##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  to
 000-50511  Commission File Number
 UNITED AMERICA INDEMNITY, LTD.
  Cayman Islands
    
    98-0417107(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 WALKER HOUSE, 87 MARY STREET
P.O. BOX 908GT
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS
 (345) 949-0100
 þ o
 þ o
    1




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TABLE OF CONTENTS
 PagePART
I  FINANCIAL INFORMATION (1)Item 1. Financial Statements:Consolidated Balance Sheets
    
    
    1Consolidated
Statements of Operations for the Quarter and Six Months Ended June 30, 2005
    
    
    2Consolidated
Statements of Comprehensive Income for the Quarter and Six Months Ended June 30, 2005
    
    
    3Consolidated Statements of Changes in Shareholders Equity
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    56PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    57Item 4. Submission of Matters to a Vote of Security Holders
    
    
    57Item 6. Exhibits
    
    
    59Signatures
    
    
    60CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
  
 (1)
    
    On January 24, 2005, we completed our merger with Penn-America Group, Inc.,
as well as our acquisition of Penn Independent Corporation. In connection with the
transactions, our shareholders approved a change in our name from United National
Group, Ltd. to United America Indemnity, Ltd. Under purchase accounting rules, our
results of operations for the quarter ended June 30, 2005 reflect the addition of
Penn-America Group, Inc. and Penn Independent Corporation. Our results for the six
months ended June 30, 2005 reflect the addition of Penn-America Group, Inc. and Penn
Independent Corporation from January 25, 2005 through June 30, 2005. All prior
period results reflect only the results of operations of United America Indemnity.




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PART
I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Balance Sheets
 (Unaudited)June 30, 2005
    
    December 31, 2004ASSETSBonds:Available for sale securities, at fair value
(amortized cost: $1,044,766 and $575,298)
    
    $
    1,053,911
    
    
    $
    585,385Preferred shares:Available for sale securities, at fair value
(cost: $7,134 and $4,804)
    
    
    6,893
    
    
    
    5,112Common shares:Available for sale securities, at fair value
(cost: $53,595 and $34,004)
    
    
    57,804
    
    
    
    37,894Other invested assets
    
    
    51,975
    
    
    
    53,756Total investments
    
    
    1,170,583
    
    
    
    682,147Cash and cash equivalents
    
    
    149,292
    
    
    
    242,123Accounts receivable
    
    
    22,941
    
    
    
    Agents balances, net
    
    
    77,907
    
    
    
    47,132Reinsurance receivables, net
    
    
    1,428,846
    
    
    
    1,531,863Accrued investment income
    
    
    11,875
    
    
    
    7,141Federal income taxes receivable
    
    
    1,183
    
    
    
    Deferred federal income taxes, net
    
    
    15,830
    
    
    
    28,372Deferred acquisition costs, net
    
    
    48,255
    
    
    
    29,735Goodwill
    
    
    97,955
    
    
    
    Prepaid reinsurance premiums
    
    
    46,803
    
    
    
    42,623Other assets
    
    
    59,108
    
    
    
    14,801Total assets
    
    $
    3,130,578
    
    
    $
    2,625,937LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Unpaid losses and loss adjustment expenses
    
    $
    1,998,390
    
    
    $
    1,876,510Unearned premiums
    
    
    257,265
    
    
    
    152,166Federal income taxes payable
    
    
    
    
    
    
    1,943Amounts held for the account of others
    
    
    13,757
    
    
    
    10,234Ceded balances payable
    
    
    27,043
    
    
    
    22,698Insurance premium payable
    
    
    30,843
    
    
    
    Payable for securities
    
    
    6,274
    
    
    
    Senior notes payable to related party
    
    
    72,848
    
    
    
    72,848Junior subordinated debentures
    
    
    61,857
    
    
    
    30,929Notes and loans payable
    
    
    6,914
    
    
    
    Other liabilities
    
    
    40,711
    
    
    
    26,056Total liabilities
    
    
    2,515,902
    
    
    
    2,193,384Commitments and contingencies (Note 11)
    
    
    
    
    
    
    Minority interest
    
    
    131
    
    
    
    Shareholders equity:Common shares, $0.0001 par value, 900,000,000 common
shares authorized, 23,742,238 and 15,585,653 Class A
common shares issued and outstanding, respectively,
and 12,687,500 Class B common shares issued and
outstanding
    
    
    4
    
    
    
    3Preferred shares, $0.0001 par value, 100,000,000
shares authorized, none issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    501,400
    
    
    
    356,725Accumulated other comprehensive income
    
    
    18,776
    
    
    
    15,507Retained earnings
    
    
    94,365
    
    
    
    60,318Total shareholders equity
    
    
    614,545
    
    
    
    432,553Total liabilities and shareholders equity
    
    $
    3,130,578
    
    
    $
    2,625,937
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Operations
 (Unaudited)
    
    (Unaudited)Quarter Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Gross premiums written
    
    $
    163,902
    
    
    $
    88,138
    
    
    $
    299,362
    
    
    $
    206,076Net premiums written
    
    $
    136,294
    
    
    $
    68,183
    
    
    $
    245,815
    
    
    $
    126,800Net premiums earned
    
    $
    119,802
    
    
    $
    59,396
    
    
    $
    221,914
    
    
    $
    104,818Agency commission and fee revenues
    
    
    10,115
    
    
    
    
    
    
    
    16,367
    
    
    
    Net investment income
    
    
    11,114
    
    
    
    4,417
    
    
    
    22,982
    
    
    
    8,627Net realized investment losses
    
    
    394
    
    
    
    463
    
    
    
    (222
    )
    
    
    393Total revenues
    
    
    141,425
    
    
    
    64,276
    
    
    
    261,041
    
    
    
    113,838Losses and Expenses:Net losses and loss adjustment expenses
    
    
    71,221
    
    
    
    34,509
    
    
    
    134,818
    
    
    
    63,779Acquisition costs and other underwriting expenses
    
    
    37,033
    
    
    
    19,286
    
    
    
    68,148
    
    
    
    30,610Agency commission and operating expenses
    
    
    10,174
    
    
    
    
    
    
    
    17,093
    
    
    
    Corporate and other operating expenses
    
    
    2,507
    
    
    
    1,488
    
    
    
    4,473
    
    
    
    2,958Interest expense
    
    
    2,180
    
    
    
    1,394
    
    
    
    4,096
    
    
    
    2,709Income before income taxes
    
    
    18,310
    
    
    
    7,599
    
    
    
    32,413
    
    
    
    13,782Income tax expense (benefit)
    
    
    145
    
    
    
    (470
    )
    
    
    226
    
    
    
    (1,126
    )Net income before minority interest and
equity in net income of partnerships
    
    
    18,165
    
    
    
    8,069
    
    
    
    32,187
    
    
    
    14,908Minority interest, net of taxes
    
    
    (23
    )
    
    
    
    
    
    
    9
    
    
    
    Equity in net income of partnerships
    
    
    314
    
    
    
    38
    
    
    
    425
    
    
    
    617Net income before extraordinary gain
    
    
    18,456
    
    
    
    8,107
    
    
    
    32,621
    
    
    
    15,525Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    1,426
    
    
    
    Net income
    
    $
    18,456
    
    
    $
    8,107
    
    
    $
    34,047
    
    
    $
    15,525Per share data:Net income before extraordinary gain:Basic
    
    $
    0.51
    
    
    $
    0.29
    
    
    $
    0.92
    
    
    $
    0.55Diluted
    
    $
    0.50
    
    
    $
    0.28
    
    
    $
    0.91
    
    
    $
    0.54Extraordinary gain:Basic
    
    $
    
    
    
    $
    
    
    
    $
    0.04
    
    
    $
    Diluted
    
    $
    
    
    
    $
    
    
    
    $
    0.04
    
    
    $
    Net income:Basic
    
    $
    0.51
    
    
    $
    0.29
    
    
    $
    0.96
    
    
    $
    0.55Diluted
    
    $
    0.50
    
    
    $
    0.28
    
    
    $
    0.95
    
    
    $
    0.54Weighted-average number of shares outstanding:Basic
    
    
    36,392,539
    
    
    
