959 |                  |                     | (5,635 | )                   |       |                  | 935,013   |  |                     | (22,389 | )                |  |   | 1,040,972 |  |   | (28,024 | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  
|Total investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | $                    | 105,959 |                  | $                   | (5,635 | )                   |       | $                | 2,653,228 |  | $                   | (27,381 | )                |  | $ | 2,759,187 |  | $ | (33,016 | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                      |         |                  |                     |        |                     |       |                  |           |  |                     |         |                  |  |   |           |  |   |         |  



11



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As of December 31, 2008, there were approximately 9 securities in an unrealized loss
position with an estimated fair value of $2,759,187. Of these securities, there was 1 security that had been in an unrealized loss position for 12 months or greater with an estimated fair value of $105,959. As of December 31, 2008, none of
these securities were considered to be other than temporarily impaired. The unrealized losses from these securities were not a result of credit, collateral or structural issues.

The cost or amortized cost and estimated fair value of fixed maturity investments at September 30, 2009 by contractual maturity are
shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations without penalties.



|                                                                                |  |                   |            |   |                     |   |            |  
|------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ------------------- | - | ---------- | -
|                                                                                |  | AmortizedCost     |            |   | EstimatedFair Value |  
|Due in one year or less                                                         |  | $                 | 525,000    |   |                     | $ | 522,454    |  
|Due after one year through five years                                           |  |                   | 4,063,554  |   |                     |   | 4,261,357  |  
|Due after five years through ten years                                          |  |                   |           |   |                     |   |           |  
|Due after ten years                                                             |  |                   |           |   |                     |   |           |  
|                                                                                |  |                   |            |   |                     |   |            |  
|Subtotal                                                                        |  |                   | 4,588,554  |   |                     |   | 4,783,811  |  
|U.S. government agency securities                                               |  |                   | 2,312,162  |   |                     |   | 2,329,439  |  
|                                                                                |  |                   |            |   |                     |   |            |  
|Total                                                                           |  | $                 | 6,900,716  |   |                     | $ | 7,113,250  |  
|                                                                                |  |                   |            |   |                     |   |            |  
|                                                                                |  |                  
|Information on sales and maturities of investments are as follows:              |  |                   |            |   |                     |   |            |  
|                                                                                |  |                  
|                                                                                |  | September 30,2009 |            |   | December 31,2008    |  
|Total proceeds on sales of securities                                           |  | $                 | 36,401,295 |   |                     | $ | 20,456,120 |  
|Total proceeds from maturities of fixed maturity investments                    |  |                   | 1,097,484  |   |                     |   | 4,975,000  |  
|Gross gains on sales                                                            |  |                   | 3,709,650  |   |                     |   | 1,225,335  |  
|Gross losses on sales                                                           |  |                   | (997,622   | ) |                     |   | (1,767,121 | )
|Impairment losses                                                               |  |                   | (847,889   | ) |                     |   | (4,016,465 | )
|                                                                                |  |                  
|Major categories of net interest and dividend income are summarized as follows: |  |                   |            |   |                     |   |            |  
|                                                                                |  |                  
|                                                                                |  | September 30,2009 |            |   | December 31,2008    |  
|Interest earned:                                                                |  |                   |            |   |                     |   |            |  
|Fixed maturity investments                                                      |  | $                 | 556,388    |   |                     | $ | 1,340,972  |  
|Cash and cash equivalents                                                       |  |                   | 5,617      |   |                     |   | 42,552     |  
|Dividends earned                                                                |  |                   | 238,889    |   |                     |   | 325,970    |  
|Investment expenses                                                             |  |                   | (129,105   | ) |                     |   | (226,321   | )
|                                                                                |  |                   |            |   |                     |   |            |  
|Net investment income                                                           |  | $                 | 671,789    |   |                     | $ | 1,483,173  |  
|                                                                                |  |                   |            |   |                     |   |            |  



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Managements discussion and analysis (MD&A) provides supplemental information, which sets forth the major factors that
have affected our financial condition and results of operation and should be read in conjunction with our consolidated financial statements and notes thereto included in this Form 10-Q.

Certain statements contained in this Form 10-Q, including this MD&A section, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, and contain information relating to us that is based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. The words
expect, believe, may and similar expressions as they relate to us or our management are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially
from those set forth in our forward-looking statements. Please see the Introductory Note and Item 1A Risk Factors of this Form 10-Q for a discussion of factors that could cause our actual results to differ materially from those in
the forward-looking statements. However, the risk factors listed in Item 1A Risk Factors or discussed in this Form 10-Q should not be construed as exhaustive and should be read in conjunction with other cautionary statements that
are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our managements analysis only as of the date they are made. We undertake no obligation to release publicly the results of
any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



12



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The following discussion addresses our financial condition and results of operations for the
periods and as of the dates indicated.

