##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-51127
 NATIONAL ATLANTIC HOLDINGS
    CORPORATION
 (Exact name of Registrant as
    specified in its charter)
  New Jersey(State or other
    jurisdiction of
    incorporation or organization)

22-3316586(I.R.S. Employer
    Identification No.)   4 Paragon Way
 Freehold, NJ 07728
 (732) 665-1100
 (Address, including zip code,
    of
 Registrants principal
    executive offices)
  Registrants telephone number, including area code:
 (732) 665-1100
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Class

Name of Each Exchange on Which RegisteredCommon Stock, no par value per
    share


The Nasdaq Stock Market LLC   Securities
    Registered pursuant to Section 12(g) of the Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
   o þ o
  Rule 12b-2). o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 



PART I
  The Company, National Atlantic,
    NAHC, we, us, and
    our refer to National Atlantic Holdings Corporation
    and its consolidated subsidiaries, and Proformance
    refers to Proformance Insurance Company, a wholly-owned
    insurance subsidiary of NAHC.
  Form 10-K Form 10-K) Form 10-K Form 10-K Form 10-K,
  Item 1.
    Business  Overview
       2




---



##### 



fee-for-service
  
    Riverview Professional Services, Inc., which we refer to
    as Riverview, which provides case management and medical
    treatment cost containment to ensure cost-efficient service in
    the treatment of auto accident victims and reduced claims
    expenses for Proformance. Riverview is also a third party claims
    administrator providing claims handling services to companies
    that self insure.
    National Atlantic Insurance Agency, Inc., which we refer
    to as NAIA, which provides services to orphan
    policyholders no longer serviced by their independent agents and
    policyholders acquired as part of our replacement carrier
    transactions.   3




---



##### 



Net
    Income and Revenues
  Net Income


RevenuesFor the Year








For the YearEnded








EndedDecember 31,








December 31,2006


2005


2004


2006


2005


2004(In thousands)Proformance Insurance Company

$
15,613


$
8,530


$
15,799


$
174,783


$
186,277


$
208,023Riverview Professional Services


474



485



777



5,654



4,713



4,893National Atlantic Insurance Agency


910



830



2,141



2,370



2,234



4,067Mayfair Reinsurance Company Limited


(114
)


(414
)


(31
)


260



152



105National Atlantic Holdings
    Corporation


(2,501
)


(2,995
)


(1,238
)


677



541



2Less intercompany eliminations














(7,888
)


(6,576
)


(8,418
)Total

$
14,382


$
6,436


$
17,448


$
175,856


$
187,341


$
208,672   (732) 665-1100. www.nationalatlantic.com
  Our
    Growth Strategies
    Focusing on the New Jersey Market.
  Capturing a Larger Share of Our Agents
    Business.
  Converting Single Coverage Policies into Our Packaged
    Policies and Opportunistically Growing Our Business through
    Replacement Carrier Transactions.
 4




---



##### 



Marketing the Services of Our Non-Insurance Subsidiaries to
    Third Parties.
  Other
    Subsidiaries
    Riverview
    Professional Services, Inc.
        National
    Atlantic Insurance Agency, Inc.
  and/or
    Mayfair
    Reinsurance Company Limited
   5




---



##### 



Niagara
    Atlantic Holdings Corporation
    The New
    Jersey Property and Casualty Insurance Market
  Regulatory
    Environment
  Form 10-K.
  New
    Jersey Market for Private Passenger Automobile
    Insurance
    Recent
    and Proposed Legislation
       6




---



##### 



New
    Jersey Automobile Insurance Competition & Choice
    Act
    Rate Increases.
  Excess Profits.
  Take All Comers Requirement.
  Tier Rating.
 7




---



##### 



Unsatisfied Claim and Judgment Fund.
  Insurance Fraud Detection Reward Program.
  Insurance Scenarios.
  Automobile
    Insurance Urban Enterprise Zone Program
    Personal
    Automobile Insurance Plan
       8




---



##### 



Commercial
    Automobile Insurance Plan
      New
    Jersey Automobile Insurance Risk Exchange
      true-up true-up true-up
  Summary
    of Replacement Carrier Transactions
  Ohio
    Casualty Replacement Carrier Transaction
   9




---



##### 



premium-to-surplus premium-to-surplus premium-to-surplus
     10




---



##### 



Sentry
    Insurance Replacement Carrier Transaction
    premium-to-surplus premium-to-surplus
    Metropolitan
    Property and Casualty Replacement Carrier
    Transaction
        The
    Hartford Financial Services Group, Inc. Replacement Carrier
    Transaction
   11




---



##### 



Hanover
    Insurance Group Replacement Carrier Transaction
          Products
  High
    Proformance Policy
    
    Private passenger automobile insurance, including bodily injury
    and property damage liability, uninsured motorist coverage,
    personal injury protection, extended medical payments,
    comprehensive fire and theft, collision, rental reimbursement,
    towing and labor, and miscellaneous electronic device and mobile
    telephone coverages;
    Homeowners and condominium insurance coverage, including various
    endorsements for extended coverage for eligible property and
    liability exposures;
    Personal excess (umbrella) liability insurance as an
    additional line of coverage; and
    Personal specialty property lines covering jewelry, furs, fine
    arts, cameras, electronic data process equipment, boats, yachts
    and other high value items.   12




---



##### 



Other
    Products
          Years Ended December 31,Direct Written Premium

2006


2005


2004(In thousands)Private passenger auto

$
111,379



65.1
%

$
152,482



77.0
%

$
175,940



84.9
%Commercial auto


17,883



10.5
%


17,921



9.0
%


14,665



7.1
%Homeowners


29,273



17.1
%


20,925



10.6
%


14,667



7.0
%Other liability


12,534



7.3
%


6,721



3.4
%


2,048



1.0
%Total

$
171,069



100.0
%

$
198,049



100.0
%

$
207,320



100.0
%    13




---



##### 



Distribution
  Independent
    Agent Relationships
    Partner
    Agents
    30-50 year
      Replacement
    Carrier Service Agents
     14




---



##### 



Agency
    Agreements
    Peer
    Review Committee
    Marketing
  Strategy
      
    To offer a range of products, which we believe enables our
    agents to meet the insurance needs of their clients who meet our
    target criteria;
    To price our products competitively, including offering
    discounts when and where appropriate for policyholders seeking
    to place all of their primary property and casualty insurance
    coverage with one carrier;
    To offer agents competitive commissions, with incentives for
    placing their more profitable business with us; and
    To provide a level of support and service that enhances the
    agents ability to do business with their clients and with
    us while reducing operating costs, providing us with an ability
    to maintain our competitive pricing position. 15




---



##### 



Agent
    Commissions and Incentive Plans
    
    Agent Commission Rates.  We pay agent
    commissions on new and renewal business, which we believe are
    competitive in our marketplace.
    Partner Agents Profit Sharing Plan.  Our
    Partner Agents profit sharing plan rewards our Partner
    Agents by providing annual incentives based primarily on profit
    benchmarks as well as growth and product mix of the business
    produced by each Partner Agent.
    Custom Agency Plan.  Our Custom Agents are our
    Partner Agents that participate in the Custom Agency Plan. The
    Custom Agency Plan enables Custom Agents to perform some of the
    basic underwriting, claims processing and other functions for
    additional compensation. As of December 31, 2006, 85.7% of
    our Partner Agents participate in the Custom Agency Plan.
    Investment Incentive.  All of our Partner
    Agents are shareholders of NAHC. By reason of their ownership
    interest in NAHC, we believe that each agent has an incentive to
    provide us with more profitable segments of the personal and
    commercial lines business in New Jersey.  Service
    and Support
    Underwriting
  General
    Agent
    Underwriting Authority
     16




---



##### 



Use of
    Credit Scoring
        Claims
  1-800
        Reserves
     17




---



##### 



Years Ended December 31,2006


2005


2004(In thousands)Balance as of beginning of year

$
219,361


$
184,283


$
134,201Less reinsurance recoverable on
    unpaid losses


(28,069
)


(24,936
)


(21,329
)Net balance as of beginning of year


191,292



159,347



112,872Incurred related to:Current period


103,801



122,728



135,659Prior period


23



10,066



(672
)Total incurred


103,824



132,794



134,987Paid related to:Current period


38,009



42,301



44,899Prior period


83,587



58,548



43,613Total paid


121,596



100,849



88,512Net balance as of December 31,


173,520



191,292



159,347Plus reinsurance recoverable on
    unpaid losses


17,866



28,069



24,936Balance as of December 31,

$
191,386


$
219,361


$
184,283     2002-2004
 18




---



##### 



2000-2003
 19




---



##### 



As of and for the Year Ended December 31,1997


1998


1999


2000


2001


2002


2003


2004


2005


2006(In thousands)As Originally
    Estimated


10,928



14,965



15,484



20,386



30,014



66,041



112,872



159,347



191,292



173,520As Re-estimated as of
    December 31, 2006


16,284



21,730



26,637



38,847



44,185



81,737



126,571



172,912



191,315



Liability Re-estimated as
    of:One Year Later


12,017



15,261



17,901



25,588



32,028



74,671



112,200



169,414



191,315



Two Years Later


12,888



16,530



21,201



29,484



38,952



74,981



125,591



172,912







Three Years Later


13,562



18,471



23,740



33,720



40,999



82,583



126,571











Four Years Later


14,762



20,203



25,797



35,905



43,875



81,737















Five Years Later


15,870



20,924



26,324



37,614



44,185



















Six Years Later


15,587



21,339



26,880



38,847























Seven Years Later


16,203



21,725



26,637



























Eight Years Later


16,291



21,730































Nine Years Later


16,284



































Cumulative Deficiency
    (Redundancy)


5,356



6,765



11,153



18,461



14,171



15,696



13,699



13,565



23



Cumulative Amounts Paid as
    of:One Year Later


6,123



6,770



6,437



11,147



13,819



23,695



44,398



58,541



103,509



Two Years Later


9,194



10,554



13,511



19,591



22,766



40,764



72,551



110,568







Three Years Later


10,999



15,178



18,926



25,518



32,609



55,683



102,585











Four Years Later


13,437



18,050



21,944



30,969



40,054



68,019















Five Years Later


14,535



18,722



24,282



34,808



43,364



















Six Years Later


14,844



20,091



25,498



37,196























Seven Years Later


15,579



20,778



26,287



























Eight Years Later


16,002



21,354































Nine Years Later


16,142



































   As of and for the Year Ended December 31,1997


1998


1999


2000


2001


2002


2003


2004


2005


2006Percentage of Initially
    Estimated LiabilityLiability Re-estimated as
    of:One Year Later


110
%


102
%


116
%


126
%


107
%


113
%


99
%


106
%


100
%


Two Years Later


118
%


110
%


137
%


145
%


130
%


114
%


111
%


109
%






Three Years Later


124
%


123
%


153
%


165
%


137
%


125
%


112
%










Four Years Later


135
%


135
%


167
%


176
%


146
%


124
%














Five Years Later


145
%


140
%


170
%


185
%


147
%


















Six Years Later


143
%


143
%


174
%


191
%






















Seven Years Later


148
%


145
%


172
%


























Eight Years Later


149
%


145
%






























Nine Years Later


149
%


































Ten Years LaterCumulative Deficiency
    (Redundancy)


49
%


45
%


74
%


85
%


46
%


25
%


11
%


6
%






 20




---



##### 



As of and for the Year Ended December 31,1997


1998


1999


2000


2001


2002


2003


2004


2005


2006Net Loss and Loss Adjustment
    Cumulative Paid as a Percentage of Initially Estimated
    LiabilityCumulative Amounts Paid as
    of:One Year Later


