FG FINANCIAL GROUP, INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our consolidated
financial statements and related notes and information included elsewhere in
this Quarterly Report on Form 10-Q and in our Annual Report for the year ended
December 31, 2021 on Form 10-K filed with the Securities and Exchange Commission
("SEC") on March 30, 2022.

Unless context denotes otherwise, the terms "Company," "FGF," "we," "us," and
"our," refer to FG Financial Group, Inc., and its subsidiaries.

Cautionary Note about Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements are therefore entitled to the
protection of the safe harbor provisions of these laws. These statements may be
identified by the use of forward-looking terminology such as "anticipate,"
"believe," "budget," "can," "contemplate," "continue," "could," "envision,"
"estimate," "expect," "evaluate," "forecast," "goal," "guidance," "indicate,"
"intend," "likely," "may," "might," "outlook," "plan," "possibly," "potential,"
"predict," "probable," "probably," "pro-forma," "project," "seek," "should,"
"target," "view," "will," "would," "will be," "will continue," "will likely
result" or the negative thereof or other variations thereon or comparable
terminology. In particular, discussions and statements regarding the Company's
future business plans and initiatives are forward-looking in nature. We have
based these forward-looking statements on our current expectations, assumptions,
estimates, and projections. While we believe these to be reasonable, such
forward-looking statements are only predictions and involve a number of risks
and uncertainties, many of which are beyond our control. These and other
important factors may cause our actual results, performance, or achievements to
differ materially from any future results, performance or achievements expressed
or implied by these forward-looking statements, and may impact our ability to
implement and execute on our future business plans and initiatives.

Management cautions that the forward-looking statements in this Quarterly Report
on Form 10-Q are not guarantees of future performance, and we cannot assume that
such statements will be realized or the forward-looking events and circumstances
will occur. Factors that might cause such a difference include, without
limitation: general conditions in the global economy, including the impact of
health and safety concerns from the current COVID-19 pandemic; our lack of
operating history or established reputation in the reinsurance industry; our
inability to obtain or maintain the necessary approvals to operate reinsurance
subsidiaries; risks associated with operating in the reinsurance industry,
including inadequately priced insured risks, credit risk associated with brokers
we may do business with, and inadequate retrocessional coverage; our inability
to execute on our investment and asset management strategy, including our
strategy to invest in the risk capital of special purpose acquisition companies
(SPACs); potential loss of value of investments; risk of becoming an investment
company; fluctuations in our short-term results as we implement our new business
strategy; risks of being unable to attract and retain qualified management and
personnel to implement and execute on our business and growth strategy; failure
of our information technology systems, data breaches and cyber-attacks; our
ability to establish and maintain an effective system of internal controls; our
limited operating history as a public company; the requirements of being a
public company and losing our status as a smaller reporting company or becoming
an accelerated filer; any potential conflicts of interest between us and our
controlling stockholders and different interests of controlling stockholders;
potential conflicts of interest between us and our directors and executive
officers;; risks associated with our related party transactions and investments;
and risks associated with our investments in SPAC, including the failure of any
such SPAC to complete its initial business combination. Our expectations and
future plans and initiatives may not be realized. If one of these risks or
uncertainties materializes, or if our underlying assumptions prove incorrect,
actual results may vary materially from those expected, estimated or projected.
You are cautioned not to place undue reliance on forward-looking statements. The
forward-looking statements are made only as of the date hereof and do not
necessarily reflect our outlook at any other point in time. We do not undertake
and specifically decline any obligation to update any such statements or to
publicly announce the results of any revisions to any such statements to reflect
new information, future events or developments.