OVERVIEW

Unless otherwise indicated by the context, in this quarterly report we refer to AmerInst Insurance Group, Ltd. and its subsidiaries as the Company, AmerInst, we or
us. AMIC Ltd. means AmerInsts wholly-owned subsidiary, AmerInst Insurance Company, Ltd. APSL means AmerInst Professional Services, Limited (APSL), a Delaware corporation and wholly-owned subsidiary of AmerInst Mezco,
Ltd. which is a wholly-owned subsidiary of AmerInst. Investco means AmerInst Investment Company, Ltd., a subsidiary of AMIC Ltd. AMIG means our predecessor entity, AmerInst Insurance Group, Inc., a Delaware corporation. Our
principal offices are c/o Cedar Management Limited, 25 Church Street, Continental Building, P.O. Box HM 1601, Hamilton, Bermuda, HM GX.

AmerInst, a Bermuda holding company, was formed in 1998. Our mission is to be a Company that provides availability of insurance for the Certified Public Accountant (CPA) profession, and that
engages in investment activities. Our investment portfolios is held and managed by Investco.

Entry into Agency Agreement

Effective September 25, 2009, APSL entered into an agency agreement (the Agency Agreement) with The
North River Insurance Company, United States Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (collectively, C&F) pursuant
to which C&F appointed APSL as its exclusive agent for the purposes of soliciting, underwriting, quoting, binding, issuing, cancelling, non-renewing and endorsing accountants professional liability and lawyers professional liability
insurance coverage within the 50 states of the United States and the District of Columbia. The initial term of the Agency Agreement is for four years with automatic one year renewals. No underwriting activity has occurred through September 30,
2009.

Entry into Reinsurance Agreement

We conduct our reinsurance business through AMIC Ltd., our subsidiary, which is a registered insurer in Bermuda. Our relationship with CNA Financial Corporation (CNA) terminated effective
December 31, 2008 and our relationship with CAMICO Mutual Insurance Company (CAMICO), a California-based writer of accountants professional liability business, expired effective June 1, 2009. Those two relationships
provided 100% of AmerInsts net premiums earned in 2008. Please see the Historical Relationship with CNA and Historical Relationship with CAMICO sections below for discussion of the termination of our reinsurance
agreements with CNA and CAMICO, respectively. On September 25, 2009, AMIC Ltd. entered into a professional liability quota share agreement with C&F pursuant to which C&F agrees to cede and AMIC Ltd. agrees to accept as reinsurance a
fifty percent (50%) quota share of C&Fs liability under insurance written by APSL on behalf of C&F and classified by C&F as accountants professional liability and lawyers professional liability, subject to AMIC
Ltd. surplus limitations. The initial term of the Reinsurance Agreement is for four years with automatic one year renewals. No underwriting activity has occurred under the Reinsurance Agreement through September 30, 2009.

Historical Relationship with CNA

Historically, the primary business activity of our wholly owned insurance company subsidiary, AMIC Ltd., has been to act as a reinsurer of professional liability insurance policies that are issued under
the Professional Liability Insurance Plan sponsored by the American Institute of Certified Public Accountants (AICPA). The AICPA plan offers professional liability coverage to accounting firms and individual CPAs in all 50 states.

Our reinsurance activity depends upon agreements with outside parties. In August 1993, AMIG, our predecessor entity, began
our reinsurance relationship with CNA, taking a 10% participation of the first $1,000,000 of liability of each policy written under the AICPA plan. Effective December 1999, we began taking a 10% share of CNAs value plan business.
The value plan provided for separate limits up to $1,000,000 for losses and separate limits up to $1,000,000 for expenses per occurrence and $2,000,000 in the aggregate. The maximum limits under the value plan were $2,000,000
per occurrence and $4,000,000 in the aggregate.

On January 5, 2009, AMIC Ltd. received written notice from CNA that CNA
did not intend to renew the reinsurance program encompassed by the AmerInst Insurance Company Limited Accountants Professional Liability Treaty and the Value Plan Policies Accountants Professional Liability Quota Share Treaty (the Reinsurance
Treaties). In 2008, the business relationship with CNA accounted for approximately 95% of AmerInsts net premiums earned.