56
%


45
%


42
%


55
%


46
%


36
%


39
%


37
%


54
%


Two Years Later


84
%


71
%


87
%


96
%


76
%


62
%


64
%


69
%






Three Years Later


101
%


101
%


122
%


125
%


109
%


84
%


91
%










Four Years Later


123
%


121
%


142
%


152
%


133
%


103
%














Five Years Later


133
%


125
%


157
%


171
%


144
%


















Six Years Later


136
%


134
%


165
%


182
%






















Seven Years Later


143
%


139
%


170
%


























Eight Years Later


146
%


143
%






























Nine Years Later


148
%


































Ten Years Later     As of and for the Year Ended December 31,1997


1998


1999


2000


2001


2002


2003


2004


2005


2006As Originally
    Estimated

(In thousands)Net Liability shown above


10,928



14,965



15,484



20,386



30,014



66,041



112,872



159,347



191,292



173,520Add Reinsurance Recoverables


6,122



8,395



11,571



16,962



26,718



19,431



21,329



24,936



28,069



17,866Gross Liability


17,050



23,360



27,055



37,348



56,732



85,472



134,201



184,283



219,361



191,386As Re-estimated as of
    December 31, 2006Net Liability Shown Above


16,284



21,730



26,637



38,847



38,952



74,671



126,571



172,912



191,315



173,520Add Reinsurance Recoverables


12,535



18,442



25,475



24,156



35,824



22,389



22,342



21,043



21,561



17,866Gross Liability


28,819



40,172



52,112



63,003



74,776



97,060



148,913



193,955



212,876



191,386     Reinsurance
  Third
    Party Reinsurance Program
   21




---



##### 



ReinsuranceRecoverables/


A.M. BestReceivables


Rating(1)(In thousands)Scor Reinsurance Company

$
7,673



A
−QBE Reinsurance Company


5,663



AOdyssey America Reinsurance


4,115



AFolksamerica Reinsurance Company


2,430



A
−American Reinsurance Company


1,170



AWellington Syndicate


1,115



bbbPMA Capital Insurance Company


640



B
+     (1)
    
    Ratings as of February 9, 2007            Mayfair
    Reinsurance Company Limited
      Terrorism
    Risk Insurance Act of 2002
   22




---



##### 



Investments
            
    Must not exceed 40% of policyholders surplus,
    Must not exceed the lower of 20% of total portfolio in
    convertible securities or the maximum permitted by New Jersey
    insurance regulations,
    Investments in any one sector/industry group of the economy by
    reference to the S&P 500 Index must be no more than 10% of
    portfolio, and
    Investments in American Depository Receipts or foreign stocks
    must not exceed a maximum of 5% of portfolio;
    All investments must be denominated in U.S. dollars;
    All fixed income investments must be rated by the National
    Association of Insurance Commissioners, which we refer to as the
    NAIC. In addition (a) average maturity of fixed income
    portfolio may not exceed 10 years and the weighted average
    credit quality of the portfolio must be rated at least
    A by Moodys or at least A by
    Standard & Poors Ratings Services, which we refer
    to as Standard & Poors, and (b) the
    portfolio must have a target duration of 3.5 years, but can
    range between 3 and 4 years (with the exception that the
    10-15 year
    municipal bonds may have duration of 8.5 years); and
    Proformance may not make investments in (a) unincorporated
    businesses, (b) guaranteed investment contracts or
    (c) commercial paper rated below
    A-1
    by Standard & Poors or
    P-1
    by Moodys. 23




---



##### 



2006


2005


2004% of





% of





% ofAmount


Portfolio


Amount


Portfolio


Amount


Portfolio(In thousands)Fixed Income
    Securities:U.S. Treasury securities and
    obligations of U.S. Government agencies

$
196,900



61.8
%

$
168,893



56.3
%

$
113,788



47.9
%Obligations of states and
    political subdivisions


74,202



23.3
%


69,290



23.1
%


47,768



20.1
%Mortgage-backed securities


3,417



1.1
%


1,219



0.4
%


1,114



0.5
%Corporate and other securities


41,826



13.1
%


47,782



15.9
%


61,980



26.1
%Total fixed income securities


316,345



99.2
%


287,184



95.7
%


224,650



94.6
%Equity Securities:Preferred stocks


504



0.2
%


509



0.2
%


1,759



0.7
%Common stocks


1,923



0.6
%


12,327



4.1
%


11,042



4.7
%Total equity securities


2,427



0.8
%


12,836



4.3
%


12,801



5.4
%Total Investments

$
318,772



100.0
%

$
300,020



100.0
%

$
237,451



100.0
%       Years Ended December 31,2006


2005


2004(In thousands)Average invested assets

$
311,421


$
287,223


$
221,394Net investment income

$
16,082


$
12,403


$
7,061Net effective yield


5.2
%


4.3
%


3.2
%Net realized capital gains (losses)

$
979


$
411


$
1,931Effective yield including realized
    capital gains (losses)


5.5
%


4.5
%


4.1
%  24




---



##### 



Investment
    Results
    Composition
    of Fixed Income Security Portfolio by Rating
  December 31, 2006Amount


Percent(In thousands)U.S. Government and
    Government Agency Fixed Income Securities

$
200,517



63.5
%Aaa/Aa


106,943



33.9
%A


8,118



2.6
%Baa






Ba






Total

$
315,578



100
%     3-6
    Composition
    of Fixed Income Security Portfolio by Maturity
  December 31, 2006Amount


Percent(In thousands)1 year or less

$
13,602



4.3
%Over 1 year through
    5 years


54,856



17.4
%Over 5 years through
    10 years


179,090



56.7
%Over 10 years through
    20 years


64,392



20.4
%Over 20 years


221



.1
%Mortgage-backed securities(1)


3,417



1.1
%Total

$
315,578



100.0
%     (1)
    
    Actual maturities of mortgage-backed securities may differ from
    contractual maturities because borrowers may have the right to
    call or prepay obligations with or without call or prepayment
    penalties. Prepayment rates are determined by a number of
    factors that cannot be predicted with certainty, including the
    relative sensitivity of 25




---



##### 



the underlying mortgages or other collateral to changes in
    interest rates, a variety of economic, geographic and other
    factors, and the repayment priority of the securities in the
    overall securitization structures.  Competition
          Ratings
   26




---



##### 



Properties
    Employees
    Legal
    Proceedings
   27




---



##### 




    Transactions between an insurance company and any of its
    affiliates;
    The payment of dividends;
    The acquisition of an insurance company or of any company
    controlling an insurance company;
    Approval or filing of premium rates and policy forms;
    Solvency standards;
    Minimum amounts of capital and policyholders surplus which
    must be maintained;
    Limitations on types and amounts of investments;
    Restrictions on the size of risks which may be insured by a
    single company;
    Limitation of the right to cancel or non-renew policies in some
    lines;
    Regulation of the right to withdraw from markets or terminate
    involvement with agencies;
    Requirements to participate in residual markets;
    Licensing of insurers and agents;
    Deposits of securities for the benefit of policyholders;
    Reporting with respect to our financial condition, including the
    adequacy of our reserves and provisions for unearned premiums;
    Unfair trade and claims practices; and
    The type of accounting we must use.    Insurance Holding Company Regulation.
  Insurance Regulation Concerning
    Dividends. 12-month
 28




---



##### 



Acquisition of Control of a New Jersey Domiciled Insurance
    Company.
  Protection against Insurer Insolvency.
  Risk-Based Capital Requirements. and/or
   29




---



##### 



NAIC IRIS Ratios.
  Surplus and Capital Requirements.
  Regulation of Investments.
  Bermuda
  Bermuda Restrictions on Dividend
    Payments.
 30




---



##### 



Item 1A.
    Risk
    Factors  Form 10-K
  Risks
    Related to Our Business
  Because
    we are primarily a private passenger automobile insurance
    carrier, negative developments in the economic, regulatory or
    competitive conditions in this industry could cause us to incur
    additional costs and limit our flexibility in our underwriting
    process. This would reduce our profitability and the impact of
    these changes would have a disproportionate effect on our
    ability to operate profitably and successfully grow our business
    as compared to other more diversified insurers.
      Because
    we write insurance only in New Jersey, negative developments in
    the regulatory, economic, demographic, competitive and weather
    conditions in the New Jersey market could cause us to incur
    additional costs or limit our flexibility in our underwriting
    process and the impact of these changes would have a
    disproportionate effect on us compared to insurers that operate
    in multiple states.
      We
    have historically derived a substantial portion of our revenues
    from replacement carrier transactions, and we may not be able to
    enter into those types of transactions in the
    future.
     31




---



##### 



We
    have exposure to claims related to severe weather conditions,
    which may result in an increase in claims frequency and
    severity.
        If we
    are not able to attract and retain independent agents, we would
    be limited in our ability to sell our insurance
    products.
    Established
    competitors with greater resources may make it difficult for us
    to market our products effectively and offer our products at a
    profit.
     32




---



##### 



Our
    failure to maintain a commercially acceptable financial strength
    rating would significantly and negatively affect our ability to
    implement our business strategies and sell our
    products.
         33




---



##### 



If our
    losses and loss adjustment expenses exceed our reserves, we
    would have to increase our reserves which would lower our
    earnings.
    2002-2004
 34




---



##### 



If we
    lose key current personnel or are unable to recruit new
    qualified personnel, we could be prevented from implementing our
    business strategy and our ability to capitalize on market
    opportunities, grow our business and operate efficiently and
    profitably could be negatively affected.
    Market
    fluctuations and changes in interest rates could reduce the
    value of our investment portfolio and our asset base which would
    limit our ability to underwrite more business.
    We may
    not be able to successfully alleviate risk through reinsurance
    arrangements which could cause us to reduce our premiums written
    in certain lines or could result in losses and we are subject to
    credit risk with respect to our reinsurers.
   35




---



##### 



Because
    we continue to reduce our use of third party reinsurance, we
    will retain more risk, which could result in more
    losses.
    We
    rely on our information technology and telecommunication
    systems, and the failure of these systems could limit our
    ability to operate efficiently and cause us to lose
    business.
    Risks
    Related to Our Industry
  As a
    result of cyclical changes, which may include periods of price
    competition, excess capacity, high premium rates and shortages
    of underwriting capacity in the personal auto insurance
    industry, our results may materially fluctuate, affecting our
    ability to effectively market and price our
    products.
   36




---



##### 



We are
    subject to comprehensive regulation in the State of New Jersey,
    particularly by the New Jersey Department of Banking and
    Insurance, and we must obtain prior approval to take certain
    actions which may limit our ability to take advantage of
    profitable opportunities.
  General
    Regulation
    
    Transactions between an insurance company and any of its
    affiliates;
    The payment of dividends;
    The acquisition of an insurance company or of any company
    controlling an insurance company;
    Approval or filing of premium rates and policy forms;
    Solvency standards;
    Minimum amounts of capital and policyholders surplus which
    must be maintained;
    Limitations on types and amounts of investments;
    Restrictions on the size of risks which may be insured by a
    single company;
    Limitation of the right to cancel or non-renew policies in some
    lines;
    Regulation of the right to withdraw from markets or terminate
    involvement with agencies;
    Requirements to participate in residual markets;
    Licensing of insurers and agents;
    Deposits of securities for the benefit of policyholders;
    Reporting with respect to our financial condition, including the
    adequacy of our reserves and provisions for unearned premiums;
    Unfair trade and claims practices; and
    The type of accounting we must use at Proformance in order to
    comply with statutory reporting requirements.   37




---



##### 



We are
    subject to assessments by the New Jersey Property-Liability
    Insurance Guaranty Association, which assessments would reduce
    the capital available to us to operate our
    business.
    Our
    failure to meet risk based capital standards could subject us to
    examination or corrective action by state
    regulators.
        Proformance
    Insurance Company
    Risk-Based Capital(1)
  As of December 31,2006


2005


2004(in thousands)Total Adjusted Capital

$
128,031


$
104,727


$
61,931Company Action Level = 200% of
    Authorized Control Level

$
36,337


$
58,985


$
67,065Regulatory Action Level = 150% of
    
    Authorized Control Level

$
27,253


$
44,239


$
50,298Authorized Control Level = 100% of
    
    Authorized Control Level

$
18,168


$
29,493


$
33,532Mandatory Control Level = 70% of
    
    Authorized Control Level

$
12,718


$
20,645


$
23,473     (1)
    
    For a description of the regulatory action that may be taken at
    each level, see Business  Supervision and
    Regulation  Risk Based Capital Requirements. 38




---



##### 



If we
    fail to satisfy a sufficient number of IRIS Ratios, we would be
    subject to regulatory action which could negatively affect our
    ability to operate our business efficiently and
    profitably.
    