    28,257,184
    
    
    
    35,331,277
    
    
    
    28,238,564Diluted
    
    
    37,045,044
    
    
    
    28,823,086
    
    
    
    36,015,474
    
    
    
    28,854,740
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Comprehensive Income
 (Unaudited)
    
    (Unaudited)Quarter Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    18,456
    
    
    $
    8,107
    
    
    $
    34,047
    
    
    $
    15,525Other comprehensive income (loss) before tax:Unrealized gains (losses) on securities:Unrealized holding gains (losses)
arising during period
    
    
    13,927
    
    
    
    (11,544
    )
    
    
    2,332
    
    
    
    (5,768
    )Less: Reclassification adjustment
for gains (losses) included in net
income
    
    
    (498)
    
    
    
    464
    
    
    
    (1,030
    )
    
    
    173Other comprehensive income (loss), before tax
    
    
    14,425
    
    
    
    (12,008
    )
    
    
    3,362
    
    
    
    (5,941
    )Income tax expense (benefit) related to
items of other comprehensive income
    
    
    3,584
    
    
    
    (4,084
    )
    
    
    93
    
    
    
    (2,359
    )Other comprehensive income (loss), net of tax
    
    
    10,841
    
    
    
    (7,924
    )
    
    
    3,269
    
    
    
    (3,582
    )Comprehensive income, net of tax
    
    $
    29,297
    
    
    $
    183
    
    
    $
    37,316
    
    
    $
    11,943
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Changes in Shareholders Equity
 (Unaudited)Six Months Ended
    
    Year EndedJune 30, 2005
    
    December 31, 2004Common shares:Number at beginning of period
    
    
    28,273,153
    
    
    
    27,802,503Class A common shares issued in merger
    
    
    7,930,536
    
    
    
    Class A
common shares issued (retired) under share incentive
plans
    
    
    201,935
    
    
    
    (200
    )Class A common shares issued in IPO
    
    
    
    
    
    
    462,500Class A common shares issued to directors
    
    
    24,114
    
    
    
    8,350Number at end of period
    
    
    36,429,738
    
    
    
    28,273,153Common shares:Balance at beginning of period
    
    $
    3
    
    
    $
    3Class A common shares issued
    
    
    1
    
    
    
    Balance at end of period
    
    $
    4
    
    
    $
    3Additional paid-in capital:Balance at beginning of period
    
    $
    356,725
    
    
    $
    347,487Contributed capital from Class A common shares issued
    
    
    142,439
    
    
    
    7,312Other
    
    
    2,236
    
    
    
    1,926Balance at end of period
    
    $
    501,400
    
    
    $
    356,725Accumulated other comprehensive income net of deferred
income tax:Balance at beginning of period
    
    $
    15,507
    
    
    $
    10,031Other comprehensive income
    
    
    3,269
    
    
    
    5,476Balance at end of period
    
    $
    18,776
    
    
    $
    15,507Retained earnings:Balance at beginning of period
    
    $
    60,318
    
    
    $
    23,271Net income
    
    
    34,047
    
    
    
    37,047Balance at end of period
    
    $
    94,365
    
    
    $
    60,318Total shareholders equity
    
    $
    614,545
    
    
    $
    432,553
  4




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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Cash Flows
 (Unaudited)Six Months Ended June 30,2005
    
    2004Cash flows from operating activities:Net income
    
    $
    34,047
    
    
    $
    15,525Adjustments to reconcile net income to net cash
provided by (used for) operating activities:Amortization of debt issuance costs
    
    
    90
    
    
    
    90Amortization and depreciation
    
    
    882
    
    
    
    Restricted stock expense
    
    
    2,155
    
    
    
    242Extraordinary gain
    
    
    (1,426
    )
    
    
    Deferred federal income taxes
    
    
    (1,178
    )
    
    
    (1,448
    )Amortization of bond premium and discount, net
    
    
    3,290
    
    
    
    1,499Net realized investment losses
    
    
    222
    
    
    
    (393
    )Equity in net earnings of partnerships
    
    
    (703
    )
    
    
    (617
    )Changes in:Agents balances
    
    
    (9,185
    )
    
    
    14,859Account receivables
    
    
    14,179
    
    
    
    Reinsurance receivables
    
    
    146,925
    
    
    
    63,820Unpaid losses and loss adjustment expenses
    
    
    (113,312
    )
    
    
    (63,824
    )Unearned premiums
    
    
    20,821
    
    
    
    (22,584
    )Ceded balances payable
    
    
    (2,984
    )
    
    
    (32,880
    )Insurance premiums payable
    
    
    (15,036
    )
    
    
    Other liabilities
    
    
    (2,478
    )
    
    
    (8,877
    )Amounts held for the account of others
    
    
    3,400
    
    
    
    (3,433
    )Contingent commissions
    
    
    (2,334
    )
    
    
    (824
    )Federal income tax receivable
    
    
    (1,577
    )
    
    
    (1,088
    )Prepaid reinsurance premiums
    
    
    3,079
    
    
    
    44,564Deferred acquisition costs, net
    
    
    (19,012
    )
    
    
    (11,573
    )Other  net
    
    
    525
    
    
    
    (1,908
    )Net cash provided by (used for) operating activities
    
    
    60,390
    
    
    
    (8,850
    )Cash flows from investing activities:Proceeds from sale of bonds and stocks
    
    
    168,368
    
    
    
    385,792Proceeds from maturity of bonds
    
    
    27,379
    
    
    
    3,200Proceeds from sale of other invested assets
    
    
    5,914
    
    
    
    587Purchase of bonds and stocks
    
    
    (295,069
    )
    
    
    (443,484
    )Purchase of other invested assets
    
    
    (148
    )
    
    
    (989
    )Acquisition of business, net of cash acquired
    
    
    (58,529
    )
    
    
    Net cash used for investing activities
    
    
    (152,085
    )
    
    
    (54,894
    )Cash flows from financing activities:Net proceeds from IPO of common shares
    
    
    
    
    
    
    7,312Borrowing under credit facility
    
    
    1,954
    
    
    
    Repayments of credit facility
    
    
    (2,583
    )
    
    
    Dividends paid to minority shareholders
    
    
    (22
    )
    
    
    Capital lease obligations
    
    
    (149
    )
    
    
    Change in debt
    
    
    (336
    )
    
    
    Net cash (used for) provided by financing activities
    
    
    (1,136
    )
    
    
    7,312Net change in cash and cash equivalents
    
    
    (92,831
    )
    
    
    (56,432
    )Cash and cash equivalents at beginning of period
    
    
    242,123
    
    
    
    214,796Cash and cash equivalents at end of period
    
    $
    149,292
    
    
    $
    158,364
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UNITED AMERICA INDEMNITY, LTD.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Principles of Consolidation and Basis of Presentation
      6




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Description of Business
  2. Acquisition of Penn Independent Corporation and Merger with Penn-America Group, Inc.
  Acquisition of Penn Independent Corporation
  7




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  PennIndependentGroupAssets:Investment in 30.5% of Penn-America Group, Inc. Class A
common stock
    
    $
    65,440Other investments and cash
    
    
    23,697Premium receivable
    
    
    37,124Accrued investment income
    
    
    21Federal income taxes receivable
    
    
    1,157Intangible assets
    
    
    2,695Capital lease
    
    
    1,222Other assets
    
    
    1,899Total
    
    
    133,255Liabilities:Insurance premiums payable
    
    
    47,162Deferred federal income taxes, net
    
    
    6,944Federal income taxes payable
    
    
    224Other liabilities
    
    
    8,467Notes and loans payable
    
    
    5,703Total
    
    
    68,500Minority interest
    
    
    431Estimated fair value of net assets acquired
    
    
    64,324Purchase price
    
    
    98,540Goodwill
    
    $
    34,216
   January 24, 2005Estimated(Dollars in thousands)
    
    Amount
    
    Useful LifeTradenames
    
    $
    430
    
    
    IndefiniteAgency relationships
    
    
    1,830
    
    
    12 yearsCustomer contracts
    
    
    435
    
    
    3 years$
    2,695
 Purchases of Penn-America Group, Inc. Common Shares from Individual Shareholders
  8