On May 15, 2009, AMIC Ltd. and CNA entered into a Commutation and Release Agreement (the Commutation Agreement) whereby:



| |  |  | AMIC Ltd. paid to CNA $20,550,000 on May 22, 2009;
| | - |  | --------------------------------------------------



13



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| |  |  | CNA released and discharged AMIC Ltd. from any claims or liabilities whatsoever under, arising out of, or in any way related to past Reinsurance
Treaties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | AMIC Ltd. released and discharged CNA from any claims or liabilities whatsoever under, arising out of, or in any way related to the past Reinsurance
Treaties;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All rights, duties, liabilities, and obligations of AMIC Ltd. and CNA under the current Reinsurance Treaties were discharged;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | The 2009 Reinsurance Treaties were rescinded and terminated retroactive to their inception; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | The 2009 Reinsurance Treaties were void as though they never existed.
| | - |  | ---------------------------------------------------------------------

The Company has reduced its estimated liability for unpaid losses and loss adjustment expenses by approximately $5,400,000 to reflect the
impact of the Commutation Agreement.

Included in net income for the nine months ended September 30, 2009 is earned
premium of approximately $2,800,000, losses and loss adjustment expenses and policy acquisition costs of approximately $2,000,000 and $800,000, respectively, relating to the commuted treaties. Since the Commutation Agreement rescinded and terminated
the 2009 Reinsurance Treaties retroactive to their inception, such treaties are not recorded in these unaudited condensed consolidated financial statements.

Historical Relationship with CAMICO

Effective June 1, 2005, we
accepted a 5% share in the first excess layer of $2,000,000 excess of $1,000,000 of CAMICO. Effective June 1, 2007, the contract renewed with our share amended to 2.5%, but of a $4,000,000 excess $1,000,000 layer. Effective June 1, 2008,
the contract renewed with similar expiring terms.

Effective June 1, 2009, we decided not to renew the CAMICO contract
and permitted the contract to expire pursuant to its terms. In 2008, the business relationship with CAMICO accounted for approximately 5% of AmerInsts net premiums earned. We remain potentially liable for claims related to coverage through
May 31, 2009.

VSC Payment

On July 22, 2009, the Company received a payment of $500,891 from Virginia Surety Company (VSC) in satisfaction of certain recoveries not previously remitted by VSC under retrocession
contracts between the Company and VSC for the years 1989-1993. The $500,891 payment was recorded as a decrease in losses and loss adjustment expenses. The Company and VSC are in dispute with respect to over $500,000 in additional recoveries, fees
and interest, which the Company currently expects to resolve via arbitration.

Attorneys Professional Liability Coverage

Effective January 1, 2003, we entered into a 15% quota share participation of the attorneys professional liability
coverage provided by Professionals Direct Insurance Company. This participation terminated on December 31, 2003. We remain potentially liable for claims related to this period of coverage.

Third-party Managers and Service Providers

Cedar Management Limited provides the day-to-day services necessary for the administration of our business. Effective July 1, 2008, USA Risk Group (Bermuda) Ltd., our former manager, acquired a
majority interest in Cedar Management Limited, a Bermuda based captive manager. Following the acquisition, the business operations of USA Risk Group (Bermuda) Ltd. and Cedar Management Limited were combined and operate as Cedar Management Limited.
Shareholder services are conducted by USA Risk Group of Vermont, Inc., an affiliate of Cedar Management Limited. Our agreement with Cedar Management Limited renewed for one year beginning January 1, 2009 and ending December 31, 2009.

The Country Club Bank of Kansas City, Missouri, provides portfolio management of fixed-income securities and directs our
investments pursuant to guidelines approved by us. Harris Associates L.P. and Aurora Investment Management, LLC provide discretionary investment advice with respect to our equity investments. We have retained Milliman USA, an independent casualty
actuarial consulting firm, to render advice regarding actuarial matters.

OPERATIONS

Three months ended September 30, 2009 compared to three months ended September 30, 2008:

We recorded net income of $1,798,424 for the quarter ended September 30, 2009 compared to a net loss of $1,022,165 for the quarter ended
September 30, 2008. The net income recorded for the quarter ended September 30, 2009 is mainly attributable to net realized gain on investments, and a decrease in losses and loss adjustment expenses and policy acquisition costs as a result
of the finalization of the Commutation Agreement with CNA and the recovery from VSC, offset by a reduction in net premiums, all as discussed above and below in further detail.