    Two-Year Reserve Development to Policyholder
    Surplus  In addition to measuring the accuracy
    with which reserves were established in the second prior year,
    the ratio of two-year reserve development to surplus as it
    relates to policyholders provides an indirect indication of
    managements opinion of the adequacy of surplus.    New
    Jersey Personal Auto Insurance Regulation
  We are
    subject to extensive regulation in the New Jersey personal auto
    insurance industry which is subject to change, and we can give
    you no assurance that any changes in the regulations would not
    significantly limit our ability to operate our business
    profitably.
       39




---



##### 



We
    cannot be certain of the impact that the New Jersey Automobile
    Insurance Competition & Choice Act or any future
    legislative initiatives will have on our business and
    operations.
    We are
    subject to the New Jersey excess profits
    requirements which require us to refund or credit excess
    profits to our policyholders.
   40




---



##### 



We are
    subject to New Jerseys Take All Comers
    requirements whereby we are not permitted to refuse to issue
    policies in those rating territories to certain applicants which
    could negatively impact our underwriting results.
    We are
    subject to New Jerseys urban enterprise zone
    requirements. Unless we write enough business in designated
    urban enterprise zones, we may be assigned business
    in those zones by the State of New Jersey which could negatively
    impact our underwriting results.
      The
    continued threat of terrorism and ongoing military and other
    actions may result in decreases in our net income, revenue and
    assets under management and may adversely affect our investment
    portfolio.
  and/or
   41




---



##### 



Changes
    in insurance industry practices and regulatory, judicial and
    consumer conditions and class action litigation are continually
    emerging in the automobile insurance industry, and these new
    issues could adversely impact our revenues or our methods of
    doing business.
  Diprospero v.
    Penn.
    Risks
    Related to Our Common Stock
  We
    have principal shareholders who have the ability to exert
    significant influence over our operations, including controlling
    the election of directors.
    As a
    holding company, NAHC is dependent on the results of operations
    of its operating subsidiaries, particularly Proformance, and the
    ability of Proformance to pay a dividend to us is limited by the
    insurance laws and regulations of New Jersey.
   42




---



##### 



12-month
  There
    are anti-takeover provisions contained in our organizational
    documents and in laws of the State of New Jersey that could
    delay or impede the removal of our directors and management and
    could make a merger, tender offer or proxy contest involving us
    more difficult, or could discourage a third party from
    attempting to acquire control of us, even if such a transaction
    were beneficial to the interest of our
    shareholders.
    Section 14A:10A-4
  Section 14A:10A-5
 43




---



##### 



We may
    require additional capital in the future, which may not be
    available or may only be available on unfavorable
    terms.
    12-month
  Future
    sales of shares of our common stock by our existing
    shareholders, officers or employees in the public market, or the
    possibility or perception of such future sales, could adversely
    affect the market price of our stock.
  Form S-8 Form S-8 Form S-8
 44




---



##### 



Because
    we do not intend to pay dividends, you will not receive funds
    without selling shares and you will only see a return on your
    investment if the value of the shares appreciates.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Price Range of Common Shares2006


2005High


Low


High


LowFirst Quarter





$
12.00


$
9.35


$



$
Second Quarter





$
10.90


$
8.02


$
12.15


$
9.75Third Quarter





$
11.90


$
8.68


$
13.40


$
10.79Fourth Quarter





$
13.70


$
10.86


$
12.00


$
9.92      45




---



##### 



(c)(a)





Number of SecuritiesNumber of Securities


(b)


Remaining Available forto be Issued


Weighted Average


Issuance Under EquityUpon Exercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrant and Rights


Warrant and Rights


Reflected in Column (a))Equity compensation plans approved
    by security holders


311,750


$
2.58



1,000,000Equity compensation plans not
    approved by security holders










Total


311,750


$
2.58



1,000,000   Use of
    Proceeds
  Form S-1, No. 333-117804),
       46




---



##### 



Item 6.
    Selected
    Financial Data    Form 10-K
  Year Ended December 31,2006


2005


2004


2003


2002($ in thousands, except share data)Income Statement
    Data:Direct written premiums(1)

$
171,069


$
198,049


$
207,320


$
163,179


$
114,624Net written premiums(1)


161,125



189,634



193,192



147,045



110,626Net earned premiums(1)


157,354



172,782



179,667



143,156



75,654Replacement carrier revenue from
    related party(2)










13,880



13,298



21,683Replacement carrier revenue from
    unrelated party










4,089



661



Investment income


16,082



12,403



7,061



4,258



1,593Net realized investment gains
    (losses)


979



411



1,931



1,373



(55
)Other Income


1,441



1,745



2,044



929



564Total Income


175,856



187,341



208,672



163,675



99,439Losses and loss adjustment
    expenses(3)


103,824



132,794



134,987



108,123



69,491Underwriting, acquisition and
    insurance related expenses


48,275



42,264



46,771



26,055



18,048Other operating and general
    expenses


2,268



3,989



580



484



444Total expenses


154,367



179,047



182,338



134,662



87,983Income (loss) before income taxes


21,489



8,294



26,334



29,013



11,456Income tax expense


7,107



1,858



8,886



9,945



2,822Net income(6)

$
14,382


$
6,436


$
17,448


$
19,068


$
8,634Basic Earnings per Share

$
1.28


$
0.70


$
3.53


$
4.29


$
1.96Diluted Earnings per Share

$
1.26


$
0.68


$
3.11


$
3.77


$
1.74   47




---



##### 



As of and for the Year Ended December 31,2006


2005


2004


2003


2002($ in thousands)Balance Sheet Data:Total cash & investments

$
345,060


$
339,856


$
252,993


$
179,696


$
92,352Total assets


452,830



462,736



347,172



266,748



161,184Unpaid losses and loss adjustment
    expenses


191,386



219,361



184,283



134,201



85,472Debt(4)


















Total liabilities

$
301,942


$
324,527


$
279,333


$
216,961


$
143,050Total stockholders
    equity(5)(6)(7)

$
150,888


$
138,209


$
67,839


$
49,787


$
18,134Statutory Data:Policyholders surplus (at period
    end)(7)(8)

$
128,031


$
104,727


$
58,754


$
46,325


$
17,549Loss ratio(3)


69.20
%


79.80
%


75.30
%


82.20
%


93.10
%Expense ratio(3)


26.93
%


22.30
%


21.80
%


20.40
%


21.50
%Combined ratio(3)


96.13
%


102.10
%


97.10
%


102.60
%


114.60
%     (1)
    
    The primary driver for a significant portion of our growth from
    2002 through 2003 was an agreement entered into on
    December 18, 2001 with OCIC, and OCNJ, to become a
    replacement carrier pursuant to which OCNJ would transfer
    to Proformance the obligation to offer renewals for all of
    OCNJs New Jersey private passenger automobile business
    effective March 18, 2002. Primarily as a result of this
    transaction our direct written premiums, net written premiums
    and net earned premiums increased from $49.8 million,
    $25.5 million and $25.4 million, respectively, for the
    year ended December 31, 2001, to $163.2 million,
    $147.0 million and $143.2 million, respectively, for
    the year ended December 31, 2003. In addition total assets,
    losses and loss adjustment expense reserves, as well as total
    stockholders equity, increased from $78.3 million,
    $56.7 million and $(4.0) million, respectively as of
    December 31, 2001 to $266.7 million,
    $134.2 million and $49.8 million, respectively as of
    December 31, 2003.(2)
    
    We recorded replacement carrier revenue related to the OCIC
    agreement referred to above in the amount of $21.7 million
    and $12.7 million for the years ended December 31,
    2002 and 2003, respectively which contributed to increasing
    total stockholders equity from $(4.0) million as of
    December 31, 2002 to $49.8 million for the year ended
    December 31, 2003.(3)
    
    The loss ratio, when calculated on a statutory basis, is the
    ratio of losses and loss adjustment expenses to net earned
    premiums. The expense ratio, when calculated on a statutory
    accounting basis, is the ratio of underwriting expenses to net
    written premiums. The expense ratio, when calculated on a GAAP
    basis, differs from the statutory method specifically as it
    related to policy acquisition expenses. Policy acquisition
    expenses are expensed as incurred under the statutory accounting
    method. However, for GAAP, policy acquisition expenses are
    deferred and amortized over the period in which the related
    premiums are earned. The combined ratio is the sum of the loss
    ratio and the expense ratio. Management considers the statutory
    methods for calculating the loss, expense and combined ratios to
    compare our performance to benchmarks used by rating agencies
    and regulatory bodies that monitor the insurance industry.(4)
    
    In 1997, we entered into two separate loan agreements. In March
    of 2002, one of the loans was paid in full and in December of
    2002 the remaining loan was paid in full.(5)
    
    On October 21, 2003 and December 8, 2003,
    respectively, we entered into two additional replacement carrier
    agreements with Sentry Insurance and Met P&C, whereby we
    agreed to become the replacement carrier for the personal lines
    business of each entity in New Jersey. We received
    $0.9 million and have received an additional
    $2.6 million in 2004 and $0 in 2005 from Sentry Insurance,
    $2.8 million of which has been recorded as deferred revenue
    as of December 31, 2003 and $0.7 million recorded as
    replacement carrier revenue for the year ended December 31,
    2003. We received $20.1 million ($9.5 million recorded
    as deferred revenue as of December 31, 2003,
    $0.6 million recorded as replacement carrier revenue from a
    related party for the year ended December 31, 2003, and
    $10.0 million in the form of a capital contribution) from
    Met P&C in 2004 and $0 in 2005. In 48




---



##### 



connection with these transactions we recorded $0 million
    of replacement carrier transaction revenue for the year ended
    December 31, 2005 as we continued the process of fulfilling
    our obligations under the terms of each of these respective
    contracts.(6)
    
    In connection with the financial reporting as of and for the
    year ended December 31, 2001, certain adjustments were made
    to reduce net income and stockholders equity as of
    January 1, 2001 by $1.0 million.(7)
    
    On April 21, 2005, an initial public offering of
    6,650,000 shares of the Companys common stock (after
    the 43-for-1
    stock split) was completed. The company sold
    5,985,000 shares resulting in net proceeds to the Company
    (after deducting issuance costs and the underwriters
    discount) of $62,198,255. The Company contributed $43,000,000 to
    Proformance, which increased its statutory surplus.(8)
    