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Merger with Penn-America Group, Inc.
   9




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Assets:Investments and cash
    
    $
    431,850Agents balances
    
    
    22,881Reinsurance receivables
    
    
    43,908Accrued investment income
    
    
    3,527Prepaid reinsurance premiums
    
    
    7,259Intangible assets
    
    
    37,430Capital lease
    
    
    1,398Other assets
    
    
    1,695Total
    
    
    549,948Liabilities:Unpaid losses and loss adjustment expenses
    
    
    235,192Unearned premiums
    
    
    84,278Income tax payable
    
    
    810Deferred federal income taxes
    
    
    6,896Ceded balances payable
    
    
    7,329Contingent commissions
    
    
    6,787Junior subordinated debentures
    
    
    30,928Capitalized lease obligation
    
    
    1,089Other liabilities
    
    
    4,562Total
    
    
    377,871Estimated fair value of net assets acquired
    
    
    172,077Purchase price of Penn-America Group, Inc. common shares
acquired through the merger
    
    
    165,538Purchase price of Penn-America Group, Inc. common shares
acquired through Penn Independent Corporation acquisition
    
    
    65,440Purchase price of Penn-America Group, Inc. common shares
acquired from private individuals
    
    
    4,838Total purchase price
    
    
    235,816Goodwill
    
    $
    63,739
   January 24, 2005Estimated Useful(Dollars in thousands)
    
    Amount
    
    LifeTradenames
    
    $
    16,140
    
    
    IndefiniteAgency relationships
    
    
    14,790
    
    
    12 yearsState insurance licenses
    
    
    6,000
    
    
    IndefiniteSoftware technology
    
    
    500
    
    
    3 years$
    37,430
 10




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  3. Summary of Significant Accounting Policies
 Investments
        11




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Derivative Instruments
      Valuation of Agents Balances and Accounts Receivable
  12




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Goodwill and Intangible Assets
     (Dollars in thousands)
    
    
    
    
    
    
    
    
    
    AccumulatedDescription
    
    Life
    
    Cost
    
    Amortization
    
    NetTradenames
    
    Indefinite
    
    $
    16,570
    
    
    $
    
    
    
    $
    16,570Agency relationships
    
    12 years
    
    
    16,620
    
    
    
    604
    
    
    
    16,016State insurance licenses
    
    Indefinite
    
    
    6,000
    
    
    
    
    
    
    
    6,000Software technology
    
    3 years
    
    
    500
    
    
    
    73
    
    
    
    427Customer contracts
    
    3 years
    
    
    435
    
    
    
    6
    
    
    
    429$
    40,125
    
    
    $
    683
    
    
    $
    39,442
 Capitalized Leases
  Notes and Loans Payable
  Insurance Premium Payables
  Junior Subordinated Debentures
  13




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Revenue Recognition
    Agency Commissions and Operating Expenses
  Extraordinary Gain
  Earnings Per Share
  New Accounting Pronouncements
   14




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
     4. Investments
  (Dollars in thousands)
    
    Estimated Fair ValueJune 30, 2005
    
    December 31, 2004On deposit with governmental authorities
    
    $
    42.4
    
    
    $
    30.1Intercompany
trust held for the benefit of U.S. Subsidiaries
    
    
    494.5
    
    
    
    405.6Held in
trust pursuant to U.S. regulatory requirements for the benefit of
U.S. policyholders
    
    
    5.7
    
    
    
    5.5Total
    
    $
    542.6
    
    
    $
    441.2
 15




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Cost or
    
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Estimated(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    Fair ValueJune 30, 2005Bonds:Obligations of states and political subdivisions
    
    $
    404,143
    
    
    $
    8,113
    
    
    $
    (600
    )
    
    $
    411,656Mortgage-backed securities
    
    
    224,372
    
    
    
    1,159
    
    
    
    (858
    )
    
    
    224,673U.S. treasury and agency obligations
    
    
    199,972
    
    
    
    1,347
    
    
    
    (1,535
    )
    
    
    199,784Corporate notes
    
    
    216,279
    
    
    
    2,715
    
    
    
    (1,196
    )
    
    
    217,798Total bonds
    
    
    1,044,766
    
    
    
    13,334
    
    
    
    (4,189
    )
    
    
    1,053,911Common stock
    
    
    53,595
    
    
    
    5,628
    
    
    
    (1,419
    )
    
    
    57,804Preferred stock
    
    
    7,134
    
    
    
    193
    
    
    
    (434
    )
    
    
    6,893Total
    
    $
    1,105,495
    
    
    $
    19,155
    
    
    $
    (6,042
    )
    
    $
    1,118,608
 Cost or
    
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Estimated(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    Fair ValueDecember 31, 2004Bonds:Obligations of states and political subdivisions
    
    $
    299,525
    
    
    $
    8,700
    
    
    $
    (315
    )
    
    $
    307,910Mortgage-backed securities
    
    
    52,690
    
    
    
    456
    
    
    
    (3
    )
    
    
    53,143U.S. treasury and agency obligations
    
    
    163,108
    
    
    
    285
    
    
    
    (979
    )
    
    
    162,414Corporate notes
    
    
    59,975
    
    
    
    2,215
    
    
    
    (272
    )
    
    
    61,918Total bonds
    
    
    575,298
    
    
    
    11,656
    
    
    
    (1,569
    )
    
    
    585,385Common stock
    
    
    34,004
    
    
    
    4,338
    
    
    
    (448
    )
    
    
    37,894Preferred stock
    
    
    4,804
    
    
    
    418
    
    
    
    (110
    )
    
    
    5,112Total
    
    $
    614,106
    
    
    $
    16,412
    
    
    $
    (2,127
    )
    
    $
    628,391
   Gross Unrealized LossesNumber
    
    
    
    
    
    Cost or
    
    
    
    
    
    Six
    
    Between
    
    Greaterof
    
    Fair
    
    Amortized
    
    
    
    
    
    Months or
    
    Seven Months
    
    than(Dollars in thousands)
    
    Securities
    
    Value
    
    Cost
    
    Total
    
    Less
    
    and One Year
    
    One YearBonds
    
    
    325
    
    
    $
    476,715
    
    
    $
    480,537
    
    
    $
    4,189
    
    
    $
    2,512
    
    
    $
    500
    
    
    $
    1,177Preferred Stock
    
    
    18
    
    
    
    3,606
    
    
    
    3,870
    
    
    
    434
    
    
    
    353
    
    
    
    81
    
    
    
    Common Stock
    
    
    68
    
    
    
    17,816
    
    
    
    19,235
    
    
    
    1,419
    
    
    
    952
    
    
    
    467
    
    
    
    $
    6,042
    
    
    $
    3,817
    
    
    $
    1,048
    
    
    $
    1,177
    16




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Amortized
    
    Estimated(Dollars in thousands)
    
    Cost
    
    Fair ValueDue in one year or less
    
    $
    32,237
    
    
    $
    32,015Due after one year through five years
    
    
    298,239
    
    
    
    296,827Due after five years through ten years
    
    
    242,821
    
    
    
    245,994Due after ten years
    
    
    246,297
    
    
    
    253,601Mortgage-backed securities
    
    
    225,172
    
    
    
    225,474$
    1,044,766
    
    
    $
    1,053,911
  5. Reinsurance
      17




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
    6. Income Taxes
       18




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Quarter Ended
    
    Quarter EndedJune 30, 2005
    
    June 30, 2004% of Pre-
    
    
    
    
    
    % of Pre-Amount
    
    Tax Income
    
    Amount
    
    Tax IncomeExpected tax provision at
weighted average rate
    
    $
    1,448
    
    
    
    7.9
    %
    
    $
    310
    
    
    
    4.1
    %Adjustments:Tax exempt interest
    
    
    (1,308
    )
    
    
    (7.1
    )
    
    
    (1,123
    )
    
    
    (14.8
    )Dividend exclusion
    
    
    (75
    )
    
    
    (0.4
    )
    
    
    (31
    )
    
    
    (0.4
    )Non-resident withholding
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    1.9Other
    
    
    80
    
    
    
    0.4
    
    
    
    229
    
    
    