14



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Our net premiums earned for the quarter ended September 30, 2009 were $171,272 compared
to $2,061,362 for the quarter ended September 30, 2008, a decrease of $1,890,090 or 91.7%. This decrease is due to the 2009 Reinsurance Treaties being rescinded and terminated retroactive to their inception.

We recorded net investment income of $64,463 for the quarter ended September 30, 2009 compared to $346,360 for the quarter ended
September 30, 2008, a decrease of $281,897 or 81.4.%. The decline in net investment income is due to a lower amount invested in 2009 compared to 2008. Annualized investment yield, calculated as total interest and dividends divided by the net
average amount of total investments, was 0.9% for the quarter ended September 30, 2009 compared to 2.6% for the quarter ended September 30, 2008.

Sales of securities during the quarter ended September 30, 2009, net of impairment, resulted in realized gains on investments of $1,780,292 compared to losses of $865,735 during the quarter
ended September 30, 2008. The significant increase in realized gains recorded in the third quarter of 2009 primarily related to realized gains on the sale of equity securities.

For the quarter ended September 30, 2009 we recorded loss and loss adjustment recoveries of $434,372 as a result of the recognition of
the payment of $500,891 received from VSC in satisfaction of certain recoveries not previously remitted by VSC under retrocession contracts between AMIC Ltd. and VSC for the years 1989-1993. To determine the loss ratio for the third quarter of 2008
we multiplied an estimated loss ratio of 70% times the AICPA Professional Liability Insurance Plan net premiums earned and the CAMICO net premiums earned.

We expensed policy acquisition costs of $1,713 in the third quarter of 2009 compared to $594,485 for the same period of 2008, a decrease of $592,772 or 99.7%. The decrease in policy acquisition costs is
due to a decrease in net premiums earned. These costs were 1% and 28.8% of net premiums earned for the quarter ended September 30, 2009 and 2008, respectively. Policy acquisition costs are the sum of ceding commissions paid to ceding companies
determined contractually pursuant to reinsurance agreements and federal excise taxes paid on premiums written to ceding companies.

We expensed operating and management expenses of $650,262 for the quarter ended September 30, 2009 compared to $511,121 for the quarter ended September 30, 2008, an increase of $139,141 or 27.2%. The primary reason for this
increase was due to increases in directors fees and expenses, management and professional fees, business development expenses and start-up costs of our new business venture.

AmerInst has three operating segments: 1) reinsurance activity, 2) RINITS, its insurance financing product, which is in the marketing
phase of development, and 3) insurance activity under the Agency Agreement. The reinsurance segment had revenues of $2,016,027 for the quarter ended September 30, 2009 and $1,541,987 for the quarter ended September 30, 2008. Total losses
and expenses for this segment were $12,667 for the quarter ended September 30, 2009 and $2,441,059 for the quarter ended September 30, 2008. This resulted in segment income of $2,003,360 for the quarter ended September 30, 2009 and
segment loss of $899,072 for the period ended September 30, 2008.

The RINITS segment offers a mechanism to
securitize insurance and reinsurance risk, involving property, casualty, life and health lines of insurance. This segment as of September 30, 2009 had generated no revenue. Operating and management expenses in the marketing phase of development
were $27,503 for the quarter ended September 30, 2009 and $123,093 for the quarter ended September 30, 2008.

The
insurance segment offers accountants professional liability and lawyers professional liability insurance coverage. This segment as of September 30, 2009 had generated no revenue. Operating and management expenses were $177,433 for
the quarter ended September 30, 2009 and no expenses were incurred for the quarter ended September 30, 2008.

Nine months ended
September 30, 2009 compared to nine months ended September 30, 2008:

We recorded net income of $6,450,904 for
the nine months ended September 30, 2009 compared to net loss of $2,407,402 for the nine months ended September 30, 2008. The net income recorded for the nine months ended September 30, 2009 is mainly attributable to the reduction of
approximately $5,400,000 in loss and loss adjustment expenses in recognition of the positive development recorded as a result of updating the estimated liability for unpaid losses and loss adjustment expenses on the finalization of the Commutation
Agreement with CNA, as discussed above and below in further detail.

Our net premiums earned were $3,227,147 for the nine
months ended September 30, 2009 compared to $6,230,098 for the nine months ended September 30, 2008. The change of $3,002,951 represented a 48.2% decrease. This decrease is due to the 2009 Reinsurance Treaties being rescinded and
terminated retroactive to their inception.