    On May 8, 2006, the Company contributed $9,000,000 to
    Proformance, thereby increasing its statutory surplus.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K.
  Overview
    
    our extensive knowledge of the New Jersey insurance market and
    regulatory environment;
    our business model which is designed to align our Partner
    Agents interests with management by requiring many of them
    to retain an ownership stake in us;
    our packaged product that includes private passenger automobile,
    homeowners, personal excess (umbrella) and specialty
    property liability coverage; and
    our insurance related services businesses.       49




---



##### 



Premium


Percent ofModifications


TotalTier Designation

Factor


VehiclesTier A


0.88



30.4
%Tier One


1.00



61.0
%Tier Two


1.70



7.3
%Tier Three


2.25



0.3
%Tier Four


2.60



1.0
%     and/or
  
    The recent rise in gasoline prices may serve to decrease the
    number of miles driven by our policyholders and result in lower
    frequency of automobile claims; and
    An evolving set of legal standards by which we are required to
    pay claims may result in significant variability in our loss
    reserves over time. 50




---



##### 



51




---



##### 



premium-to-surplus
 52




---



##### 



premium-to-surplus premium-to-surplus
    DiProspero v. Penn, et al.
         53




---



##### 



Revenues
        Expenses
  Our expenses consist primarily of three
    types:
 54




---



##### 



Critical
    Accounting Policies
    Unpaid
    Loss and Loss Adjustment Expenses
         55




---



##### 



2002-2004
     56




---



##### 



National
    Atlantic Holdings Corporation
  Breakout
    of Reserves by Line of Business
 As of
    December 31, 2006
  TotalDirect


Assumed








BalanceCase


Case


Direct


Assumed


SheetReserves


Reserves


IBNR


IBNR


Reserves($ in thousands)Line of Business:Fire





$
32










$
32Allied






4











4Homeowners


5,531







6,903







12,434Personal Auto


92,672



5



55,139







147,816Commercial Auto


10,049



1,134



14,964



970



27,117Other Liability


962







3,021







3,983Total Reserves


109,214



1,175



80,027



970



191,386Less: Reinsurance Recoverables on
    Unpaid Losses


















17,866Total Net Reserves

















$
173,520     
    The volume of reported losses and reported claim frequency for
    the accident years 2005 and 2006 are at a lower rate than prior
    periods, especially for personal auto liability. If this
    development continues, reserves for accident years could be
    redundant.
    We believe that the claims department has improved its claims
    handling practices during the past two years with regard to
    claims reserving and settlement. These improvements could result
    in lower loss development factors than those which currently
    underlie our actuarial estimates.    
    Loss trends (both frequency and severity) have been declining in
    recent years in the New Jersey personal auto insurance market.
    If loss trends become unfavorable, our reserves could be
    deficient. In addition, the Diprospero v. Penn.
    decision of the New Jersey Supreme Court, discussed above, which
    potentially increases a claimants right to sue for serious
    injury, could impact future claims frequency.
    Claims for uninsured motorists generally have a longer
    development period than other liability losses. If the frequency
    of uninsured motorist claims increases beyond our current
    estimated levels, loss emergence could be greater than what we
    projected in our loss development analysis.  Investment
    Accounting Policy  Impairment
  FAS 115-1 FAS 124-1, Other-Than-Temporary 115-1), other-than-temporary, 115-1 other-than-temporary
 57




---



##### 



other-than-temporary 115-1 No. 03-1, Other-Than-Temporary 03-1) Other-Than-Temporary (Topic D-44) other-than-temporarily 03-1. 115-1 115-1 EITF-03-1,
  case-by-case
  Insurance
    Ratios
    Results
    of Operations
   58




---



##### 



For the Year Ended Dec 31,2006


2005


2004(In thousands)Direct written premiums

$
171,069


$
198,049


$
207,320Net written premiums


161,125



189,634



193,192Net premiums earned


157,354



172,782



179,667Replacement carrier revenue from
    related party










13,880Replacement carrier revenue from
    unrelated party










4,089Investment income


16,082



12,403



7,061Net realized investment gains
    (losses)


979



411



1,931Other income


1,441



1,745



2,044Total revenue

$
175,856


$
187,341


$
208,672   For the Year Ended Dec 31,2006


2005


2004(In thousands)Losses and loss adjustment
    expenses incurred

$
103,824


$
132,794


$
134,987Underwriting, acquisition and
    insurance related expenses


48,275



42,264



46,771Other operating and general
    expenses


2,268



3,989



580Total expenses


154,367



179,047



182,338Income before income taxes


21,489



8,294



26,334Income taxes


7,107



1,858



8,886Net income

$
14,382


$
6,436


$
17,448   For
    the year ended December 31, 2006, compared to the year
    ended December 31, 2005
  Direct Written Premiums.
    Net Written Premiums.
  Net Premiums Earned.
 59




---



##### 



Investment Income.
  Net Realized Investment Gain.
  Other Income.
  Losses and Loss Adjustment Expenses
    Incurred.
  Underwriting, Acquisition and Insurance Related
    Expenses.
  Other Operating and General Expenses.
  Income Tax Expense.
 60




---



##### 



Net Income.
  For
    the years ended December 31, 2005 compared to the year
    ended December 31, 2004
  Direct Written Premiums.
  Net Written Premiums.
  Net Premiums Earned.
  Replacement Carrier Revenue.
  Investment Income.
  Net Realized Investment Gains .
  Other Income.
  Losses and Loss Adjustment Expenses
    Incurred. 2002-2004
 61




---



##### 



Underwriting, Acquisition and Insurance Related
    Expenses. ,
  Other Operating and General Expenses.
  Income Tax Expense.
  Net Income.
  Liquidity
    and Capital Resources
       62




---



##### 



43-for-1
        Regulation 1.362-2,
 63




---



##### 



12-month
      2006


2005


2004NAIA

$
714,781


$
1,550,000


$
1,650,000Riverview

$
188,760


$
950,000


$
1,000,000        64




---



##### 



Year

Amount2007

$
867,5992008


796,7992009


545,9992010


2011 and thereafter


Total

$
2,210,397           Investments
       65




---



##### 



other-than-temporary
      other-than-temporarily
  i.e
 66




---



##### 



and/or
  other-than-temporary. other-than-temporarily
    other-than-temporarily other-than-temporarily
  Securities
    in an Unrealized Loss Position for Less than 6 Months
  % ofAmortized


Fair


Unrealized


UnrealizedCost


Value


Losses


LossInvestment Grade Fixed Income

$
52,465,307



52,209,657


$
(255,650
)


(0.49
)%Equities

$



$



$




(0.0
)%   Securities
    in an Unrealized Loss Position for 6 to 12 Months
  % ofAmortized


Fair


Unrealized


UnrealizedCost


Value


Losses


LossInvestment Grade Fixed Income

$
20,662,136


$
20,490,031


$
(172,105
)


(.83
)%Equities

$



$



$




(0.0
)%  67




---



##### 



Securities
    in an Unrealized Loss Position for greater than 12
    Months
  % ofAmortized


Fair


Unrealized


UnrealizedCost


Value


Losses


LossInvestment Grade Fixed Income

$
200,782,164


$
198,113,358


$
(2,668,806
)


(1.33
)%Equities

$
988,545


$
877,488


$
(111,057
)


(11.23
)%   Securities
    with a Decline in Fair Value Below Carrying Values Less than
    20%
  % ofAmortized


Fair


Unrealized


UnrealizedCost


Value


Losses


LossInvestment Grade Fixed Income

$
273,909,607


$
270,813,046


$
(3,096,561
)


(1.13
)%Equities

$
988,545


$
877,488


$
(111,057
)


(11.23
)%   Securities
    with a Decline in Fair Value below Carrying Values of
    20%-50%
  % ofAmortized


Fair


Unrealized


UnrealizedCost


Value


Losses


LossInvestment Grade Fixed Income














Equities














   Securities
    with a Decline in Fair Value Below Carrying Values Greater than
    50%
  % ofAmortized


Fair


Unrealized


UnrealizedCost


Value


Losses


LossInvestment Grade Fixed Income














Equities














   Contractual
    obligations
    Contractual
    Obligations and Credit-Related Commitments
  Less Than


1 - 3


3 - 5


More Than1 Year


Years


Years


5 Years


TotalLoss and Loss Adjustment
    Expenses(1)

$
99,520,504


$
64,114,171


$
24,880,126


$
2,870,783


$
191,385,584Operating Lease Obligations(2)

$
867,599


$
796,799


$
545,999


$



$
2,210,397     (1)
    
    As of December 31, 2006 we had property and casualty
    reserves of $191.4 million. The amounts and timing of these
    obligations are not set contractually. Nonetheless, based on
    cumulative property and casualty claims paid over the last ten
    years, we anticipate that approximately 52.0% will be paid
    within a year, an additional 33.5% between one and three years,
    13.0% between three and five years and 1.5% in more than five
    years. While we believe that historical performance of loss
    payment patterns is a reasonable source for projecting future
    claim payments, there is inherent uncertainty in this payment
    estimate because of the potential impact from changes in:  
    The legal environment whereby court decisions and changes in
    backlogs in the court system could influence claim payout
    patterns.
    Our mix of business because property and first-party claims
    settle more quickly than bodily injury claims.
    Claims staffing levels  claims may be settled at a
    different rate based on the future staffing levels of the claim
    department. 68




---



##### 




    Reinsurance programs  changes in Proformances
    retention will influence the payout of the liabilities. As
    Proformances net retention increases, the liabilities will
    take longer to settle than in past years.
    Loss cost trends  increases/decreases in inflationary
    factors (legal and economic) will influence ultimate claim
    payouts and their timing.  (2)
    
    Represents our minimum rental commitments as of
    December 31, 2006 pursuant to our seven-year lease
    agreement for the use of our office space and equipment at 4
    Paragon Way, Freehold, NJ 07728 and our
    four-year
    lease agreement for the use of our office space and equipment at
    3 Paragon Way, Freehold, NJ 07728. Off-Balance Sheet Arrangements  Off-Balance
    Sheet Arrangements
    Adoption
    of New Accounting Pronouncements
    Share-Based Payment Accounting for Stock Issued to Employees
  FAS 115-1 FAS 124-1, Other-Than-Temporary 115-1), other-than-temporary, 115-1 other-than-temporary other-than-temporary 115-1 No. 03-1, Other-Than-Temporary 03-1) Other-Than-Temporary (Topic D-44) other-than-temporarily 03-1. 115-1
 69




---



##### 



115-1 EITF-03-1,
  No. 05-6, 05-6). 05-6
  05-1, (SOP 05-1). SOP 05-1 SOP 05-1
  Item 7a.
    Quantitative
    and Qualitative Disclosures About Market Risk  General
    Interest
    Rate Risk
        Fair Value−100 Basis





+100 BasisPoint


As of


PointChange


12/31/2006


Change($ in thousands)Fixed maturities and preferred
    stocks

$
328,947


$
316,082


$
303,218Cash and cash equivalents

$
26,288


$
26,288


$
26,288Total

$
355,235


$
342,370


$
329,506   70




---



##### 



−100 Basis





+100 BasisPoint


As of


PointChange


12/31/2005


Change($ in thousands)Fixed maturities and preferred
    stocks

$
295,709


$
278,892


$
262,076Cash and cash equivalents

$
39,836


$
39,836


$
39,836Total

$
335,545


$
318,728


$
301,912   Equity
    Risk
      Credit
    Risk
      Effects
    of Inflation
    Item 8.
    Financial
    Statements and Supplementary Data  page F-2. page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure  Form 8-K
 71