    3.0Actual Taxes
    
    $
    145
    
    
    
    0.8
    %
    
    $
    (470
    )
    
    
    (6.2
    %)
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2004% of Pre-
    
    
    
    
    
    % of Pre-Amount
    
    Tax Income
    
    Amount
    
    Tax IncomeExpected tax provision at
weighted average rate
    
    $
    2,079
    
    
    
    6.4
    %
    
    $
    758
    
    
    
    5.5
    %Adjustments:Tax exempt interest
    
    
    (2,561
    )
    
    
    (7.9
    )
    
    
    (2,338
    )
    
    
    (17.0
    )Dividend exclusion
    
    
    (156
    )
    
    
    (0.5
    )
    
    
    (68
    )
    
    
    (0.5
    )Non-resident withholding
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    2.1Other
    
    
    864
    
    
    
    2.7
    
    
    
    233
    
    
    
    1.7Actual Taxes
    
    $
    226
    
    
    
    0.7
    %
    
    $
    (1,126
    )
    
    
    (8.2
    %)
  19




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 7. Liability for Unpaid Losses and Loss Adjustment Expenses
  Quarter Ended June 30,
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Unpaid losses and loss adjustment expenses at
beginning of period
    
    $
    2,085,199
    
    
    $
    2,036,072
    
    
    $
    1,876,510
    
    
    $
    2,059,760Less gross reinsurance receivables on unpaid losses
and loss adjustment expenses
    
    
    1,525,782
    
    
    
    1,719,412
    
    
    
    1,531,896
    
    
    
    1,745,737Net balance at beginning of period
    
    
    559,417
    
    
    
    316,660
    
    
    
    344,614
    
    
    
    314,023Plus unpaid losses and loss adjustment expenses
acquired as a result of the merger (1)
    
    
    
    
    
    
    
    
    
    
    235,192
    
    
    
    Less gross reinsurance receivables on unpaid losses
and loss adjustment expenses acquired as a result
of the merger (1)
    
    
    
    
    
    
    
    
    
    
    43,908
    
    
    
    Unpaid losses and loss adjustment expense
subtotal
    
    
    559,417
    
    
    
    316,660
    
    
    
    535,898
    
    
    
    314,023Incurred losses and loss adjustment expenses
related to:Current year
    
    
    71,221
    
    
    
    34,509
    
    
    
    134,818
    
    
    
    63,779Prior years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total incurred losses and loss
adjustment expenses
    
    
    71,221
    
    
    
    34,509
    
    
    
    134,818
    
    
    
    63,779Paid losses and loss adjustment expenses related to:Current year
    
    
    11,469
    
    
    
    3,705
    
    
    
    14,293
    
    
    
    5,938Prior years
    
    
    34,782
    
    
    
    21,221
    
    
    
    72,036
    
    
    
    45,621Total paid losses and loss adjustment
expenses
    
    
    46,251
    
    
    
    24,926
    
    
    
    86.329
    
    
    
    51,559Net balance at end of period
    
    
    584,387
    
    
    
    326,243
    
    
    
    584,387
    
    
    
    326,243Plus gross reinsurance receivables on unpaid losses
and loss adjustment expenses
    
    
    1,414,003
    
    
    
    1,669,693
    
    
    
    1,414,003
    
    
    
    1,669,693Unpaid losses and loss adjustment expenses at end
of period
    
    $
    1,998,390
    
    
    $
    1,995,936
    
    
    $
    1,998,390
    
    
    $
    1,995,936
 
 (1)
    
    Unpaid loss and loss adjustment expenses and gross reinsurance receivable
on unpaid losses acquired on January 24, 2005, as a result of the merger with
Penn-America Insurance Group.    20




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  8. Junior Subordinated Debentures
      9. Notes and Loans Payable
 Notes Payable
  21




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
    Loans Payable
  (Dollars in thousands)
    
    
    
    
    
    June 30, 2005Loans payable, former shareholder of subsidiary
    
    
    (1
    )
    
    $
    701Loans payable, former shareholder of subsidiary
    
    
    (2
    )
    
    
    943Loans payable, former shareholder of subsidiary
    
    
    (3
    )
    
    
    1,921Loans payable, vendor
    
    
    (4
    )
    
    
    7Loans payable, vendor
    
    
    (5
    )
    
    
    40Loans payable, minority shareholder of subsidiary
    
    
    (6
    )
    
    
    277$
    3,889
 
 (1)
    
    Loan payable, to former shareholder of subsidiary, due in monthly principal
installments of $6,870, plus interest at a fixed rate of 4.5%. This loan matures on
December 1, 2013.(2)
    
    Loan payable, to former shareholder of subsidiary, due in monthly principal
installments of $9,242, plus interest at a fixed rate of 4.5%. This loan matures on
December 1, 2013.(3)
    
    Loan payable, to former minority shareholder of subsidiary, due in monthly principal
and interest installments of $23,715 at a fixed rate of 4.0%. This loan matures on March
1, 2012.(4)
    
    Loan payable due to a vendor in monthly principal installments of $930. This loan is
non-interest bearing and matures on February 16, 2006. Automotive equipment is held as
collateral.(5)
    
    Loan payable due to a vendor in fixed monthly installments of $767, including interest
at a fixed rate of 5.59%. This loan matures on May 24, 2010. Automotive equipment is held
as collateral.(6)
    
    Loan payable, to minority shareholder of subsidiary, due in monthly principal
installments of $5,333, plus interest at a fixed rate of 4.5%. This loan matures on
September 1, 2009.  10. Related Party Transactions
  22




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 .
      11. Commitments and Contingencies
 Capital Leases
 .
 23




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  June 30, 2005Accumulated(Dollars in thousands)
    
    Cost
    
    Amortization
    
    NetOffice facility
    
    $
    2,621
    
    
    $
    74
    
    
    $
    2,547
  Lease Commitments
  (Dollars in thousands)2005
    
    $
    2,4032006
    
    
    3,3442007
    
    
    2,7582008
    
    
    2,8652009 and thereafter
    
    
    11,481Total
    
    $
    22,851
 Legal Proceedings
   12. Shareholders Equity
  24




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 13. Compensation Plans
  Deferred Compensation
   Share Incentive Plan
    WeightedAverageNumber of
    
    Exercise PriceShares
    
    Per ShareOptions outstanding at December 31, 2004
    
    
    1,720,164
    
    
    $
    11.35Options issued
    
    
    305,007
    
    
    $
    13.15Options forfeited
    
    
    (48,133
    )
    
    $
    17.00Options cancelled
    
    
    (11,425
    )
    
    $
    17.00Options exercised
    
    
    (131,979
    )
    
    $
    9.66Options outstanding at June 30, 2005
    
    
    1,833,634
    
    
    $
    11.59Options exercisable at June 30, 2005
    
    
    400,921
    
    
    $
    7.99
 25




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Number of optionsOption Price
    
    exercisable$5.62
    
    
    1,933$6.02
    
    
    486$6.50
    
    
    256,074$8.49
    
    
    40,609$10.00
    
    
    78,875$17.00
    
    
    22,944Options exercisable
at June 30, 2005
    
    
    400,921
  Annual Incentive Plans
   26




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  401(k) Plans
    14. Earnings Per Share
   Quarter Ended June 30,
    
    Six Months Ended June 30,(Dollars in thousands, except per share data)
    
    2005
    
    2004
    
    2005
    
    2004Net income before extraordinary gain
    
    $
    18,456
    
    
    $
    8,107
    
    
    $
    32,621
    
    
    $
    15,525Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    1,426
    
    
    
    Net income
    
    $
    18,456
    
    
    $
    8,107
    
    
    $
    34,047
    
    
    $
    15,525Basic earnings per share:Weighted average shares for basic earnings per share
    
    
    36,392,539
    
    
    
    28,257,184
    
    
    
    35,331,277
    
    
    
    28,238,564Net income available to common shareholders before
extraordinary gain
    
    $
    0.51
    
    
    $
    0.29
    
    
    $
    0.92
    
    
    $
    0.55Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    0.04
    
    
    
    Net income
    
    $
    0.51
    
    
    $
    0.29
    
    
    $
    0.96
    
    
    $
    0.55Diluted earnings per share:Weighted average shares for diluted earnings per
share
    
    
    37,045,044
    
    
    
    28,823,086
    
    
    
    36,015,288
    
    
    
    28,854,740Net income available to common shareholders before
extraordinary gain
    
    $
    0.50
    
    
    $
    0.28
    
    
    $
    0.91
    
    
    $
    0.54Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    0.04
    
    
    
    Net income
    
    $
    0.50
    
    
    $
    0.28
    
    
    $
    0.95
    
    
    $
    0.54
 27




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 15. Statutory Financial Information
  
    
    Under SAP, investments in debt securities are carried at amortized cost, while under
GAAP the Company records its debt securities at estimated fair value.
    