We recorded realized gains, net of impairment, of $1,864,139 during the nine
months ended September 30, 2009 compared to $1,835,788 in realized losses, including impairment losses, in the same period of 2008. The significant increase in realized gains



15



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recorded in 2009 relates to realized gain on sale of fixed income and equity securities. Net investment income through September 30, 2009 was $671,789 compared to $1,112,680 for the same
period of 2008. The decline in net investment income is due to a lower amount invested in 2009 compared to 2008. Annualized investment yield was approximately 2.3% for the nine months ended September 30, 2009 and 2.8% for the first nine months
of 2008.

For the nine months ended September 30, 2009 we recorded loss and loss adjustment recoveries of $3,623,591 as a
result of, (1) the reduction in loss reserves related to the CNA treaty following the determination of the ultimate settlement amount in view of the finalization of the Commutation Agreement, and (2) the recognition of the payment of
$500,891 received from VSC in satisfaction of certain recoveries not previously remitted by VSC under retrocession contracts between AMIC Ltd. and VSC for the years 1989-1993. To determine total losses for the nine months of 2008, we multiplied an
estimated loss ratio of 70% times the AICPA Professional Liability Insurance Plan net premiums earned and the CAMICO net premiums earned. Our actual overall loss ratio for the year ended December 31, 2008 was 15.1%.

We expensed policy acquisition costs of $859,364 for the nine months ended September 30, 2009 compared to $1,774,739 for the nine
months ended September 30, 2008, a decrease of $915,375 or 51.6%. These costs were 26.6% of premiums earned for the nine-month period ended September 30, 2009 and 28.5% for the nine-month period ended September 30, 2008. The decrease
in policy acquisition costs in 2009 was due to the decrease in net premiums earned. Policy acquisition costs are the sum of ceding commissions paid to ceding companies, which are determined contractually pursuant to reinsurance agreements, and
federal excise taxes paid on premiums written to ceding companies.

AmerInst has three operating segments: 1) reinsurance
activity, 2) RINITS, its insurance financing product, which is in the marketing phase of development, and 3) insurance activity under the Agency Agreement.

The reinsurance segment had revenues of $5,763,075 for the nine months ended September 30, 2009 and $5,506,990 for the nine months ended September 30, 2008. Total losses and expenses for this
segment were $(1,210,213) for the nine months ended September 30, 2009 and $7,551,208 for the nine months ended September 30, 2008. This resulted in segment income of $6,973,288 for the nine months ended September 30, 2009 and segment
loss of $2,044,218 for the nine months ended September 30, 2008.

The RINITS segment offers a mechanism to
securitize insurance and reinsurance risk, involving property, casualty, life and health lines of insurance. This segment as of September 30, 2009 had generated no revenue. Operating and management expenses in the marketing phase of development
were $158,222 for the nine months ended September 30, 2009 and $363,184 for the nine months ended September 30, 2008.

The insurance segment offers accountants professional liability and lawyers professional liability insurance coverage. This segment as of September 30, 2009 had generated no revenue. Operating and management expenses were
$364,162 for the nine months ended September 30, 2009 and no expenses were incurred for the nine months ended September 30, 2008.

FINANCIAL CONDITION AND LIQUIDITY

Under existing accounting principles generally accepted in the United
States, we are required to recognize certain assets at their fair value in our condensed consolidated balance sheets. This includes our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures
Topic of the Financial Accounting Standards Board Accounting Standards Codification (ASC), fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair Value Measurements and Disclosures Topic of the ASC, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs
to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value
measurement will fall within the level of the hierarchy based on the input that is significant to determining such measurement. The three levels are defined as follows:



| |  |  | Level 1: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active
markets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in
active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets in markets that are not active and inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Inputs to the valuation methodology that are unobservable for the asset or liability.
| | - |  | ----------------------------------------------------------------------------------------------

At each measurement date, we estimate the fair value of the financial instruments using various valuation techniques. We utilize, to the
extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are not available, we utilize valuation techniques that rely
on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held as of September 30, 2009 and what level within the fair value hierarchy
the valuation technique resides.