---



##### 



Item 9A.
    Controls
    and Procedures  Evaluation
    of disclosure controls and procedures
  form 10-K, Rules 13a-15(e)
  Internal
    Control over Financial Reporting
  Rule 13a-15(f).
    Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors
    and Executive Officers of the Registrant    Code of
    Ethics
  Regulation S-K
 72




---



##### 



www.national-atlantic.com. Form 8-K,
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services    PART IV
  Item 15.
    Exhibit
    and Financial Statement Schedules    Financial statements
                Financial statement schedules required to be filed by
    Item 8 of this form:
         73




---



##### 



Exhibits
  3
.1

Form of Amended and Restated
    Certificate of Incorporation of the Registrant.**3
.2

Form of Amended and Restated
    Bylaws of the Registrant.**4
.1

Form of Stock Certificate for the
    Common Stock.**10
.1

Form of Agency Agreements between
    Proformance Insurance Company and Partner Agents of Proformance
    Insurance Company.**10
.2

Form of Limited Agency Agreements
    between Proformance Insurance Company and Non-Active Replacement
    Carrier Service Agents of Proformance Insurance Company.**10
.3

Replacement Carrier Agreement,
    dated December 18, 2001, among the Registrant, Proformance
    Insurance Company and Ohio Casualty of New Jersey, Inc.**10
.4

Non-Competition Agreement, dated
    December 18, 2001, among the Registrant, Proformance
    Insurance Company, The Ohio Casualty Insurance Company and Ohio
    Casualty of New Jersey.**10
.5

Letter Agreement, dated
    July 10, 2004, among the Registrant, Proformance Insurance
    Company and The Ohio Casualty Insurance Company and Ohio
    Casualty of New Jersey.**10
.6

Replacement Carrier Agreement,
    dated December 8, 2003, between the Registrant and
    Metropolitan Property and Casualty Insurance Company.**10
.7

Share Repurchase Agreement, dated
    December 8, 2003, between the Registrant and Metropolitan
    Property and Casualty Insurance Company.**10
.8

Replacement Carrier Agreement,
    dated March 14, 2003, between Proformance Insurance Company
    and Sentry Insurance.**10
.9

Replacement Carrier Agreement,
    dated May 6, 2005, between Proformance Insurance Company
    and The Hartford Financial Services Group, Inc.*****10
.9.1

First Amendment to the Replacement
    Carrier Agreement, dated June 28, 2005, between Proformance
    Insurance Company and The Hartford Financial Services Group,
    Inc.*****10
.10

Limited Assignment Distribution
    Agreement, effective January 1, 2004, between Proformance
    Insurance Company and The Clarendon National Insurance Company.**10
.11

Limited Assignment Distribution
    Agreement, effective January 1, 2004, between Proformance
    Insurance Company and AutoOne Insurance Company.**10
.12

2004 Stock and Incentive Plan of
    the Registrant.**10
.13

National Atlantic Holdings Corp.
    Annual Bonus Plan.**10
.14

Form of Employment Agreement
    between the Registrant and James V. Gorman, Frank J. Prudente,
    John E. Scanlan, Cynthia L. Codella and Bruce C. Bassman.**10
.15

Form of Employment Agreement
    between Proformance Insurance Company and Peter A. Cappello,Jr.**10
.16

Commutation and Release Agreement,
    effective as of December 31, 2002, between Odyssey America
    Reinsurance Corporation and Proformance Insurance Company.**10
.17

Form of Agency Agreements between
    Proformance Insurance Company and Active Replacement Carrier
    Service Agents of Proformance Insurance Company.**10
.18

Form of Indemnification Agreement
    between the Registrant and its directors and officers.**10
.19

Letter Agreement, dated
    December 7, 2004, among the Registrant, Proformance
    Insurance Company, The Ohio Casualty Insurance Company and Ohio
    Casualty of New Jersey.**10
.20

Commutation and Mutual Release
    Agreement, effective as of March 26, 2003, between
    Proformance Insurance Company and Gerling Global Reinsurance
    Corporation of America.**10
.21

Form of Underwriting Agreement
    among the Company, the Ohio Casualty Insurance Company as
    Selling Shareholder and the Underwriters named therein.** 74




---



##### 



10
.22

Form of Employee Stock Option
    Agreement for the Companys Nonstatutory Stock Option
    Plan.***10
.23

Form of Amendment to Employee
    Stock Option Agreement for Certain Options Granted to
    Messrs. James V. Gorman, Peter A. Capello, Jr. and
    Steven V. Stallone.***10
.24

Form of Nonstatutory Stock Option
    Agreement for Certain Stock Options Granted to the Estate of
    Mr. Frank Campion.***10
.25

Form of Amendment to Employment
    Agreement for James V. Gorman, Frank J. Prudente, John E.
    Scanlan, Cynthia L. Codella, Bruce C. Bassman and Peter A.
    Cappello, Jr.****14
.1

Code of Ethics.*21
.1

Subsidiaries of the Registrant.**23
.1

Consent of Beard Miller Company
    LLP.*23
.2

Consent of Deloitte &
    Touche LLP.*31
.1

Certification pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act of 1934, as amended.*31
.2

Certification pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act of 1934, as amended.*32
.1

Certification Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the
    Sarbanes-Oxley
    Act of 2002.*32
.2

Certification Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the
    Sarbanes-Oxley
    Act of 2002.*99


Reports of Independent Registered
    Public Accounting Firms.*     *
    
    Filed herewith**
    
    Incorporated by reference to the Registration Statement on
    Form S-1
    (File
    No. 333-117804).
    Initially filed July 30, 2004.***
    
    Incorporated by reference from National Atlantic Holdings
    Corporations Report on
    Form 8-K,
    filed with the SEC on September 23, 2005.****
    
    Incorporated by reference from National Atlantic Holdings
    Corporations Report on
    Form 8-K,
    filed with the SEC on September 1, 2006.*****
    
    Incorporated by reference from National Atlantic Holdings
    Corporations annual report on
    Form 10-K
    for the year ended December 31, 2006. 75




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  INDEX
  
  Page(s)Consolidated Financial
    Statement:Reports of
    Independent Registered Public Accounting Firms


F-2Consolidated Balance Sheets:As of
    December 31, 2006 and 2005


F-6Consolidated Statements of Income:For the years ended
    December 31, 2006, 2005 and 2004


F-7Consolidated Statements of
    Comprehensive Income:For the years ended
    December 31, 2006, 2005 and 2004


F-8Consolidated Statements of Changes
    in Stockholders Equity:For the years ended
    December 31, 2006, 2005 and 2004


F-9Consolidated Statements of Cash
    Flows:For the years ended
    December 31, 2006, 2005 and 2004


F-10Notes to
    Consolidated Financial Statements


F-11   F-1




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              Internal Control 
    Integrated Framework
  /s/ Beard Miller Company
    LLP
     F-2




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Deloitte &
    Touche LLP
    F-3




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
   F-4




---



##### 



F-5




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS
    (in thousands, except share data)  December 31,


December 31,2006


2005Investments: (Note 2)Fixed maturities
    held-to-maturity
    (fair value at December 31, 2006 and 2005 
    was $41,401 and $0, respectively)

$
42,168



Fixed maturities
    available-for-sale
    (amortized cost at December 31, 2006 and 
    2005 was $275,810 and $281,010, respectively)


273,724



278,384Equity securities (cost at
    December 31, 2006 and 2005 was $2,288 and $12,636,
    respectively)


2,427



12,836Short-term investments (cost at
    December 31, 2006 and 2005, was $453 and
    $8,800, respectively)


453



8,800Total investments


318,772



300,020Cash and cash equivalents


26,288



39,836Accrued investment income


4,122



3,560Premiums receivable  net


49,976



49,926Reinsurance recoverables and
    receivables (Note 4)


26,914



41,057Deferred acquisition costs


18,601



17,134Property and equipment 
    net (Note 7)


1,988



2,062Income taxes recoverable
    (Note 6)






1,152Other assets


6,169



7,989Total assets

$
452,830


$
462,736Liabilities and
    Stockholders Equity:Liabilities:Unpaid losses and loss adjustment
    expenses (Note 5)

$
191,386


$
219,361Unearned premiums


85,523



81,546Accounts payable and accrued
    expenses


2,420



2,578Deferred income taxes (Note 6)


9,967



11,069Income taxes payable (Note 6)


3,026



Other liabilities


9,620



9,973Total liabilities


301,942



324,527Commitments and Contingencies:
    (Note 10)






Stockholders equity:Common Stock, $0.01 par value
    (50,000,000 shares authorized; 11,288,190 issued,
    11,121,941 outstanding as of December 31, 2006; 11,202,190
    issued
    and outstanding as of December 31, 2005, respectively)


97,570



97,458Retained earnings


56,735



42,353Accumulated other comprehensive
    loss


(1,694
)


(1,602
)Common stock held in treasury, at
    cost (166,249 and 0 shares held as of December 31,
    2006 and 2005, respectively)


(1,723
)


Total stockholders equity


150,888



138,209Total liabilities and
    stockholders equity

$
452,830


$
462,736    F-6




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF INCOME
    (in thousands, except earnings per share data)  For the Years Ended December 31,2006


2005


2004Revenue:Net premiums earned

$
157,354


$
172,782


$
179,667Net investment income


16,082



12,403



7,061Net realized investment gains


979



411



1,931Replacement carrier revenue from
    related party










13,880Replacement carrier revenue from
    Sentry










4,089Other income


1,441



1,745



2,044Total revenue


175,856



187,341



208,672Costs and Expenses:Loss and loss adjustment expenses
    incurred


103,824



132,794



134,987Underwriting, acquisition and
    insurance related expenses


48,275



42,264



46,771Other operating and general
    expenses


2,268



3,989



580Total costs and expenses


154,367



179,047



182,338Income before income taxes


21,489



8,294



26,334Provision for income taxes


7,107



1,858



8,886Net Income

$
14,382


$
6,436


$
17,448Net income per share Common
    Stock  Basic

$
1.28


$
0.70


$
3.53Net income per share Common
    Stock  Diluted

$
1.26


$
0.68


$
3.11    F-7




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME
    (in thousands)  For the Years Ended December 31,2006


2005


2004Net Income

$
14,382


$
6,436


$
17,448Other comprehensive
    income  net of tax:Net holding (losses) gains arising
    during the period


(462
)


(1,806
)


451Reclassification adjustment for
    realized losses (gains) included in net income


311



22



(326
)Amortization of unrealized loss
    recorded on transfer of fixed income securities to
    held-to-maturity


59







Total other comprehensive (loss)
    income


(92
)


(1,784
)


125Comprehensive Income

$
14,290


$
4,652


$
17,573    F-8




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    For the years ended December 31, 2006, 2005, and 2004
    (in thousands, except share data)  AccumulatedClass A


Class B











Other








TotalCommon Stock


Common Stock


Common Stock


Retained


Comprehensive


Treasury Stock


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Earnings


Income (Loss)


Shares


Amount


EquityBalance at December 31,
    2003


2,747,743


$
3,002



2,194,247


$
28,258






$



$
18,470


$
57










$
49,787Amortization of 2002 and 2003
    options














480



























480Net Income


























17,448















17,448Other comprehensive income






























125











125Balance at December 31,
    2004


2,747,743


$
3,002



2,194,247


$
28,738






$



$
35,917


$
182










$
67,839Issuance of Common Stock related to
    IPO


















5,985,000



62,198



















62,198Conversion of Class A and
    Class B Common Stock


(2,747,743
)