    Under SAP, policy acquisition costs, such as commissions, premium taxes, fees and other
costs of underwriting policies are charged to current operations as incurred, while under
GAAP such costs are deferred and amortized on a pro rata basis over the period covered by
the policy.
    
    Under SAP, certain assets designated as Non-admitted Assets (such as prepaid expenses)
are charged against surplus.
    
    Under SAP, net deferred income tax assets are admitted following the application of
specified criteria, with the resulting admitted deferred tax amount being credited directly
to surplus.
    
    Under SAP, receivables are non-admitted and are charged against surplus based upon aging
criteria.
    
    Under SAP, the costs and related receivables for guaranty funds and other assessments
are recorded based on managements estimate of the ultimate liability and related
receivable settlement, while under GAAP such costs are accrued when the liability is
probable and reasonably estimable and the related receivable amount is based on future
premium collections or policy surcharges from in-force policies.
    
    Under SAP, unpaid losses and loss adjustment expenses and unearned premiums are reported
net of the effects of reinsurance transactions, whereas under GAAP, unpaid losses and loss
adjustment expenses and unearned premiums are reported gross of reinsurance.
    28




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
   Statutory Capital and Surplus
    
    Statutory Net IncomeAs of
    
    As of
    
    Year to Date
    
    Year Ended(Dollars in thousands)
    
    June 30, 2005
    
    December 31, 2004
    
    June 30, 2005
    
    December 31, 2004United National Insurance Companies
    
    $
    351,150
    
    
    $
    373,669
    
    
    $
    4,149
    
    
    $
    32,701Penn-America Insurance Companies
    
    
    158,427
    
    
    
    140,336
    
    
    
    21,032
    
    
    
    10,777
 16. Segment Information
    Six Months Ended June 30,(Dollars in thousands)
    
    2005
    
    2004Property and general liability
    
    $
    263,959
    
    
    $
    163,209Professional liability
    
    
    35,403
    
    
    
    42,867Total
    
    $
    299,362
    
    
    $
    206,076
 29




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Quarter Ended June 30, 2005:
    
    Insurance
    
    Agency(Dollars in thousands)
    
    Operations
    
    Operations
    
    Corporate
    
    Eliminations
    
    TotalRevenues:Gross premiums written
    
    $
    163,902
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    163,902Net premiums written
    
    $
    136,294
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    136,294Net premiums earned
    
    $
    119,802
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    119,802Agency commission and fee revenues
    
    
    
    
    
    
    10,940
    
    
    
    
    
    
    
    (825
    )
    
    
    10,115Net investment income
    
    
    
    
    
    
    
    
    
    
    11,114
    
    
    
    
    
    
    
    11,114Net realized investment losses
    
    
    
    
    
    
    
    
    
    
    394
    
    
    
    
    
    
    
    394Total revenues
    
    
    119,802
    
    
    
    10,940
    
    
    
    11,508
    
    
    
    (825
    )
    
    
    141,425Losses and Expenses:Net losses and loss adjustment expenses
    
    
    71,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,221Acquisition costs and other
underwriting expenses
    
    
    37,205
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    37,033Agency commission and operating expenses
    
    
    
    
    
    
    10,573
    
    
    
    
    
    
    
    (399
    )
    
    
    10,174Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    2,507
    
    
    
    
    
    
    
    2,507Interest expense
    
    
    
    
    
    
    
    
    
    
    2,180
    
    
    
    
    
    
    
    2,180Income (loss) before income taxes
    
    $
    11,376
    
    
    $
    367
    
    
    $
    6,821
    
    
    $
    (254
    )
    
    
    18,310Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Net income before minority interest
and equity in net income of
partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,165Minority interest and equity in net
income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291Net income before extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,456Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,456
 Quarter Ended June 30, 2004:
    
    Insurance
    
    Agency(Dollars in thousands)
    
    Operations
    
    Operations
    
    Corporate
    
    Eliminations
    
    TotalRevenues:Gross premiums written
    
    $
    88,138
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    88,138Net premiums written
    
    $
    68,183
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    68,183Net premiums earned
    
    $
    59,396
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    59,396Agency commission and fee revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net investment income
    
    
    
    
    
    
    
    
    
    
    4,417
    
    
    
    
    
    
    
    4,417Net realized investment losses
    
    
    
    
    
    
    
    
    
    
    463
    
    
    
    
    
    
    
    463Total revenues
    
    
    59,396
    
    
    
    
    
    
    
    4,880
    
    
    
    
    
    
    
    64,276Losses and Expenses:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net losses and loss adjustment expenses
    
    
    34,509
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,509Acquisition costs and other underwriting expenses
    
    
    19,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,286Agency commission and operating expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    1,488
    
    
    
    
    
    
    
    1,488Interest expense
    
    
    
    
    
    
    
    
    
    
    1,394
    
    
    
    
    
    
    
    1,394Income before income taxes
    
    $
    5,601
    
    
    $
    
    
    
    $
    1,998
    
    
    $
    
    
    
    
    7,599Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (470
    )Net income before minority interest and equity
in net income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,069Minority interest and equity in net income of
partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38Net income before extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,107Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,107
 30




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Six Months Ended June 30, 2005:
    
    Insurance
    
    Agency(Dollars in thousands)
    
    Operations
    
    Operations
    
    Corporate
    
    Eliminations
    
    TotalRevenues:Gross premiums written
    
    $
    299,362
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    299,362Net premiums written
    
    $
    245,815
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    245,815Net premiums earned
    
    $
    221,914
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    221,914Agency commission and fee revenues
    
    
    
    
    
    
    17,723
    
    
    
    
    
    
    
    (1,356
    )
    
    
    16,367Net investment income
    
    
    
    
    
    
    
    
    
    
    22,982
    
    
    
    
    
    
    
    22,982Net realized investment losses
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    
    
    
    
    (222
    )Total revenues
    
    
    221,914
    
    
    
    17,723
    
    
    
    22,760
    
    
    
    (1,356
    )
    
    
    261,041Losses and Expenses:Net losses and loss adjustment expenses
    
    
    134,818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,818Acquisition costs and other underwriting expenses
    
    
    68,457
    
    
    
    
    
    
    
    
    
    
    
    (309
    )
    
    
    68,148Agency commission and operating expenses
    
    
    
    
    
    
    17,750
    
    
    
    
    
    
    
    (657
    )
    
    
    17,093Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    4,473
    
    
    
    
    
    
    
    4,473Interest expense
    
    
    
    
    
    
    
    
    
    
    4,096
    
    
    
    
    
    
    
    4,096Income (loss) before income taxes
    
    $
    18,639
    
    
    $
    (27
    )
    
    $
    14,191
    
    
    $
    (390
    )
    
    
    32,413Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226Net income before minority interest and equity
in net income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,187Minority interest and equity in net income of
partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    434Net income before extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,621Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,426Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34,047Total Assets
    
    $
    3,052,984
    
    
    $
    77,594
    
    
    $
    
    
    
    $
    
    
    
    $
    3,130,578
 Six Months Ended June 30, 2004:
    
    Insurance
    
    Agency(Dollars in thousands)
    
    Operations
    
    Operations
    
    Corporate
    
    Eliminations
    
    TotalRevenues:Gross premiums written
    
    $
    206,076
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    206,076Net premiums written
    
    $
    126,800
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    126,800Net premiums earned
    
    $
    104,818
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    104,818Agency commission and fee revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net investment income
    
    
    
    
    
    
    
    
    