16



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| |  |  | U.S. government agency securities: Comprised primarily of bonds issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation, Federal Farm Credit Bank and the Federal National Mortgage Association. The fair values of U.S. government agency securities are priced using the spread above the risk-free U.S. Treasury yield curve. As the yields for the risk-free U.S.
Treasury yield curve are observable market inputs, the fair values of U.S. government agency securities are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker
quotes are not used for fair value pricing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Obligations of state and political subdivisions: Comprised of fixed income obligations of state and local governmental municipalities. The fair
values of these securities are based on quotes and current market spread relationship, and are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not
used for fair value pricing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity securities, at fair value: Comprised primarily of investments in the common stock of publicly traded companies. All of the Companys
equities are included in the Level 1 fair value hierarchy. The Company receives prices based on closing exchange prices from independent pricing sources to measure fair values for the equities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hedge fund: Comprised of a hedge fund whose objective is to seek attractive long-term returns with lower volatility by investing in a range of
diversified investment strategies. The fund invests in a diversified pool of hedge fund managers, generally across six different strategies: long/short equities, long/short credit, macro, multi-strategy opportunistic, activist, and portfolio hedge.
The fair value of the hedge fund is based on the net asset value of the fund as reported by the fund manager. The fair value of our hedge fund is included in the Level 3 fair value hierarchy.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

To validate prices, we complete quantitative analyses to compare the performance of the overall investment portfolio to the performance of
an appropriate benchmark, with significant differences identified and investigated.

There have been no material changes to
any of our valuation techniques from what was used as of December 31, 2008. Since the fair value of a financial instrument is an estimate of what a willing buyer would pay for our asset if we sold it, we will not know the ultimate value of our
financial instruments until they are sold. We believe the valuation techniques utilized provide us with the best estimate of the price that would be received to sell our assets or transfer our liabilities in an orderly transaction between
participants at the measurement date.

In late 2008 and into 2009, the capital markets were illiquid, reflecting uncertainties
associated with the mortgage crisis, worsening economic conditions, widening of credit spreads, bankruptcies and government intervention in large financial institutions. Though current market conditions appear to have stabilized and even improved
recently resulting in realized and unrealized gains in our investment portfolio, there is still the potential for further instability which could present additional risks and uncertainties for our business and make it more difficult to value certain
of our securities if trading becomes less frequent. As such, valuations may include assumptions and estimates that may have significant period-to-period changes that could have a material adverse effect on our results of operations or financial
condition.

As of September 30, 2009, our total investments were $23,877,140, a decrease of $22,157,784, or 48.1%, from
$46,034,924 at December 31, 2008. The decrease was primarily due to the sale of investments from the Companys fixed income investment portfolio, which had a fair value of $21,376,953 on May 15, 2009, to fund the payment to CNA of
$20,550,000 as required by the Commutation Agreement. The cash and cash equivalents balance increased from $887,107 at December 31, 2008 to $6,377,846 at September 30, 2009, an increase of $5,490,739, or 86.1%. The amount of cash and cash
equivalents varies depending on the maturities of fixed term investments and on the level of funds invested in money market mutual funds. The restricted cash and cash equivalents balance increased from $316,841 at December 31, 2008 to $691,544
at September 30, 2009, an increase of $374,703. The increase is due to the timing of sales and maturities of investments held as restricted cash at September 30, 2009 that have not yet been reinvested. The ratio of cash and total
investments to total liabilities at September 30, 2009 was 19.55:1, compared to a ratio of 1.65:1 at December 31, 2008. The ratio results at September 30, 2009 are due to the reduction in loss reserves arising from the CNA
commutation.

As noted in Historical Relationship with CNA section above, the Company paid to CNA $20,550,000 on
May 22, 2009. Subsequent to the payment of this settlement, the Company will continue to meet its cash flow requirements from its investment portfolios and the investment income that it earns on these, and the Company believes it will continue
to remain in compliance with the minimum solvency and liquidity requirement of the insurance regulations of Bermuda. Management believes the Company will have sufficient existing resources to meet future operating expenses and implement its new
business plan.



17



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The Bermuda Monetary Authority previously authorized Investco, a wholly-owned subsidiary of
AmerInst, to purchase up to 20% of the Companys common shares from individuals who have died or retired from the practice of public accounting and on a negotiated case-by-case basis. Through November 2, 2009 Investco had purchased 97,030
common shares from individuals who have died or retired for a total purchase price of $2,107,088. In addition, through that date, Investco had purchased in negotiated transactions at various prices 66,615 common shares for a total purchase price of
$875,111.

Cash Dividends

We paid a semi-annual dividend of $0.47 per share during the first and third quarters of 2009. The third quarter dividend amount has been reduced by $33,862 for 2009 and $29,080 for 2008, which represents
a write-back of uncashed dividends issued prior to the year 2003 to shareholders that we have been unable to locate. Since AmerInst began paying consecutive dividends in 1995, our original shareholders have received $16.96 in cumulative dividends
per share. When measured by a total rate of return calculation this has resulted in an effective annual rate of return of approximately 10.9% from the inception of the Company, based on a per share purchase price of $8.33 paid by the original
shareholders, and using an unaudited book value of $40.47 per share as of September 30, 2009.