(3,002
)


(2,194,247
)


(28,738
)


4,941,990



31,740



















Exercise of stock options


















275,200



470



















470Amortization of options






















3,050



















3,050Net Income


























6,436















6,436Other comprehensive (loss)






























(1,784
)










(1,784
)Balance at December 31,
    2005


















11,202,190


$
97,458


$
42,353


$
(1,602
)









$
138,209Exercise of stock options


















86,000



112



















112Net Income


























14,382















14,382Other comprehensive (loss)






























(92
)










(92
)Repurchase of common stock


































166,249



(1,723
)


(1,723
)Balance at December 31,
    2006


















11,288,190


$
97,570


$
56,735


$
(1,694
)


166,249


$
(1,723
)

$
150,888    F-9




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    (in thousands)  For the Year Ended December 31,2006


2005


2004CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income

$
14,382


$
6,436


$
17,448Adjustment to reconcile net income
    to net cash provided by operating activities:Depreciation and amortization


413



493



428Amortization of premium/discount
    on bonds


875



1,079



1,090Share based compensation expense


1,063



3,050



480Realized (gains) on investment
    sales


(979
)


(411
)


(1,931
)Changes in:Deferred income taxes


(1,014
)


(7
)


3,932Premiums receivable


(50
)


(18,741
)


(7,966
)Reinsurance recoverables and
    receivables


14,143



(5,913
)


2,886Receivable from Ohio Casualty






4,350



2,470Receivable from Sentry






1,250



1,375Deferred acquisition costs


(1,467
)


(6,262
)


(1,084
)Accrued interest income


(562
)


(1,475
)


(184
)Income taxes recoverable


1,152



(1,152
)


2,168Other assets


1,820



(714
)


(5,856
)Unpaid losses and loss adjustment
    expenses


(27,975
)


35,078



50,082Accounts payable and accrued
    expenses


(158
)


(4,943
)


1,971Deferred revenue










(12,369
)Unearned premiums


3,977



17,376



12,357Income taxes payable


3,026



(1,601
)


1,202Other liabilities


(1,419
)


211



5,132Net cash provided by operating
    activities


7,227



28,104



73,631CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchases of property and equipment


(339
)


(537
)


(1,367
)Purchases of fixed maturity
    securities  available for sale


(94,749
)


(164,897
)


(215,882
)Sales and maturities of fixed
    maturity investments 
    available-for-sale


56,247



93,460



135,410Purchases of equity securities






(21,366
)


(21,779
)Sales of equity securities


11,327



21,842



18,650Sales of short-term
    investments  net


8,347



5,020



17,755Net cash used in investing
    activities


(19,167
)


(66,478
)


(67,213
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Proceeds from issuance of common
    stock  net


115



62,668



Purchases of common stock held in
    treasury


(1,723
)






Net cash (used in) provided by
    financing activities


(1,608
)


62,668



Net (decrease) increase in cash


(13,548
)


24,294



6,418Cash and cash
    equivalents  beginning of period


39,836



15,542



9,124Cash and cash
    equivalents  end of period

$
26,288


$
39,836


$
15,542Cash paid during the period for:Income taxes

$
3,649


$
4,717



1,692    F-10




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  1.
    Nature of
    Operations and Significant Accounting Policies              43-for-1
   F-11




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Basis of Presentation
  Segment Disclosure
    For the Years Ended December 31,2006


2005


2004ProformancePersonal lines insurancePersonal auto

$
109,854,722



62.47
%

$
140,845,822



75.18
%

$
154,943,058



74.25
%Homeowners


21,264,484



12.09
%


16,066,193



8.58
%


10,738,933



5.15
%Commerical lines insurance


26,234,594



14.92
%


15,870,049



8.47
%


13,984,730



6.70
%Replacement carrier revenue from
    related party


















13,880,303



6.65
%Replacement carrier revenue from
    unrelated party


















4,088,889



1.96
%RiverviewMedical Case Management


5,638,235



3.21
%


4,704,598



2.51
%


4,882,171



2.34
%NAIAInsurance brokerage


2,365,851



1.35
%


2,230,989



1.19
%


4,061,520



1.95
%MayfairReinsurance






















NAHC






















Intercompany elimination entries


(7,888,461
)


(4.49
)%


(6,576,113
)


(3.51
)%


(8,417,604
)


(4.03
)%Subtotal


157,469,425







173,141,538







198,162,000Net investment income


16,081,895



9.14
%


12,403,235



6.62
%


7,061,161



3.38
%Net realized investment gains


979,007



0.56
%


410,635



0.22
%


1,931,258



0.93
%Other income


1,325,586



0.75
%


1,385,588



0.74
%


1,517,823



0.73
%Total Consolidated
    Revenue

$
175,855,913



100.00
%

$
187,340,996



100.00
%

$
208,672,242



100.00
%  F-12




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Use of Estimates other-than-temporary
  Cash and Cash Equivalents
  Property and Equipment
 EstimatedDescription

Life (Years)Automobiles


5Furniture and fixtures


7Computer software and electronic
    data equipment


3Leasehold improvements


*     *
    
    Amortized over the remaining life of the lease from the date
    placed in service.    Investments available-for-sale
  other-than-temporary other-than-temporarily
  Concentration of Credit Risk
 F-13




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred Policy Acquisition Costs
    Insurance Liabilities/Reserves for Losses and Loss Adjustment
    Expenses
    Recognition of Premium Revenues
  Allowance for Doubtful Accounts
  Recognition of Replacement Carrier Revenue
  Replacement Carrier Transaction Fees
  Accounting for Reinsurance Accounting and
    Reporting for Reinsurance of Short-Duration and Long-
 F-14




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Capitalization of Costs of Software for Internal
    Use SOP 98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use.
  Income Taxes
    Stock Options Share-Based Payment Accounting for Stock Issued to
    Employees.
  Adoption
    of New Accounting Pronouncements
   F-15




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Share-Based Payment Accounting for Stock Issued to Employees.
  FAS 115-1 FAS 124-1, Other-Than-Temporary 115-1), other-than-temporary, 115-1 other-than-temporary other-than-temporary 115-1 No. 03-1, Other-Than-Temporary 03-1) Other-Than-Temporary (Topic D-44) other-than-temporarily 03-1. 115-1 115-1 EITF-03-1,
  No. 05-6, 05-6). 05-6
  05-1, (SOP 05-1). SOP 05-1 SOP 05-1
  Retirement Plans
 F-16




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Guaranty Fund Assessments 97-3, Accounting by Insurance and Other Enterprises for Insurance
    Related Assessments (SOP 97-3). SOP 97-3
      2.
    Investments  available-for-sale held-to-maturity. available-for-sale held-to-maturity, available-for-sale held-to-maturity
  held-to-maturity available-for-sale
 F-17




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   held-to-maturity available-for-sale
  held-to-maturity
  Cost/


Gross


Gross


EstimatedAmortized


Unrealized


Unrealized


FairCost


Gains


(Losses)


ValueFixed maturities:U.S. Government, government
    agencies and authorities

$
6,787,542






$
(253,084
)

$
6,534,458State, local government and
    agencies


2,846,423







(57,768
)


2,788,655Industrial and miscellaneous


32,533,860



5,979



(462,248
)


32,077,591Total Investments 
    Held-to-Maturity

$
42,167,825



5,979


$
(773,100
)

$
41,400,704   available-for-sale
  Cost/


Gross


Gross


EstimatedAmortized


Unrealized


Unrealized


FairCost


Gains


(Losses)


ValueFixed maturities:U.S. Government, government
    agencies and authorities

$
191,929,393


$
42,805


$
(1,859,870
)

$
190,112,328State, local government and
    agencies


71,460,810



186,607



(291,578
)


71,355,839Industrial and miscellaneous


8,994,746



979



(156,865
)


8,838,860Mortgage-backed securities


3,425,451



6,435



(15,148
)


3,416,738Total fixed maturities


275,810,400



236,826



(2,323,461
)


273,723,765Other Investments:Short-term investments


453,000











453,000Equity securities


2,287,743



250,710



(111,057
)


2,427,396Total Investments 
    Available-for-Sale

$
278,551,143


$
487,536


$
(2,434,518
)

$
276,604,161  F-18




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cost/


Gross


Gross


EstimatedAmortized


Unrealized


Unrealized


FairCost


Gains


(Losses)


ValueFixed maturities:U.S. Government, government
    agencies and authorities

$
170,627,486


$
21,928


$
(1,756,164
)

$
168,893,250State, local government and
    agencies


69,462,854



283,797



(456,673
)


69,289,978Industrial and miscellaneous


39,691,216



124,113



(834,448
)


38,980,881Mortgage-backed securities


1,228,665



5,157



(14,430
)


1,219,392Total fixed maturities


281,010,221



434,995



(3,061,715
)


278,383,501Other Investments:Short-term investments


8,800,000











8,800,000Equity securities


12,636,230



525,887



(325,820
)


12,836,297Total Investments

$
302,446,451


$
960,882


$
(3,387,535
)

$
300,019,798   held-to-maturity
  held-to-maturity
  held-to-maturity
  available-for-sale
  available-for-sale
  available-for-sale
       F-19




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               other-than-temporarily other-than-temporarily
  held-to-maturity
  Amortized


EstimatedCost


Fair ValueDue in one year or less






Due in one year through five years






Due in five years through ten years

$
29,505,299


$
29,148,552Due in ten through twenty years


12,435,357



12,031,905Due in over twenty years


227,169



220,247Total

$
42,167,825


$
41,400,704  F-20




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale
  Amortized


EstimatedCost


Fair ValueDue in one year or less

$
13,190,493


$
13,149,339Due in one year through five years


55,243,314



54,856,085Due in five years through ten years


151,291,010



149,941,595Due in ten through twenty years


52,660,132



52,360,008Mortgage-backed securities


3,425,451



3,416,738Total

$
275,810,400


$
273,723,765       other-than-temporary
  For the Years Ended December 31,2006


2005


2004Proceeds

$
67,574,328


$
115,302,759


$
154,060,505Gross realized gains


1,091,487



991,807



2,605,208Gross realized losses


(112,480
)


(581,172
)


(673,950
)     For the Years Ended December 31,2006


2005


2004Investment income:Interest income

$
15,902,694


$
11,807,190


$
6,651,242Dividend income


275,190



744,592



539,105Investment income


16,177,884



12,551,782



7,190,347Investment expenses


(95,989
)


(148,547
)


(129,187
)Net investment income

$
16,081,895


$
12,403,235


$
7,061,160   3.
    Replacement
    Carrier Transactions  Ohio
    Casualty
   F-21




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      premium-to-surplus premium-to-surplus
  premium-to-surplus
   F-22




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Metropolitan
    Property and Casualty Insurance Company
    Sentry
    Insurance Company
    premium-to-surplus premium-to-surplus premium-to-surplus
  The
    Hartford
   F-23




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Hanover
    Insurance Company
        4.
    Reinsurance
    Activity   F-24




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          2006


2005


2004Written


Earned


Written


Earned


Written


EarnedDirect

$
171,069,389


$
166,785,769


$
198,048,757


$
180,378,535


$
207,320,350


$
195,070,774Assumed


1,171,615



1,478,232



1,913,775



2,208,920



3,375,295



3,266,956Gross


172,241,004



168,264,001



199,962,532



182,587,455



210,695,645



198,337,730Ceded


(11,115,747
)


(10,910,201
)


(10,328,654
)