    
    8,627
    
    
    
    
    
    
    
    8,627Net realized investment gains
    
    
    
    
    
    
    
    
    
    
    393
    
    
    
    
    
    
    
    393Total revenues
    
    
    104,818
    
    
    
    
    
    
    
    9,020
    
    
    
    
    
    
    
    113,838Losses and Expenses:Net losses and loss adjustment expenses
    
    
    63,779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,779Acquisition costs and other underwriting expenses
    
    
    30,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,610Agency commission and operating expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    2,958
    
    
    
    
    
    
    
    2,958Interest expense
    
    
    
    
    
    
    
    
    
    
    2,709
    
    
    
    
    
    
    
    2,709Income before income taxes
    
    $
    10,429
    
    
    $
    
    
    
    $
    3,353
    
    
    $
    
    
    
    
    13,782Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,126
    )Net income before equity in net income of
partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,908Equity in net income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    617Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,525Total Assets
    
    $
    2,735,836
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,735,836
 31




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 17. Supplemental Cash Flow Information
 Taxes and Interest Paid
 Quarter Ended June 30,
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Net federal income
taxes paid (refunded)
    
    $
    2,983
    
    
    $
    1,750
    
    
    $
    1,603
    
    
    $
    1,116Interest paid
    
    
    2,239
    
    
    
    393
    
    
    
    1,158
    
    
    
    793
 Non-Cash Investing Activities
  (Dollars in thousands)Fair value of assets acquired (including goodwill)
    
    $
    715,718Cash portion of purchase price
    
    
    (125,985
    )Non-cash portion of purchase price
    
    
    (142,931
    )Liabilities assumed (including minority interest)
    
    $
    446,802
 18. Subsequent Events
     32




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Recent Developments
         33




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##### Table of Contents



Overview
      34




---



##### Table of Contents



Critical Accounting Policies and Estimates
 Investments
 Fair values
  Classification of Investments
  Other Than Temporary Impairment
  35




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##### Table of Contents



Gross Unrealized LossesNumber
    
    
    
    
    
    Cost or
    
    
    
    
    
    Six
    
    Between
    
    Greaterof
    
    Fair
    
    Amortized
    
    
    
    
    
    Months or
    
    Seven Months
    
    than(Dollars in thousands)
    
    Securities
    
    Value
    
    Cost
    
    Total
    
    Less
    
    and One Year
    
    One YearBonds
    
    
    325
    
    
    $
    476,715
    
    
    $
    480,537
    
    
    $
    4,189
    
    
    $

    2,512
    
    
    $
    500
    
    
    $
    1,177Preferred Stock
    
    
    18
    
    
    
    3,606
    
    
    
    3,870
    
    
    
    434
    
    
    
    353
    
    
    
    81
    
    
    
    Common Stock
    
    
    68
    
    
    
    17,816
    
    
    
    19,235
    
    
    
    1,419
    
    
    
    952
    
    
    
    467
    
    
    
    $
    6,042
    
    
    $
    3,817
    
    
    $
    1,048
    
    
    $
    1,177
  Goodwill and Intangible Assets
     Liability For Unpaid Losses And Loss Adjustment Expenses
  36




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##### Table of Contents



Recoverability of Reinsurance Receivables
    37




---



##### Table of Contents



A.M.
    
    Gross
    
    Prepaid
    
    Total
    
    Percent
    
    Ceded
    
    PercentBest
    
    Reinsurance
    
    Reinsurance
    
    Reinsurance
    
    of
    
    Premiums
    
    of(Dollars in millions)
    
    Rating
    
    Receivables
    
    Premium
    
    Assets
    
    Total
    
    Written
    
    TotalAmerican Re-Insurance Co.
    
    A
    
    $
    606.8
    
    
    $
    21.6
    
    
    $
    628.4
    
    
    
    41.1
    %
    
    $
    25.4
    
    
    
    47.5
    %Employers Reinsurance Corp.
    
    A
    
    
    311.0
    
    
    
    10.6
    
    
    
    321.6
    
    
    
    21.0
    
    
    
    11.0
    
    
    
    20.6Hartford Fire Insurance Co.
    
    A+
    
    
    84.0
    
    
    
    0.0
    
    
    
    84.0
    
    
    
    5.5
    
    
    
    0.1
    
    
    
    0.2General Reinsurance Corp.
    
    A++
    
    
    75.5
    
    
    
    5.8
    
    
    
    81.3
    
    
    
    5.3
    
    
    
    5.3
    
    
    
    9.9GE Reinsurance Corporation
    
    A
    
    
    62.6
    
    
    
    0.1
    
    
    
    62.7
    
    
    
    4.1
    
    
    
    0.3
    
    
    
    0.6Generali  Assicurazioni
    
    A+
    
    
    45.2
    
    
    
    0.0
    
    
    
    45.2
    
    
    
    3.0
    
    
    
    0.0
    
    
    
    0.0Converium AG
    
    B++
    
    
    42.6
    
    
    
    0.0
    
    
    
    42.6
    
    
    
    2.8
    
    
    
    (0.2
    )
    
    
    (0.4
    )Converium Re (North America)
    
    B-
    
    
    35.7
    
    
    
    0.0
    
    
    
    35.7
    
    
    
    2.3
    
    
    
    0.0
    
    
    
    0.0Swiss Reinsurance America Corp
    
    A+
    
    
    27.9
    
    
    
    0.0
    
    
    
    27.9
    
    
    
    1.8
    
    
    
    (0.1
    )
    
    
    (0.2
    )Clearwater Insurance (Odyssey
Reinsurance Corp.)
    
    A
    
    
    21.6
    
    
    
    0.0
    
    
    
    21.6
    
    
    
    1.5
    
    
    
    0.0
    
    
    
    0.0Subtotal
    
    
    
    
    1,312.9
    
    
    
    38.1
    
    
    
    1,351.0
    
    
    
    88.4
    
    
    
    41.8
    
    
    
    78.2All other reinsurers
    
    
    
    
    166.7
    
    
    
    10.4
    
    
    
    177.1
    
    
    
    11.6
    
    
    
    11.7
    
    
    
    21.8Total reinsurance
receivables before purchase
accounting adjustments
    
    
    
    
    1,479.6
    
    
    
    48.5
    
    
    
    1,528.1
    
    
    
    100.0
    %
    
    $
    53.5
    
    
    
    100.0
    %Purchase accounting adjustments
    
    
    
    
    (50.8
    )
    
    
    (1.7
    )
    
    
    (52.5
    )Total receivables
    
    
    
    
    1,428.8
    
    
    $
    46.8
    
    
    
    1,475.6Collateral from reinsurers
    
    
    
    
    695.8
    
    
    
    
    
    
    
    695.8Net receivables
    
    
    
    $
    733.0
    
    
    
    
    
    
    $
    779.8
   Deferred Acquisition Costs
  38




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##### Table of Contents



Realizability of Deferred Tax Assets
   Stock Based Compensation
  Revenue Recognition
    New Accounting Pronouncements
    39




---



##### Table of Contents



Our Business Segments
  Quarter Ended June 30.(Dollars in thousands)
    
    2005
    
    2004Insurance Operations premiums written:Gross premiums written
    
    $
    163,902
    
    
    $
    88,138Ceded premiums written
    
    
    27,608
    
    
    
    19,955Net premiums written
    
    $
    136,294
    
    
    $
    68,183Revenues:Insurance Operations
    
    $
    119,802
    
    
    $
    59,396Agency Operations
    
    
    10,940
    
    
    
    Corporate
    
    
    11,508
    
    
    
    4,880Subtotal
    
    
    142,250
    
    
    
    64,276Eliminations
    
    
    (825
    )
    
    
    Net revenues
    
    $
    141,425
    
    
    $
    64,276Expenses (including losses and loss
adjustment expenses):Insurance Operations
    
    $
    108,426
    
    
    $
    53,795Agency Operations
    
    
    10,573
    
    
    
    Corporate
    
    
    4,487
    
    
    
    2,882Subtotal
    
    
    123,486
    
    
    
    56,677Eliminations
    
    
    (571
    )
    