Critical Accounting Policies

The Companys critical accounting policies are discussed in Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2008.

Available
Information

We file annual, quarterly, and current reports, proxy statements and other information with the Securities and
Exchange Commission (SEC or the Commission). You may read any document we file with the Commission at the Commissions public reference room at 100 F Street, NE, Washington, DC 20549. Please call the Commission at
1-800-SEC-0330 for information on the public reference room. The Commission maintains an internet site that contains annual, quarterly, and current reports, proxy and information statements and other information that issuers (including AmerInst)
file electronically with the Commission. The Commissions internet site is www.sec.gov.

Our
internet site is www.amerinst.bm. We make available free of charge through our internet site our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished
pursuant to the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Commission. You will need to have on your computer the Adobe Acrobat Reader® software to view these documents, which are in PDF format. If you do not have Adobe Acrobat Reader, a link to
Adobes internet site, from which you can download the software, is provided. We also make available, through our internet site, via links to the Commissions internet site, statements of beneficial ownership of our equity securities filed
by our directors, officers, 10% or greater shareholders and others under Section 16 of the Securities Exchange Act. In addition, we post on www.amerinst.bm our Memorandum of Association, our Bye-Laws, our Statement of Share Ownership
Policy, Charters for our Audit Committee and Governance and Nominations Committee, as well as our Code of Business Conduct and Ethics. You can request a copy of these documents, excluding exhibits, at no cost, by writing or telephoning us c/o Cedar
Management Limited, 25 Church Street, Continental Building, P.O. Box HM 1601 Hamilton, Bermuda HMGX, Attention: Investor Relations (441) 296-3973. The information on our internet site is not incorporated by reference into this report.



|Item 4. | Controls and Procedures
|------- | -----------------------

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Principal Executive Officer and our
Principal Financial Officer concluded that our disclosure controls and procedures are effective. There has been no change in our internal control over financial reporting identified in that evaluation that occurred during our last fiscal quarter
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



18



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Part IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

The
Company is not a party to any material legal proceedings.



|Item 1A. | Risk Factors
|-------- | ------------

There have
been no material changes in our risk factors from those disclosed in our 2008 Annual Report on Form 10-K other than the following:

Now
that our agreement with CNA, our primary insurer, has terminated, if we are unable to successfully implement our new business plan, our ability to generate revenue will be materially adversely affected.

On January 5, 2009, AMIC Ltd., our wholly-owned subsidiary, received written notice from CNA that CNA did not intend to renew its
reinsurance agreement with us regarding the AICPA Plan. In 2008, our business relationship with CNA accounted for over 95% of our net premiums earned. On May 15, 2009, we completed our commutation negotiations and executed the Commutation and
Release Agreement with CNA whereby, effective January 1, 2009, in exchange for a payment of a portion of the reserves which we had previously set aside, CNA assumed responsibility for prior years undetermined and unpaid liabilities.

We are currently implementing a new business plan. Effective September 25, 2009, APSL, a wholly-owned subsidiary of
AmerInst Mezco, Ltd. which is a wholly-owned subsidiary of AmerInst, entered into the Agency Agreement with C&F pursuant to which C&F appointed APSL as its exclusive agent for the purposes of soliciting, underwriting, quoting, binding,
issuing, cancelling, non-renewing and endorsing accountants professional liability and lawyers professional liability insurance coverage within the 50 states of the United States and the District of Columbia. Also on September 25,
2009, AMIC Ltd. entered into the reinsurance agreement with C&F pursuant to which C&F agrees to cede and AMIC Ltd. agrees to accept as reinsurance a fifty percent (50%) quota share of C&Fs liability under insurance written by
APSL on behalf of C&F and classified by C&F as accountants professional liability and lawyers professional liability. No underwriting activity has occurred through September 30, 2009 under either the Agency Agreement or
Reinsurance Agreement.

Because we have only recently entered into the Agency Agreement and Reinsurance Agreement and our
ability to generate revenue under either agreement is unproven, neither agreement may result in material revenue or profit. Even if we are able to generate material revenue and or profit from these agreements, we may not be able to do so for a
significant period of time.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

From time to time, the Company has repurchased shares of its common shares from individual shareholders who have died or retired from the practice of accounting. Through November 2, 2009, Investco
had repurchased 97,030 common shares pursuant to such program.

