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Exhibit 10.3
 First Amendment to Credit Agreement  And Waiver of Defaults
 First Amendment Borrower
  Credit Agreement
      Definitions
 Definitions
  Amendments to Credit Agreement
 Amendments to Credit Agreement Section 1.1
  Affirmative Trust I
 1




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Affirmative Trust II
 Affirmative Trust I Declaration of Trust
 Affirmative Trust II Declaration of Trust
 Expenses Incurred
 Expense Ratio
 Loss Ratio
 Losses Incurred
 2




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Premiums Earned
 3




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Premiums Written
 2004 Debentures
 2004 Documents
 2004 Guaranty
 2004 Indenture
 4




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2004 Preferred Securities
 2005 Debentures
 2005 Documents
 2005 Guaranty
 2005 Indenture
 2005 Preferred Securities
 Combined Ratio in lieu
 Combined Ratio
 Consolidated Net Worth in lieu
 Consolidated Net Worth
 5




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Debt in
lieu
 Debt Section 7.3
 Permitted Acquisition in lieu
 Permitted Acquisition pro forma Sections 7.1 7.5
 6




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Sections
7.10(a) (i)
 Permitted Debt in lieu
 Permitted Debt
 Subsidiary
  Amendments to Section 6.2(a)
 Sections 6.2(a)(i) (ii) in lieu
  7




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Amendment to Section 6.2(b)(i)
 Section 6.2(b)(i) in lieu
 Amendment to Section 6.2(b)(v)
 Section 6.2(b)(v) in lieu
 Section
6.2(b)(i)
 Amendment to Article VII
 Article VII
 Activities of Affirmative Trust I
 Activities of Affirmative Trust II
 8




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2004 Documents
 2005 Documents
 Amendment to Article IX
 Article IX Section 9.1(l) Section 9.1(m) in lieu
 2004 Documents
 9




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2005 Documents
 Amendment to Exhibit H (Compliance Certificate
 Exhibit H Exhibit H Exhibit H in lieu
 Amendment to Schedule 8.18 (Existing Investments
 Schedule 8.18 Schedule 8.18 Schedule 8.18 in lieu
 Effectiveness Sections 4.1 5.2 Sections 2.1(a) and (b) 2.5 Article IV
  Waivers
 Credit Agreement Provisions; Existing Defaults
 Section 7.6
 Fed Franchising Fed Retail Fed Purchase Agreement st
 10




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AAGA IPA Purchase Agreement
 Section 7.10 AAIA BW BW Purchase Agreement
 Section 7.10 Section 7.10
 Section 7.10 pro forma Section 7.10
  11




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Section 7.10 Section
7.10
 Section 7.12 Section 7.10
 Section 7.10 Section 7.12
 Section 7.12
 Section 7.12
 Section 7.12 Section 7.10 Section 7.15 2005
Stock Purchase Agreement Vesta Sections 7.12 7.15
 12




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Existing Defaults Section 3.1 Existing Default
 Waivers
 Existing Defaults
 Limited Waivers Section 3.3(a)
  Conditions Precedent
 Conditions
 Documents
  Pro forma
   13




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No Default
 Representations and Warranties
 Article VIII
 Article VI
 Expenses of Administrative Agent
 14




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Ratification
 Ratification
  Representations and Warranties
 Representations and Warranties
 Loan Documents
 2004 Documents Exhibit A Exhibit A
 Subordination; 2004 Documents
 15




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2005 Documents Exhibit B Exhibit B
 Subordination; 2005 Documents
 2005 Stock Purchase Agreement Exhibit C Exhibit C
  Miscellaneous
 Reference to Credit Agreement
 16




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Severability
 Counterparts
 INTEGRATION . THIS FIRST AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
 GOVERNING LAW . THIS FIRST AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
  The Remainder of This Page Is Intentionally Left Blank.
 17




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BORROWER:
    
    AFFIRMATIVE INSURANCE HOLDINGS, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryRICS:
    
    AFFIRMATIVE INSURANCE COMPANYBy:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryINSURA PROPERTY AND CASUALTY INSURANCE COMPANYBy:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary




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ADMINISTRATIVE AGENT,
LENDER AND L/C ISSUER:
    
    THE FROST NATIONAL BANK, as Administrative Agent, Lender and L/C IssuerBy:
    
    /s/ Stephen S. MartinPrint Name: Stephen S. MartinPrint Title: Vice President




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OTHER OBLIGORS:A-AFFORDABLE INSURANCE AGENCY, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryA-AFFORDABLE LOCATIONS, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryA-AFFORDABLE MANAGING GENERAL AGENCY, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE ALTERNATIVE DISTRIBUTION, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE FRANCHISES, INC.By
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary




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AFFIRMATIVE INSURANCE SERVICES, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE INSURANCE SERVICES OF SOUTH CAROLINA, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE MANAGEMENT SERVICES, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE PROPERTY HOLDINGS, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE RETAIL, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE SERVICES, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary




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AFFIRMATIVE SERVICES RETAIL, INC.By:
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAFFIRMATIVE UNDERWRITING SERVICES, INC.By:
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAMERICAN AGENCIES GENERAL AGENCY, INC.By:
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAMERICAN AGENCIES INSURANCE GROUP, INC.By:
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryAMERICAN AGENCIES INSURANCE SERVICES OF LOUISIANA, INC.By:
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary




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AMERICAN AGENCIES INVESTMENTS, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryDRIVERS CHOICE INSURANCE AGENCIES, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryDRIVERS CHOICE INSURANCE SERVICES, LLCBy:
    
    /s/David SnyderPrint Name:David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryFED USA FRANCHISING, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryFED USA RETAIL, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary




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INSTANT AUTO INSURANCE AGENCY OF ARIZONA, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryINSTANT AUTO INSURANCE AGENCY OF COLORADO, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryINSTANT AUTO INSURANCE AGENCY OF INDIANA, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryINSTANT AUTO INSURANCE AGENCY OF NEW MEXICO, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretaryINSUREONE INDEPENDENT INSURANCE AGENCY, LLCBy:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/SecretarySPACE COAST HOLDINGS, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary




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YELLOW KEY INSURANCE AGENCY, INC.By:
    
    /s/David SnyderPrint Name: David SnyderPrint Title: Senior Vice President/General Counsel/Secretary