    
    Net expenses
    
    $
    122,915
    
    
    $
    56,677Insurance Operations ratios:Net losses and loss adjustment expense ratio
    
    
    59.4
    %
    
    
    58.1
    %Other underwriting expense ratio
    
    
    31.0
    %
    
    
    32.5
    %Combined ratio
    
    
    90.4
    %
    
    
    90.6
    %
 40




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##### Table of Contents



Six Months Ended June 30.(Dollars in thousands)
    
    2005
    
    2004Insurance Operations premiums written:Gross premiums written
    
    $
    299,362
    
    
    $
    206,076Ceded premiums written
    
    
    53,547
    
    
    
    79,276Net premiums written
    
    $
    245,815
    
    
    $
    126,800Revenues:Insurance Operations
    
    $
    221,914
    
    
    $
    104,818Agency Operations
    
    
    17,723
    
    
    
    Corporate
    
    
    22,760
    
    
    
    9,020Subtotal
    
    
    262,397
    
    
    
    113,838Eliminations
    
    
    (1,356
    )
    
    
    Net revenues
    
    $
    261,041
    
    
    $
    113,838Expenses (including losses and loss
adjustment expenses):Insurance Operations
    
    $
    203,275
    
    
    $
    96,654Agency Operations
    
    
    17,750
    
    
    
    Corporate
    
    
    8,569
    
    
    
    3,711Subtotal
    
    
    229,594
    
    
    
    100,365Eliminations
    
    
    (966
    )
    
    
    Net expenses
    
    $
    228,628
    
    
    $
    100,365Insurance Operations ratios:Net losses and loss adjustment expense ratio
    
    
    60.8
    %
    
    
    60.8
    %Other underwriting expense ratio
    
    
    30.7
    %
    
    
    29.3
    %Combined ratio
    
    
    91.5
    %
    
    
    90.1
    %
 Results of Operations
 Six Months Ended June 30, 2005 Compared with the Six Months Ended June 30, 2004
 Premiums
  
    
    Property and general liability gross premiums written were $264.0 million for the six
months ended June 30, 2005, compared with $163.2 million for the six months ended June 30,
2004, an increase of $100.8 million or 61.7%. This increase primarily resulted from the
merger with Penn-America partially offset by the termination of several heavily reinsured
products.
    
    Professional liability gross premiums written were $35.4 million for the six months
ended June 30, 2005, compared with $42.9 million for the six months ended June 30, 2004, a
decrease of $7.5 million or 17.4%. This decrease primarily resulted from underwriting and
pricing actions in response to market conditions.
  
    
    Property and general liability net premiums written were $215.7 million for the six
months ended June 30,
 41




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##### Table of Contents



2005, compared with $99.2 million for the six months ended June 30, 2004, an increase of
$116.5 million or 117.4%. This increase primarily resulted from the merger with
Penn-America and reduced reinsurance cessions.
    
    Professional liability net premiums written were $30.1 million for the six months ended
June 30, 2005, compared with $27.6 million for the six months ended June 30, 2004, an
increase of $2.5 million or 9.2%. This increase primarily resulted from the restructuring
of reinsurance treaties, which resulted in the purchase of less reinsurance.
  Agency Commission and Fee Revenues
  Net Investment Income
    Net Realized Investment Gains (Losses)
  Net Losses and Loss Adjustment Expenses
  42




---



##### Table of Contents



Acquisition Costs and Other Underwriting Expenses
   Agency Commissions and Operating Expenses
  Corporate and Other Operating Expenses
  Expense and Combined Ratios
   43




---



##### Table of Contents



Interest Expense
  Income Tax Expense (Benefit)
  Equity in Net Earnings of Partnerships
  Extraordinary Gain
  Net Income and Net Operating Income
  Quarter Ended June 30, 2005 Compared with the Quarter Ended June 30, 2004
 Premiums
  44




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##### Table of Contents




    
    Property and general liability gross premiums written were $147.0 million for the
quarter ended June 30, 2005, compared with $70.8 million for the second quarter of 2004, an
increase of $76.2 million or 107.6%. This increase primarily resulted from the merger with
Penn-America partially offset by the termination of several heavily reinsured products.
 
    
    Professional liability gross premiums written were $16.9 million for the quarter ended
June 30, 2005, compared with $17.3 million for the second quarter of 2004, a decrease of
$0.4 million or 2.5%. This decrease primarily resulted from underwriting and pricing
actions in response to market conditions.
  
    
    Property and general liability net premiums written were $121.9 million for the quarter
ended June 30, 2005, compared with $50.9 million for the quarter ended June 30, 2004, an
increase of $71.0 million or 139.5%. This increase primarily resulted from the merger with
Penn-America and reduced reinsurance cessions.
 
    
    Professional liability net premiums written were $14.4 million for the quarter ended
June 30, 2005, compared with $17.3 million for the quarter ended June 30, 2004, a decrease
of $2.9 million or 16.6%. This decrease primarily resulted from the decrease in gross
written premiums noted above.
  Agency Commission and Fee Revenues
  Net Investment Income
    Net Realized Investment Gains (Losses)
  45




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##### Table of Contents



Net Losses and Loss Adjustment Expenses
  Acquisition Costs and Other Underwriting Expenses
   Agency Commission and Operating Expenses
  Corporate and Other Operating Expenses
  Expense and Combined Ratios
   46




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##### Table of Contents



Interest Expense
  Income Tax Expense (Benefit)
  Equity in Net Earnings of Partnerships
  Net Income and Net Operating Income
  Liquidity and Capital Resources
 Sources and Uses of Funds
   47




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Surplus Levels
  Cash Flows
   
    
    the fact that we collect premiums in advance of losses paid;
    
    the timing of our settlements with our reinsurers; and
    
    the timing of our loss payments.
   48




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Liquidity
      49




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Capital Resources
  50




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51




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52




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Commitments
  Payment Due by Period1 Year
    
    2 to 3 Years
    
    4 to 5 Years7/1/05 
    
    7/1/06 
    
    7/1/08 
    
    6 Years(Dollars in thousands)
    
    Total
    
    6/30/06
    
    6/30/08
    
    6/30/010
    
    and LaterCapital leases (1)
    
    $
    2,740
    
    
    $
    548
    
    
    $
    1,096
    
    
    $
    1,096
    
    
    $
    Operating leases (2)
    
    
    20,958
    
    
    
    3,284
    
    
    
    3,190
    
    
    
    2,384
    
    
    
    12,100Commitments to fund limited
partnerships (3)
    
    
    4,697
    
    
    
    4,697
    
    
    
    
    
    
    
    
    
    
    
    Discretionary demand line of
credit (4)
    
    
    109
    
    
    
    16
    
    
    
    62
    
    
    
    31
    
    
    
    Senior notes (5)
    
    
    109,878
    
    
    
    3,642
    
    
    
    7,285
    
    
    
    7,285
    
    
    
    91,666Junior subordinated debentures (6)
    
    
    152,298
    
    
    
    4,450
    
    
    
    8,011
    
    
    
    8,011
    
    
    
    131,826Revolving line of credit
    
    
    3,025
    
    
    
    3,025
    
    
    
    
    
    
    
    
    
    
    
    Term Loans
    
    
    4,480
    
    
    
    703
    
    
    
    1,329
    
    
    
    962
    
    
    
    1,486Unpaid losses and loss adjustment
expenses obligations (7)
    

    
    1,998,390
    
    
    
    479,993
    
    
    
    685,647
    
    
    
    346,649
    
    
    
    486,101Total
    
    $
    2,296,575
    
    
    $
    500,358
    
    
    $
    706,620
    
    
    $
    366,418
    
    
    $
    723,179
 
 (1)
    
    Penn Independent Group leases its home office facility in Hatboro, Pennsylvania from Irvin
Saltzman, father of United America Indemnitys President, Jon S. Saltzman, and a director of
Penn Independent Corporation through January 24, 2005. The lease is accounted for as a
capital lease, and management believes that the lease terms are at market rates. Penn-America
Group also leases a portion of the building in which Penn Independent Groups home office
facility is located. In connection with the acquisition, we are under a post-closing
obligation to either (i) enter into a lease for the Hatboro facility for a term of at least 10
years or (ii) purchase the Hatboro facility and related land on terms to be agreed upon. At
this time, we are still exploring both options.(2)
    