The following table shows information relating to the purchase
of shares from shareholders who have died or retired from the practice of accounting as described above during the three month period ended September 30, 2009:



|                                                                                                                                                                                                           |  |                               |  |                            |       |                                                                            |       |                                                                           |    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | -------------------------- | ----- | -------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------- | ---
|                                                                                                                                                                                                           |  | TotalNumberof SharesPurchased |  | AveragePrice PaidPer Share |       | Total Numberof SharesPurchased asPart of
PubliclyAnnouncedPlans or Program |       | Maximum Numberof SharesThat May Yet
BePurchased Underthe Plans or Program
|July 2009                                                                                                                                                                                                  |  | 2,397                         |  | $                          | 27.85 |                                                                            | 2,397 |                                                                           | N/A
|August 2009                                                                                                                                                                                                |  |                              |  |                            |      |                                                                            |      |                                                                           | N/A
|September 2009                                                                                                                                                                                             |  |                              |  |                            |      |                                                                            |      |                                                                           | N/A
|Total                                                                                                                                                                                                      |  | 2,397                         |  | $                          | 27.85 |                                                                            | 2,397 |                                                                           | N/A
|                                                                                                                                                                                                          
|From time to time, Investco has also purchased common shares in privately negotiated transactions. Through November 2, 2009, Investco had
repurchased 66,615 common shares pursuant to such program.      
|                                                                                                                                                                                                          
|The following table shows information relating to the purchase of shares from shareholders in privately negotiated transactions as
described above during the three month period ended September 30, 2009:
|                                                                                                                                                                                                           |  |                               |  |                           
|                                                                                                                                                                                                           |  | TotalNumberof SharesPurchased |  | AveragePrice PaidPer Share |       | Total Numberof SharesPurchased asPart of
PubliclyAnnouncedPlans or Program |       | Maximum Numberof SharesThat May Yet
BePurchased Underthe Plans or Program
|July 2009                                                                                                                                                                                                  |  | 312                           |  | $                          | 19.50 |                                                                            | 312   |                                                                           | N/A
|August 2009                                                                                                                                                                                                |  |                              |  |                            |      |                                                                            |      |                                                                           | N/A
|September 2009                                                                                                                                                                                             |  |                              |  |                            |      |                                                                            |      |                                                                           | N/A
|Total                                                                                                                                                                                                      |  | 312                           |  | $                          | 19.50 |                                                                            | 312   |                                                                           | N/A



19



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|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



|Item 6. | Exhibits
|------- | --------

(a) Exhibits

See Index to Exhibits immediately following the signature page.



20



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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 thereunto duly authorized.



|                         |  |  |  |                                |  |                                                                                                                                   
|------------------------ |  |  |  | ------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------
|Dated: November 13, 2009 |  |  |  | AMERINST INSURANCE GROUP, LTD.
|                         |  |  |  | (Registrant)                  
|                         |  |  | 
|                         |  |  |  | By:                            |  | /S/    STUART
GRAYSTON                                                                                                            
|                         |  |  |  |                                |  | Stuart H. Grayston                                                                                                                
|                         |  |  |  |                                |  | President (Principal Executive Officer, duly authorized to sign this Report in such capacity and on behalf of the Registrant)     
|                         |  |  | 
|                         |  |  |  | By:                            |  | /S/    THOMAS R.
MCMAHON                                                                                                          
|                         |  |  |  |                                |  | Thomas R. McMahon                                                                                                                 
|                         |  |  |  |                                |  | Vice President (Principal Financial Officer, duly authorized to sign this Report in such capacity and on behalf of the Registrant)



21



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AMERINST INSURANCE GROUP, LTD.

INDEX TO EXHIBITS

Filed
with the Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2009



|               |  |                                                                                                                                                                                                                                                                                                               
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                   
|               | 
|10.1           |  | Agency Agreement effective September 25, 2009 between AmerInst Professional Services, Limited, The North River Insurance Company, United States
Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company                  
|               | 
|10.2           |  | Professional Liability Quota Share Agreement dated September 25, 2009 between AmerInst Insurance Company, Ltd., The North River Insurance Company,
United States Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company*
|               | 
|31.1           |  | Certification of Stuart Grayston pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                   
|               | 
|31.2           |  | Certification of Thomas R. McMahon pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                 
|               | 
|32.1           |  | Certification of Stuart Grayston pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                     
|               | 
|32.2           |  | Certification of Thomas R. McMahon pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                   
|               | 
|               |  | *       Certain provisions are subject to a Request for Confidential
Treatment.                                                                                                                                                                                                                               



22