(9,805,391
)


(17,503,411
)


(18,671,009
)Net

$
161,125,257


$
157,353,800


$
189,633,878


$
172,782,064


$
193,192,234


$
179,666,721          F-25




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         For the Years EndedDecember 31,2006


2005


2004Scor Reinsurance Company

$
7,673


$
10,022


$
9,595QBE Reinsurance Company


5,663







Odyssey America Reinsurance


4,115



4,022



3,989Folksamerica Reinsurance Company


2,430







American Reinsurance Company


1,170







Wellington Syndicate


1,115



5,756



7,886PMA Capital Insurance Company


640







          F-26




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.  Unpaid
    Losses and Loss Adjustment Expenses
    Years Ended December 31,2006


2005


2004Balance as of beginning of year

$
219,361


$
184,283


$
134,201Less reinsurance recoverable on
    unpaid losses


(28,069
)


(24,936
)


(21,329
)Net balance as of beginning of year


191,292



159,347



112,872Incurred related to:Current period


103,801



122,728



135,659Prior period


23



10,066



(672
)Total incurred


103,824



132,794



134,987Paid related to:Current period


38,009



42,301



44,899Prior period


83,587



58,548



43,613Total paid


121,596



100,849



88,512Net balance as of December 31,


173,520



191,292



159,347Plus reinsurance recoverable on
    unpaid losses


17,866



28,069



24,936Balance as of December 31,

$
191,386


$
219,361


$
184,283     2002-2004
    Environmental Reserves
 F-27




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2006


2005


2004Environmental, gross of reinsuranceBeginning Reserves 
    including case, bulk and IBNR, and LAE

$
1,897


$
892


$
743Losses and LAE incurred


1,629



1,734



374Calendar year payments for losses
    and LAE


910



729



225Ending reserves 
    including case, bulk and IBNR, and LAE

$
2,616


$
1,897


$
892Environmental, net of reinsuranceBeginning Reserves 
    including case, bulk and IBNR, and LAE

$
1,552


$
634


$
454Losses and LAE incurred


1,405



1,599



340Calendar year payments for losses
    and LAE


891



681



160Ending reserves 
    including case, bulk and IBNR, and LAE

$
2,066


$
1,552


$
634   6.
    Income
    Taxes      For the Years Ended December 31,2006


2005


2004Taxes on income before income
    taxes:Current taxes

$
8,120,442


$
1,865,715


$
4,953,669Deferred taxes


(1,013,603
)


(7,829
)


3,932,128Total

$
7,106,839


$
1,857,886


$
8,885,797  F-28




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2006


2005Deferred tax assets:20% unearned premium adjustment

$
5,902,895


$
5,477,775Loss reserve discount


4,482,136



5,079,447Depreciation


27,386



53,653Bad debt reserve


186,847



31,146Unrealized losses on investments


912,582



825,062Share based compensation


855,523



469,535Organizational costs


5,084



Deferred tax assets


12,372,453



11,936,618Deferred tax liabilities:Deferred acquisition costs


6,510,486



5,825,411Intangible asset


288,233



Accrual of bond discount


79,987



47,942Deferred revenues 
    special surplus funds


15,130,758



16,852,832Prepaid expenses


301,211



227,250Due & accrued dividends


2,589



17,109Depreciation


25,841



34,698Deferred tax liabilities


22,339,105



23,005,242Net deferred tax liability

$
(9,966,652
)

$
(11,068,624
)      F-29




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Years Ended December 31,2006


2005


2004Income before income taxes

$
21,489






$
8,294






$
26,334Income tax statutory rate


7,521



35.00
%


2,820



34.00
%


8,954



34.00
%Prior year return to provision


(247
)


(1.15
)%


(478
)


(5.76
)%






0.00
%Tax exempt interest


(804
)


(3.74
)%


(693
)


(8.36
)%


(596
)


(2.26
)%DRD


(84
)


(0.39
)%


(34
)


(0.41
)%


(33
)


(0.13
)%Proration


133



0.62
%


109



1.31
%


94



0.36
%Life insurance expense


42



0.20
%


27



0.33
%


27



0.10
%State taxes


132



0.61
%


60



0.72
%


434



1.65
%Other


414



1.93
%


47



0.57
%


6



0.02
%Total income tax expense

$
7,107



33.07
%

$
1,858



22.40
%

$
8,886



33.74
%   7.
    Property
    and Equipment    As of December 31,2006


2005Automobiles

$
591,675


$
542,406Computer Software


1,937,541



1,808,507Furniture & fixtures


634,374



628,116Leasehold improvements


143,966



143,966Electronic data equipment


1,549,454



1,395,0074,857,010



4,518,002Less: accumulated depreciation


2,868,559



2,455,530Net property and equipment

$
1,988,451


$
2,062,472     8.
    Capital
    Transactions     F-30




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    43-for-1
      9.
    Share-Based
    Compensation  Share Based Payment Accounting
    for Stock Issued to Employees Accounting for Stock-Based Compensation
    For the Years Ended December 31,2005


2004Net income  as reported

$
6,435,950


$
17,448,050Plus: Compensation expense
    recorded against income


3,050,057



480,773Deduct: Total stock-based employee
    compensation expense determined under fair value method for all
    awards, net of related tax effects


(3,136,602
)


(492,596
)Pro forma net income

$
6,349,405


$
17,436,227Net income per weighted average
    shareholdingBasic  as reported

$
0.70


$
3.53Basic  proforma

$
0.69


$
3.53Diluted  as reported

$
0.68


$
3.11Diluted  proforma

$
0.67


$
3.11    F-31




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2005


2004Volatility factor


31.1
%


0.0
%Risk-free interest yield


4.0
%


4.0
%Dividend yield


0.0
%


0.0
%Average life


3 years



3 years     WeightedNumber of


AverageOptions


Exercise PriceBalance Outstanding at
    January 1, 2004


672,950


$
2.06Granted






Exercised






Forfeited






Balance Outstanding at
    December 31, 2004


672,950



2.06Granted


275,200



1.71Exercised


(275,200
)


(1.71
)Forfeited


(275,200
)


(1.71
)Balance Outstanding at
    December 31, 2005


397,750



2.31Granted






Exercised


(86,000
)


(1.34
)Forfeited






Balance Outstanding at
    December 31, 2006


311,750


$
2.58Options Available for Grant


1,000,000      F-32




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Options Outstanding


Options ExercisableWeighted


Weighted








WeightedNumber


Average


Average


Intrinsic


Number of


Average


IntrinsicRange of

of Stock


Contractual


Exercise


Value of


Stock


Exercise


Value ofExercise Prices

Options


Life


Price


Options


Options


Price


Options(In yrs)$0.60


43,000



5.44


$
0.60


$
11.06



43,000


$
0.60


$
11.06.98-1.29


47,300



4.54



0.98



10.68



47,300



0.98



10.682.50-2.89


178,450



1.26



2.63



9.03



178,450



2.63



9.036.14


43,000



6.28



6.14



5.52



43,000



6.14



5.52311,750



3.28


$
2.58


$
9.08



311,750


$
2.58


$
9.08  F-33




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Outstanding


Options ExercisableWeighted


Weighted








WeightedNumber


Average


Average


Intrinsic


Number of


Average


IntrinsicRange of

of Stock


Contractual


Exercise


Value of


Stock


Exercise


Value ofExercise Prices

Options


Life


Price


Options


Options


Price


Options(in yrs)$0.60


47,300



6.44


$
0.60


$
10.35



47,300


$
0.60


$
10.35.98-1.29


124,700



2.55



1.16



9.79



124,700



1.16



9.792.50-2.89


182,750



2.29



2.63



8.32



182,750



2.63



8.326.14


43,000



7.28



6.14



4.81



43,000



6.14



4.81397,750



3.40


$
2.31


$
8.64



397,750


$
2.31


$
8.64                F-34




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     WeightedNumber of


AverageSARS


Grant PriceBalance Outstanding at
    January 1, 2006






Granted


343,000


$
9.94Exercised






Forfeited


(5,000
)


9.94Balance Outstanding at
    December 31, 2006


338,000


$
9.94       As ofDecember 31,2006Volatility factor


29.56
%Risk-free interest yield


4.72
%Dividend yield


0.00
%Average life


5.8 years   Volatility factor
  Risk free interest yield
  Dividend yield
  Average life
     F-35




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Contingencies
    and Commitments  Litigation
  Operating Leases
      Year

Amount2007

$
867,5992008


796,7992009


545,9992010


2011 and thereafter


Total

$
2,210,397     Guaranty Funds and Assessments
  12-14 months
   F-36




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31,2006


2005Collected

$
2,791,015


$
2,976,872Paid


3,006,527



4,886,128Recoverable


2,211,761



1,996,248              F-37




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        New
    Jersey Automobile Insurance Risk Exchange
     F-38




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Other
    Comprehensive Income (Loss)    Before Tax


Tax


Net of TaxFor the Year Ended December 31, 2006

Amount


Effect


AmountNet holding losses arising during
    the year

$
(741
)

$
279


$
(462
)Less: reclassification adjustment
    for net realized losses included in net income


469



(158
)


311Amortization of unrealized loss
    recorded on transfer of fixed income securities to
    held-to-maturity


91



(32
)


59Other comprehensive loss

$
(181
)

$
89


$
(92
)   Before Tax


Tax


Net of TaxFor the Year Ended December 31, 2005

Amount


Effect


AmountNet holding losses arising during
    the year

$
(2,736
)

$
930


$
(1,806
)Less: reclassification adjustment
    for net realized losses included in net income


33



(11
)


22Other comprehensive loss

$
(2,703
)

$
919


$
(1,784
)   Before Tax


Tax


Net of TaxFor the Year Ended December 31, 2004

Amount


Effect


AmountNet holding gains arising during
    the year

$
683


$
(232
)

$
451Less: reclassification adjustment
    for net realized gains included in net income


(494
)


168



(326
)Other comprehensive income

$
189


$
(64
)

$
125   12.
    Statutory
    Surplus       F-39




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Dividends
    from Subsidiaries    14.
    Fair
    Value of Financial Instruments  Disclosure About Fair Value of
    Financial Instruments
    Cash and Short Term Investments.
  Investment in Securities.
    As of December 31,2006


2005


2004Carrying


Estimated


Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair Value


Amount


Fair ValueFixed maturity 
    held-to-maturity

$
42,167,825


$
41,400,704


$



$



$



$
Fixed maturity 
    available-for-sale


273,723,765



273,723,765



281,010,221



278,383,501



210,635,988



210,830,067Short-term investments


453,000



453,000



8,800,000



8,800,000



13,820,488



13,820,488Equity securities


2,427,396



2,427,396



12,636,230



12,836,297



12,718,656



12,800,536Cash and cash equivalents


26,288,127



26,288,127



39,836,498



39,836,498



15,541,685



15,541,685   15.
    Net
    Earnings Per Share   F-40




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      For the Year Ended December 31,2006


2005


2004Net Income applicable to common
    stockholders

$
14,382,394


$
6,435,950


$
17,448,050Weighted average common
    shares  basic


11,213,463



9,166,683



4,941,990Effect of dilutive securities:Options


236,623



315,885



672,950Weighted average common
    shares  diluted


11,450,086



9,482,568



5,614,940Basic Earnings Per Share

$
1.28


$
0.70


$
3.53Diluted Earnings per Share

$
1.26


$
0.68


$
3.11     16.
    Related
    Party Disclosure           F-41




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   17.
    Quarterly
    Financial Information (unaudited)  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except earnings per share data)2006Income Statement
    Data:Total revenue

$
43,191


$
42,999


$
44,425


$
45,241Income before income taxes


5,967



4,598



6,078



4,846Net income


3,985



3,027



4,381



2,989Per Share Data:Net income  Basic

$
0.36


$
0.27


$
0.39


$
0.27Net income  Diluted

$
0.35


$
0.26


$
0.38


$
0.262005Income Statement
    Data:Total revenue

$
50,330


$
45,218


$
47,228


$
44,565Income before income taxes


6,461



2,315



(2,245
)


1,763Net income


4,373



1,565



(1,638
)


2,136Per Share Data:Net income  Basic

$
0.88


$
0.16


$
(0.15
)

$
0.19Net income  Diluted

$
0.78


$
0.15


$
(0.15
)

$
0.19  F-42




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board
    of Directors and Shareholders
    Form 10-K.