    We lease office space and equipment as part of our normal operations. The amounts shown
above represent future commitments under such operating leases.(3)
    
    We are required to commit additional capital to certain limited partnership investments
during future periods. Because the timing of the payments is not specified by the limited
partnership agreements, all such commitments are treated as current obligations for the
purpose of this table. $0.7 million of the commitment was funded during July 2005 reducing the
unfunded commitment to $3.9 million.(4)
    
    There were no outstanding borrowings against the discretionary demand line of credit as of
June 30, 2005. The amounts shown above represent fees due on the amount available for
borrowing.(5)
    
    On July 20, 2005, U.N. Holdings II, Inc. sold $90.0 million of guaranteed senior notes, due
July 20, 2015. These notes have an interest rate of 6.22%, payable semi-annually. On July
20, 2011 and on each anniversary thereafter to and including July 20, 2014, U.N. Holdings II,
Inc. is required to prepay $18.0 million of the principal amount. On July 20, 2015, U.N.
Holdings II, Inc is required to pay any remaining outstanding principal amount on the notes.
The notes are guaranteed by United America Indemnity, Ltd. Proceeds from the notes were used
to prepay $72.8 million in principal and related interest due as of July 20, 2005 under senior
notes issued by Wind River Investment Corporation (Wind River) to the Ball family trusts in
September 2003. The terms of the prepayment agreement required the Ball family trusts to
reimburse Wind River for $0.3 million of the issuance costs of the new senior notes plus $1.0
million of the incremental interest costs that U.N. Holdings II, Inc. is estimated to incur
under the new senior notes. It is anticipated that the total amount of these reimbursements
of approximately $1.3 million will be recorded as a gain on the early extinguishment of debt.(6)
    
    See discussion in Capital Resources.(7)
    
    See discussion in Liability for Unpaid Losses and Loss Adjustment Expenses. Off Balance Sheet Arrangements
  Inflation
  53




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Cautionary Note Regarding Forward-Looking Statements
    
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
  Interest Rate Risk
  54




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##### Table of Contents



(Dollars in thousands)Change in Market ValueBasis Point Change
    
    Market Value
    
    $
    
    %(200)
    
    $
    1,132,558
    
    
    $
    68,093
    
    
    
    6.4
    %(100)
    
    
    1,098,898
    
    
    
    34,898
    
    
    
    3.3
    %No change *
    
    
    1,056,208
    
    
    
    
    
    
    
    0.0
    %100
    
    
    1,025,608
    
    
    
    (37,622
    )
    
    
    (3.6
    %)200
    
    
    985,483
    
    
    
    (76,593
    )
    
    
    (7.3
    %)
 
 *
    
    The no change value represents fixed income securities
with a market value of $1,053.9 million and $2.3 million of preferred stock
securities whose prices change inversely with interest rate movements. Credit Risk
    Equity Price Risk
    55




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##### Table of Contents



(Dollars in thousands)
 HypotheticalEstimated Fair Value
    
    Percentage IncreaseHypothetical Price
    
    after Hypothetical
    
    (Decrease) inChange
    
    Change in Prices
    
    Shareholders Equity(20%)
    
    $
    49,920
    
    
    
    (2.0
    %)(10%)
    
    
    56,160
    
    
    
    (1.0
    %)No change
    
    
    62,400
    
    
    
    10%
    
    
    68,640
    
    
    
    1.0
    %20%
    
    
    74,880
    
    
    
    2.0
    %
 
 The table does not include $2.3 million of preferred stock securities whose price
changes inversely with interest rate movements. These securities are included in
the Interest Rate Risk table. 
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  56




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##### Table of Contents



PART II-OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 4. Submission of Matters to a Vote of Security Holders
   Nominee
    
    Votes For
    
    Votes Against
    
    Votes AbstainedSaul A. Fox
    
    
    140,470,469
    
    
    
    2,865,007
    
    
    
    798,311Edward J. Noonan
    
    
    141,357,404
    
    
    
    1,749,122
    
    
    
    1,027,261Troy W. Thacker
    
    
    140,380,959
    
    
    
    2,898,821
    
    
    
    854,007W. Dexter Paine, III
    
    
    140,905,260
    
    
    
    2,201,266
    
    
    
    1,027,261Russell C. Ball, III
    
    
    141,136,114
    
    
    
    2,199,362
    
    
    
    798,311Michael J. McDonough
    
    
    141,079,479
    
    
    
    2,200,301
    
    
    
    854,007John J. Hendrickson
    
    
    141,136,177
    
    
    
    2,199,299
    
    
    
    798,311Kenneth J. Singleton
    
    
    143,849,861
    
    
    
    201,145
    
    
    
    82,781Stephen A. Cozen
    
    
    143,849,584
    
    
    
    201,422
    
    
    
    82,781Richard L. Duszak
    
    
    143,850,161
    
    
    
    200,845
    
    
    
    82,781Robert A. Lear
    
    
    140,907,155
    
    
    
    2,199,694
    
    
    
    1,026,938Dr. M. Moshe Porat
    
    
    143,883,646
    
    
    
    167,683
    
    
    
    82,458
  Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes137,268,687
    
    3,420,779
    
    4,800
    
    4,530,431
  Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes144,006,992
    
    121,411
    
    5,384
    
    1,090,910
  Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes143,768,647
    
    360,166
    
    4,974
    
    1,090,910
  57




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##### Table of Contents



Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes144,067,898
    
    65,066
    
    823
    
    1,090,910
  Nominee
    
    Votes For
    
    Votes WithheldTroy W. Thacker
    
    
    138,740,123
    
    
    
    58,181David N. King
    
    
    138,796,019
    
    
    
    2,285Nicholas Crichlow
    
    
    138,796,019
    
    
    
    2,285Kevin L. Tate
    
    
    138,739,700
    
    
    
    58,604
  Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes138,508,765
    
    287,981
    
    1,558
    
    6,426,393
  Nominee
    
    Votes For
    
    Votes WithheldAlan Bossin
    
    
    138,795,245
    
    
    
    3,059Michael J. Tait
    
    
    138,795,245
    
    
    
    3,059Troy W. Thacker
    
    
    138,739,349
    
    
    
    58,955Seth D. Freudberg
    
    
    138,738,453
    
    
    
    59,851Michael J. McDonough
    
    
    138,739,349
    
    
    
    58,955Kevin L. Tate
    
    
    138,739,449
    
    
    
    58,855Janita Burke Waldron (Alternate Director)
    
    
    138,795,245
    
    
    
    3,059Kaela Keen (Alternate Director)
    
    
    138,795,245
    
    
    
    3,059
  Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes138,507,927
    
    287,996
    
    2,381
    
    6,426,393
   Votes For
    
    Votes Against
    
    Votes Abstained110,015,996
    
    0
    
    0
  Votes For
    
    Votes Against
    
    Votes Abstained110,015,996
    
    0
    
    0
 58




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##### Table of Contents



Votes For
    
    Votes Against
    
    Votes Abstained110,015,996
    
    0
    
    0
 
 Item 6. Exhibits
 10.1
    
    Amended and Restated Executive Employment Agreement, dated as of January 1, 2005,
between United National Insurance Company and Richard S. March (incorporated herein by
reference to Exhibit 10.1 of our Current Report on Form 8-K dated April 12, 2005).10.2
    
    Amended and Restated Executive Employment Agreement, dated as of January 1, 2005,
between United National Insurance Company and Kevin L. Tate (incorporated herein by
reference to Exhibit 10.2 of our Current Report on Form 8-K dated April 12, 2005).31.1+
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2+
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1+
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2+
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 +
    
    Filed herewith. 59




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##### Table of Contents



SIGNATURES
  UNITED AMERICA INDEMNITY, LTD.
RegistrantAugust 9, 2005
    
    By:
    
    /s/ Edward J. NoonanDate: August 9, 2005
    
    Edward J. NoonanActing Chief Executive OfficerAugust 9, 2005
    
    By:
    
    /s/ Kevin L. TateDate: August 9, 2005
    
    Kevin L. TateChief Financial Officer
 60