Overview

FG Financial Group, Inc. ("FGF", the "Company", "we", or "us") is a reinsurance
and asset management holding company. We focus on opportunistic collateralized
and loss-capped reinsurance, while allocating capital in partnership with
Fundamental Global®, and from time to time, other strategic investors, to
merchant banking activities. The Company's principal business operations are
conducted through its subsidiaries and affiliates. The Company also provides
asset management services. From our inception in October 2012 through December
2019, we operated as an insurance holding company, writing property and casualty
insurance throughout the states of Louisiana, Florida, and Texas. On December 2,
2019, we sold our three former insurance subsidiaries, and embarked upon our
current strategy focused on reinsurance and asset management.

As of September 30, 2022, Fundamental Global GP, LLC, a private partnership
focused on long-term strategic holdings ("FG"), and its affiliated entity
collectively beneficially owned approximately 60.0% of our common stock. D. Kyle
Cerminara, Chairman of our Board of Directors, serves as Chief Executive
Officer, Co-Founder and Partner of FG.

Sale of Insurance Business

On December 2, 2019, we completed the sale of our insurance subsidiaries to
FedNat Holding Company for a combination of cash and FedNat common stock. As of
September 30, 2022, the Company held 137,871 shares of FedNat common stock. On
October 2, 2022, the Company sold the remaining FedNat common stock shares held
for approximately $30,000 of net proceeds.

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                            FG FINANCIAL GROUP, INC.

Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with
generally accepted accounting principles that involve a significant level of
estimation uncertainty and have had or are reasonably likely to have a material
impact on our financial condition or results of operations. Actual results may
differ materially from these estimates. The business and economic uncertainty
resulting from the coronavirus (COVID-19) pandemic has made such estimates and
assumptions difficult to calculate. Set forth below is qualitative and
quantitative information necessary to understand the estimation uncertainty and
the impact the critical accounting estimate has had or is reasonably likely to
have on financial condition or results of operations, to the extent the
information is material and reasonably available. Certain of these are described
in Note 2, Significant Accounting Policies, under the captions, "Investments in
Equity Securities," Other Investments," "Premium Revenue Recognition," "Policy
Acquisition Costs," "Loss and Loss Adjustment Expense Reserves," and "Stock
Based Compensation."

Consolidation of Variable Interest Entities

The determination whether to consolidate a variable interest entity under GAAP
requires a significant amount of judgment concerning the degree of control over
an entity by its holders of variable interests. To make these judgments,
management has conducted an analysis, on a case-by-case basis, of whether we are
the primary beneficiary and are therefore required to consolidate the entity.
Upon the occurrence of certain events, such as modifications to organizational
documents and investment management agreements, management will reconsider its
conclusion regarding the status of an entity as a variable interest entity.

Valuation of Net Deferred Income Taxes

The provision for income taxes is calculated based on the expected tax treatment
of transactions recorded in the Company's consolidated financial statements. In
determining its provision for income taxes, the Company interprets tax
legislation in a variety of jurisdictions and makes assumptions about the
expected timing of the reversal of deferred income tax assets and liabilities
and the valuation of net deferred income taxes.

The ultimate realization of the deferred income tax asset balance is dependent
upon the generation of future taxable income during the periods in which the
Company's temporary differences reverse and become deductible. A valuation
allowance is established when it is more likely than not that all or a portion
of the deferred income tax asset balance will not be realized. In determining
whether a valuation allowance is needed, management considers all available
positive and negative evidence affecting specific deferred income tax asset
balances, including the Company's past and anticipated future performance, the
reversal of deferred income tax liabilities, and the availability of tax
planning strategies. To the extent a valuation allowance is established in a
period, an expense must be recorded within the income tax provision in the
consolidated statements of income and comprehensive income.

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                            FG FINANCIAL GROUP, INC.

Recent Accounting Pronouncements

See Item 8, Note 3 - Recently Adopted and Issued Accounting Standards in the
Notes to the Consolidated Financial Statements for a discussion of recent
accounting pronouncements and their effect, if any, on the Company.

Analysis of Financial Condition

As of September 30, 2022 Compared to December 31, 2021

Investments

See Note 4, Investments and Fair Value Disclosure, for information regarding the
Company's investments held at fair value as of September 30, 2022 and December
31, 2021 and our holdings of FedNat Holding Company common stock.