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board
    of Directors and Stockholders of
    Form 10-K). Form 10-K.




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE I
  SUMMARY
    OF INVESTMENTS  OTHER THAN INVESTMENTS IN
    AFFILIATES
  As of December 31, 2006Cost/





Amount atAmortized





Which Shown onType of Investment

Cost


Fair Value


Balance SheetFixed MaturitiesU.S Government, government
    agencies and authorities

$
6,787,542


$
6,534,458


$
6,787,542State, local government and
    agencies


2,846,423



2,788,655



2,846,423Industrial and miscellaneous


32,533,860



32,077,591



32,533,860Total fixed
    maturities


42,167,825



41,400,704



42,167,825Total Investments 
    Held-to-Maturity

$
42,167,825


$
41,400,704


$
42,167,825   As of December 31, 2006Cost/





Amount atAmortized





Which Shown onType of Investment

Cost


Fair Value


Balance SheetFixed MaturitiesU.S Government, government
    agencies and authorities

$
191,929,393


$
190,112,328


$
190,112,328State, local government and
    agencies


71,460,810



71,355,839



71,355,839Industrial and miscellaneous


8,994,746



8,838,860



8,838,860Mortgage-backed securities


3,425,451



3,416,738



3,416,738Total fixed
    maturities


275,810,400



273,723,765



273,723,765Equity SecuritiesCommon and preferred stock


2,287,743



2,427,396



2,427,396Total equity
    securities


2,287,743



2,427,396



2,427,396Other InvestmentsShort-term investments


453,000



453,000



453,000Total other
    investments


453,000



453,000



453,000Total Investments 
    Available-for-Sale

$
278,551,143


$
276,604,161


$
276,604,161   As of December 31, 2005Cost/





Amount atAmortized





Which Shown onType of Investment

Cost


Fair Value


Balance SheetFixed MaturitiesU.S Government, government
    agencies and authorities

$
170,627,486


$
168,893,250


$
168,893,250State, local government and
    agencies


69,462,854



69,289,978



69,289,978Industrial and miscellaneous


39,691,216



38,980,881



38,980,881Mortgage-backed securities


1,228,665



1,219,392



1,219,392Total fixed
    maturities


281,010,221



278,383,501



278,383,501Equity SecuritiesCommon and preferred stock


12,636,230



12,836,297



12,836,297Total equity
    securities


12,636,230



12,836,297



12,836,297Other investmentsShort-term investments


8,800,000



8,800,000



8,800,000Total other
    investments


8,800,000



8,800,000



8,800,000Total Investments

$
302,446,451


$
300,019,798


$
300,019,798  S-1




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE II
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  BALANCE
    SHEETS
  December 31,2006


2005(In thousands)ASSETS:Cash and cash equivalents

$
7,675


$
21,137Investment in subsidiaries


145,827



118,489Accrued investment income






108Deferred expenses






Deferred tax asset


843



469Fixed assets, net of depreciation


5



6Taxes recoverable






972Intercompany receivable


574



Total assets

$
154,924


$
141,180LIABILITIES AND
    CAPITAL:Accounts payable

$
1,051


$
380Taxes payable


2,984



Intercompany payable






2,590Total liabilities


4,035



2,970STOCKHOLDERS
    EQUITY:Common stock, $0.01 par value


97,570



97,458Retained earnings


56,735



42,353Accumulated other comprehensive
    (loss)


(1,694
)


(1,602
)Common stock held in treasury


(1,723
)


Total stockholders equity


150,888



138,209Total liabilitites and
    stockholders equity

$
154,924


$
141,180    S-2




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE II
  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
  STATEMENTS
    OF INCOME
  Years Ended December 31,2006


2005


2004(In thousands)IncomeOther Income

$
677


$
542


$
4Loss on disposition of fixed assets










(2
)Total Income


677



542



2Cost and Expenses:Salary Expense


1,458



302



1,038Professional fees


926



789



87Other expenses


2,103



3,833



745Total expenses


4,487



4,925



1,871Loss before federal income taxes
    and equity in net income of subsidiaries


(3,810
)


(4,383
)


(1,869
)Income tax (benefit)


(1,309
)


(1,388
)


(631
)Loss before equity in net income
    of subsidiaries


(2,501
)


(2,995
)


(1,238
)Equity in net income of
    subsidiaries


16,884



9,431



18,686Net income

$
14,382


$
6,436


$
17,448  S-3




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE II
  CONDENSED
    FINANCIAL INFORMATION
  STATEMENTS
    OF CASH FLOWS
  Years Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net earnings

$
14,382


$
6,436


$
17,448Undistributed net (income) of
    subsidiaries


(16,884
)


(9,431
)


(18,686
)Loss on sale of fixed asset










2Amortization of share options


(3
)


3,050



482Changes in current assets and
    liabilities  net


1,198



(1,309
)


(72
)Net cash (used in) provided by
    operating activities


(1,307
)


(1,254
)


(826
)Cash flows from investing
    activities:Capital contributions to
    subsidiaries


(11,451
)


(43,866
)


(1,007
)Purchase of equipment










(6
)Dividends received


904



2,500



2,650Net cash provided by (used in)
    investing activities


(10,547
)


(41,366
)


1,637Cash flows from financing
    activities:Sale of stock


115



62,668



Stock repurchase


(1,723
)






Net cash provided by (used in )
    financing activities


(1,608
)


62,668



Net increase in cash


(13,462
)


20,048



811Cash, beginning of period


21,137



1,089



278Cash, end of period

$
7,675


$
21,137


$
1,089  S-4




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND 
    SUBSIDIARIES
    SCHEDULE III
    SUPPLEMENTARY INSURANCE INFORMATION
  Reservesfor Unpaid











Losses and


AmortizationDeferred


Losses and











Losses and


of DeferredPolicy


Loss








Net


Adjustment


Policy





NetAcquisition


Adjustment


Unearned


Earned


Investment


Expenses


Acquisition


Other


WrittenCosts


Expense


Premiums


Premiums


Income


Incurred


Costs


Expenses


Premiums(In thousands)at December 31,
    2006Property and Casualty

$
18,601


$
191,386


$
85,523


$
157,354


$
16,082


$
103,825


$
40,409


$
10,133


$
161,125Consolidated

$
18,601


$
191,386


$
85,523


$
157,354


$
16,082


$
103,825


$
40,409


$
10,133


$
161,125at December 31,
    2005Property and Casualty

$
17,134


$
219,361


$
81,546


$
172,782


$
12,403


$
132,794


$
34,506


$
11,747


$
189,634Consolidated

$
17,134


$
219,361


$
81,546


$
172,782


$
12,403


$
132,794


$
34,506


$
11,747


$
189,634at December 31,
    2004Property and Casualty

$
10,872


$
184,283


$
64,170


$
179,667


$
7,061


$
134,987


$
39,586


$
7,766


$
193,192Consolidated

$
10,872


$
184,283


$
64,170


$
179,667


$
7,061


$
134,987


$
39,586


$
7,766


$
193,192  S-5




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE IV
  REINSURANCE
  PercentageCeded to


Assumed





of AmountGross


Other


from Other


Net


AssumedAmount


Companies


Companies


Amount


to Net(In thousands)For the year ended ended
    December 31, 2006 Property and casualty insurance premiums

$
166,786


$
10,910


$
1,478


$
157,354



0.94
%Total Premiums

$
166,786


$
10,910


$
1,478


$
157,354



0.94
%For the year ended ended
    December 31, 2005 Property and casualty insurance premiums

$
180,378


$
9,805


$
2,209


$
172,782



1.28
%Total Premiums

$
180,378


$
9,805


$
2,209


$
172,782



1.28
%For the year ended ended
    December 31, 2004 Property and casualty insurance premiums

$
195,071


$
18,671


$
3,267


$
179,667



1.82
%Total Premiums

$
195,071


$
18,671


$
3,267


$
179,667



1.82
%  S-6




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE V
  VALUATION
    AND QUALIFYING ACCOUNTS
   As of
    December 31, 2006
    (In thousands)
  Balance at


Charged to







Balance atBeginning of


Costs and


Charged to Other

Deductions 


End ofDescription

Period


Expenses


Accounts  Describe

Describe


PeriodValuation Allowance for State
    Receivable


500






NY State Receivable






500Allowance for Doubtful Accounts


34






Premiums Receivable






34Valuation Allowance for Reinsurance









Reinsurance Recoverable






Valuation Allowance for
    Notes Receivable


227






Notes Receivable


227



761









227



534   As of
    December 31, 2005
    (In thousands)
  Balance at


Charged to







Balance atBeginning of


Costs and


Charged to Other

Deductions 


End ofDescription

Period


Expenses


Accounts  Describe

Describe


PeriodValuation Allowance for State
    Receivable


500






NY State Receivable






500Allowance for Doubtful Accounts


10



24


Premiums Receivable






34Valuation Allowance for Reinsurance


312






Reinsurance Recoverable


312



Valuation Allowance for
    Notes Receivable


227






Notes Receivable






2271,049



24





312



761  S-7




---



##### 



NATIONAL
    ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
  SCHEDULE VI
  SUPPLEMENTARY
    INFORMATION CONCERNING PROPERTY
 AND
    CASUALTY INSURANCE OPERATIONS
  Losses and Loss


Paid LossesAdjustment Expenses


and LossIncurred Related to:


AdjustmentCurrent Year


Prior Years


Expenses(In thousands)Years ended December 31,2006

$
103,801


$
23


$
121,5962005

$
122,728


$
10,066


$
100,8492004

$
135,659


$
(672
)

$
88,512  S-8




---



##### 



SIGNATURES
    
  By:
    /s/  James
    V. Gorman   Title:
    Chairman of the Board of Directors and Chief Executive Officer      Signature

Title

Date/s/  James
    V. GormanJames
    V. Gorman

Chairman of the Board of Directors
    and Chief Executive Officer (Principle Executive Officer)

March 14, 2007/s/  Frank
    J. PrudenteFrank
    J. Prudente

Executive Vice President ,
    Treasurer and Chief Accounting Officer

March 14, 2007/s/  Peter
    A.
    Cappello, Jr.Peter
    A. Cappello, Jr.

Director

March 14, 2007/s/  Martin
    I. Krupnick, Psy.
    DMartin
    I. Krupnick, Psy. D

Director

March 14, 2007/s/  Thomas
    M. MulhareThomas
    M. Mulhare

Director

March 14, 2007/s/  Thomas
    J.
    Sharkey, Sr.Thomas
    J. Sharkey, Sr.

Director

March 14, 2007/s/  Steven
    V. StalloneSteven
    V. Stallone

Director

March 14, 2007/s/  Candace
    L. StraightCandace
    L. Straight

Director

March 14, 2007