##### 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 March 31, 2007
 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
  o þ o
 o þ




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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated Balance Sheets
As of March 31, 2007 (Unaudited) and December 31, 2006
    
    
    1Consolidated Statements of Operations
Quarters Ended March 31, 2007 and 2006 (Unaudited)
    
    
    2Consolidated Statements of Comprehensive Income
Quarters Ended March 31, 2007 and 2006 (Unaudited)
    
    
    3Consolidated Statements of Changes in Shareholders Equity
As of March 31, 2007 (Unaudited) and December 31, 2006
    
    
    4Consolidated Statements of Cash Flows
Quarters Ended March 31, 2007 and 2006 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31Signatures
    
    
    32EMPLOYMENT AGREEMENT DATED MAY 9, 2007 BETWEEN UNITED AMERICA INDEMNITY, LTD AND LARRY A. FRAKESCERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF CHIEF FINANCIAL OFFICERCERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350
   1)
    
    United America Indemnity, we, us, and our refer to United America Indemnity, Ltd., an
exempted company incorporated with limited liability under the laws of the Cayman Islands, and
its U.S. and Non-U.S. Subsidiaries;2)
    
    our U.S. Subsidiaries refers to United America Indemnity Group, Inc., U.N. Holdings Inc.,
which was dissolved on May 31, 2006, Wind River Investment Corporation, which was dissolved on
May 31, 2006, AIS, Emerald Insurance Company, Penn-America Group, Inc., our U.S. Insurance
Operations and our Agency Operations;3)
    
    United America Insurance Group refers to our U.S. Insurance Operations;4)
    
    our U.S. Insurance Operations refers to the insurance and related operations conducted by
AIS subsidiaries, including American Insurance Adjustment Agency, Inc., International
Underwriters, LLC, J.H. Ferguson & Associates, LLC, the United National Insurance Companies
and the Penn-America Insurance Companies;5)
    
    our Predecessor Insurance Operations refers to Wind River Investment Corporation, which was
dissolved on May 31, 2006, AIS, American Insurance Adjustment Agency, Inc., Emerald Insurance
Company, the United National Insurance Companies, International Underwriters, LLC, and J.H.
Ferguson & Associates, LLC;6)
    
    the United National Insurance Companies refers to the insurance and related operations
conducted by United National Insurance Company and its subsidiaries, including Diamond State
Insurance Company, United National Casualty Insurance Company, and United National Specialty
Insurance Company;7)
    
    the Penn-America Insurance Companies refers to the insurance and related operations of
Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance
Company;8)
    
    our Insurance Operations refers to the U.S. Insurance Operations;9)
    
    our Non-U.S. Insurance Operations refers to the insurance related operations of Wind River
Barbados and Wind River Bermuda prior to the amalgamation, which occurred on September 30, 2006;




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10)
    
    Wind River Barbados refers to Wind River Insurance Company (Barbados), Ltd.;11)
    
    Wind River Bermuda refers to Wind River Insurance Company, Ltd.;12)
    
    Wind River Reinsurance refers to Wind River Reinsurance Company, Ltd. In September 2006,
Wind River Barbados was redomesticated to Bermuda and renamed Wind River Reinsurance Company,
Ltd., at which time it was amalgamated with Wind River Bermuda;13)
    
    our Agency Operations refers to the operations of Penn Independent Corporation and its
subsidiaries, which were classified as discontinued operations as of September 30, 2006;14)
    
    our Non-U.S. Subsidiaries refers to Wind River Reinsurance, U.A.I. (Gibraltar) Limited,
which was liquidated on May 30, 2006, U.A.I. (Gibraltar) II Limited, which was liquidated on
May 30, 2006, the Luxembourg Companies, U.A.I. (Ireland) Limited, and Wind River Services,
Ltd.;15)
    
    our Reinsurance Operations refers to the reinsurance and related operations of Wind River
Reinsurance;16)
    
    the Luxembourg Companies refers to U.A.I. (Luxembourg) I S.à r.l., U.A.I. (Luxembourg) II
S.à r.l., U.A.I. (Luxembourg) III S.à r.l., U.A.I. (Luxembourg) IV S.à r.l., U.A.I.
(Luxembourg) Investment S.à r.l., and Wind River (Luxembourg) S.à r.l.;17)
    