Deconsolidation of Subsidiary

See Note 4, under the caption, "Deconsolidation of Subsidiary," for information
regarding deconsolidation of FG Special Situations Fund, LP (the "Fund").

Equity Method Investments

See Note 4, under the caption, "Equity Method Investments," for information
relating to the Company's investments accounted for under the equity method.

Investments without Readily Determinable Fair Value

See Note 4, under the caption, "Investments without Readily Determinable Fair
Value," for information relating to Company investments for which readily
determinable fair values do not exist.

Funds Deposited with Reinsured Companies

See Note 2, under the caption, "Funds Held by Cedents," for information relating
to FGRe's collateral deposits.

Reinsurance Balances Receivable

Reinsurance balances receivable were $7.7 million as of September 30, 2022
compared to $3.9 million as of December 31, 2021, representing net amounts due
to the Company under our quota-share agreements. As the Company estimates the
ultimate premiums, loss expenses and other costs associated with some of these
contracts, based on information received by us from the ceding companies, a
significant portion of this balance is based on estimates and, ultimately, may
not be collected by the Company.

Net Deferred Taxes

See Note 6, Income Taxes, for information relating to deferred income taxes.

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                            FG FINANCIAL GROUP, INC.

Loss and Loss Adjustment Expense Reserves

See Note 5, Loss and Loss Adjustment Expense Reserves, for information relating
to loss and loss adjustment expense and judgments required for recording such
items.

Off Balance Sheet Arrangements

None.



Shareholders' Equity

8.00% Cumulative Preferred Stock, Series A

On May 21, 2021, we completed the underwritten public offering of an additional
194,580 shares of our preferred stock designated as 8.00% Cumulative Preferred
Stock, Series A, par value $25.00 per share (the "Series A Preferred Stock"),
for net proceeds of approximately $4.2 million. The total number of Series A
Preferred Stock shares outstanding as of September 30, 2022 is 894,580.

Dividends on the Series A Preferred Stock are cumulative from the date of
original issue and are payable quarterly on the 15th day of March, June,
September and December of each year, when, as and if declared by our Board of
Directors. Dividends are payable out of amounts legally available therefore at a
rate equal to 8.00% per annum per $25.00 of stated liquidation preference per
share, or $2.00 per share of Series A Preferred Stock per year. Our Board of
Directors declared the third quarter 2022 dividend on the shares of Series A
Preferred Stock on November 9, 2022. The Series A Preferred Stock shares trade
on the Nasdaq Stock Market under the symbol "FGFPP".

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                            FG FINANCIAL GROUP, INC.



Common Stock

In the fourth quarter of 2021, we sold a total of 750,000 shares of our common
stock, at a price of $4.00 per share, for net proceeds of approximately $2.5
million. Also in the fourth quarter, the Company completed a rights offering to
holders of its common stock. Pursuant to the rights offering, 691,735 shares
were subscribed for, for net proceeds of approximately $2.7 million. The Company
intends to use the net proceeds from the issuance of its common shares for
working capital and other general corporate purposes.

In June 2022, we sold a total of 2,750,000 shares of our common stock in an
underwritten public offering, at a price of $1.58 per share, for net proceeds of
approximately $3.8 million. On August 2, 2022, ThinkEquity, the underwriter with
respect to the public offering, partially exercised its overallotment option and
we sold an additional 71,770 shares of our common stock, at a price of 1.58 per
share, for net proceeds of $0.1 million. The Company intends to use the net
proceeds from the underwritten public offering for working capital and other
general corporate purposes.

Retirement of Treasury Stock

On August 19, 2021, the Board approved the retirement of all 1,281,511 common
stock treasury shares owned by the Company. Accordingly, these shares have been
classified as authorized, but unissued shares on the Company's balance sheet, as
of September 30, 2022.