    AIS refers to American Insurance Service, Inc.;18)
    
    United National Group refers to the United National Insurance Companies and Emerald
Insurance Company;19)
    
    Penn-America Group refers to Penn-America Group, Inc. and the Penn-America Insurance
Companies;20)
    
    the Statutory Trusts refers to United National Group Capital Trust I, United National Group
Capital Statutory Trust II, Penn-America Statutory Trust I and Penn-America Statutory Trust
II;21)
    
    Fox Paine & Company refers to Fox Paine & Company, LLC and affiliated investment funds;22)
    
    GAAP refers to accounting principles generally accepted in the United States of America;
and23)
    
    $ or dollars refers to U.S. dollars.




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Balance Sheets
 (Unaudited)March 31, 2007
    
    
    December 31, 2006Bonds:Available for sale securities, at
fair value (amortized cost: 
$1,264,837 and $1,253,016)
    
    $
    1,261,604
    
    
    $
    1,246,684Preferred shares:Available for sale securities, at
fair value (cost: $3,418 and $3,991)
    
    
    3,418
    
    
    
    4,369Common shares:Available for sale securities, at
fair value (cost: $58,373 and
$57,351)
    
    
    71,235
    
    
    
    71,003Other invested assetsAvailable for sale securities, at
fair value (cost: $24,712 and
$24,712)
    
    
    62,273
    
    
    
    60,863Total investments
    
    
    1,398,530
    
    
    
    1,382,919Cash and cash equivalents
    
    
    318,277
    
    
    
    273,745Accounts receivable
    
    
    6,468
    
    
    
    8,579Agents balances
    
    
    84,448
    
    
    
    86,409Reinsurance receivables
    
    
    948,725
    
    
    
    982,502Accrued investment income
    
    
    12,984
    
    
    
    13,150Deferred federal income taxes
    
    
    10,665
    
    
    
    12,661Deferred acquisition costs
    
    
    60,441
    
    
    
    60,086Goodwill
    
    
    84,246
    
    
    
    84,246Intangible assets
    
    
    23,276
    
    
    
    23,528Prepaid reinsurance premiums
    
    
    36,237
    
    
    
    38,335Other assets
    
    
    17,494
    
    
    
    18,456Total assets
    
    $
    3,001,791
    
    
    $
    2,984,616Liabilities:Unpaid losses and loss adjustment expenses
    
    $
    1,699,707
    
    
    $
    1,702,010Unearned premiums
    
    
    276,787
    
    
    
    283,265Federal income taxes payable
    
    
    3,299
    
    
    
    379Amounts held for the account of others
    
    
    15,624
    
    
    
    15,491Ceded balances payable
    
    
    17,421
    
    
    
    16,235Insurance premium payable
    
    
    1,433
    
    
    
    1,797Contingent commissions
    
    
    3,645
    
    
    
    8,629Payable for securities
    
    
    9,978
    
    
    
    Senior notes payable
    
    
    90,000
    
    
    
    90,000Junior subordinated debentures
    
    
    61,857
    
    
    
    61,857Notes and loans payable
    
    
    1,734
    
    
    
    4,382Other liabilities
    
    
    30,750
    
    
    
    37,301Total liabilities
    
    
    2,212,235
    
    
    
    2,221,346Commitments and contingencies (Note 8)
    
    
    
    
    
    
    Shareholders equity:Common shares, $0.0001 par value,
900,000,000 common shares authorized,
24,675,361 and 24,507,919 Class A common
shares issued and outstanding,
respectively, and 12,687,500 Class B
common shares issued and outstanding
    
    
    4
    
    
    
    4Preferred shares, $0.0001 par value,
100,000,000 shares authorized, none
issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    516,386
    
    
    
    515,357Accumulated other comprehensive income
    
    
    24,948
    
    
    
    22,580Retained earnings
    
    
    248,218
    
    
    
    225,329Total shareholders equity
    
    
    789,556
    
    
    
    763,270Total
    
    $
    3,001,791
    
    
    $
    2,984,616
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Operations
 (Unaudited)Quarter Ended March 31,2007
    
    
    2006Revenues:Gross premiums written
    
    $
    152,536
    
    
    $
    159,558Net premiums written
    
    $
    134,055
    
    
    $
    135,337Net premiums earned
    
    $
    138,437
    
    
    $
    135,430Net investment income
    
    
    18,868
    
    
    
    13,679Net realized investment gains
    
    
    225
    
    
    
    43Total revenues
    
    
    157,530
    
    
    
    149,152Losses and Expenses:Net losses and loss adjustment expenses
    
    
    81,841
    
    
    
    78,964Acquisition costs and other underwriting expenses
    
    
    42,882
    
    
    
    44,988Corporate and other operating expenses
    
    
    3,564
    
    
    
    4,258Interest expense
    
    
    2,905
    
    
    
    2,720Income before income taxes
    
    
    26,338
    
    
    
    18,222Income tax expense
    
    
    4,074
    
    
    
    1,093Income before minority interest and equity
in net income of partnership
    
    
    22,264
    
    
    
    17,129Minority interest
    
    
    
    
    
    
    (4
    )Equity in net income of partnership
    
    
    170
    
    
    
    532Income before discontinued operations
    
    
    22,434
    
    
    
    17,657Discontinued operations, net of taxes
    
    
    159
    
    
    
    121Net income
    
    $
    22,593
    
    
    $
    17,778Per share data:Income from continuing operations:Basic
    
    $
    0.61
    
    
    $
    0.49Diluted
    
    $
    0.60
    
    
    $
    0.48Discontinued operations:Basic
    
    $
    0.00
    
    
    $
    0.00Diluted
    
    $
    0.00
    
    
    $
    0.00Net income:Basic
    
    $
    0.61
    
    
    $
    0.49Diluted
    
    $
    0.60
    
    
    $
    0.48Weighted-average number of shares outstanding:Basic
    
    
    37,112,783
    
    
    
    36,565,476Diluted
    
    
    37,521,712
    
    
    
    36,949,146
  2




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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Comprehensive Income
 (Unaudited)Quarter Ended March 31,2007
    
    
    2006Net income
    
    $
    22,593
    
    
    $
    17,778Other comprehensive income (loss), net of tax:Unrealized gains (losses) on securities:Unrealized holding gains (losses) arising during period
    
    
    2,810
    
    
    
    (6,127
    )Less: Reclassification adjustment for (losses) gains
included in net income
    
    
    146
    
    
    
    59Other comprehensive income (loss), net of tax
    
    
    2,664
    
    
    
    (6,186
    )Comprehensive income, net of tax
    
    $
    25,257
    
    
    $
    11,592
  3




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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Changes in Shareholders Equity
 (Unaudited)Quarter Ended
    
    
    Year EndedMarch 31, 2007
    
    
    December 31, 2006Number of Class A common shares:Number at beginning of period
    
    
    24,507,919
    
    
    
    23,868,402Class A common shares issued under share
incentive plans
    
    
    163,679
    
    
    
    618,797Class A common shares issued to directors
    
    
    3,763
    
    
    
    20,720Number at end of period
    
    
    24,675,361
    
    
    
    24,507,919Number of Class B common shares:Number at beginning of period
    
    
    12,687,500
    
    
    
    12,687,500Number at end of period
    
    
    12,687,500
    
    
    
    12,687,500Par value of Class A common shares:Balance at beginning of period
    
    $
    3
    
    
    $
    3Class A common shares issued
    
    
    
    
    
    
    Balance at end of period
    
    $
    3
    
    
    $
    3Par value of Class B common shares:Balance at beginning of period
    
    $
    1
    
    
    $
    1Balance at end of period
    
    $
    1
    
    
    $
    1Additional paid-in capital:Balance at beginning of period
    
    $
    515,357
    
    
    $
    504,541Contributed capital from Class A common shares
    
    
    
    
    
    
    1,000Share compensation plans
    
    
    1,029
    
    
    
    9,816Balance at end of period
    
    $
    516,386
    
    
    $
    515,357Accumulated other comprehensive income, net of
deferred income tax:Balance at beginning of period
    
    $
    22,580
    
    
    $
    9,471Other comprehensive income
    
    
    2,664
    
    
    
    13,109Adoption of SFAS 155
    
    
    (296
    )
    
    
    Balance at end of period
    
    $
    24,948
    
    
    $
    22,580Retained earnings:Balance at beginning of period
    
    $
    225,329
    
    
    $
    125,911Net income
    
    
    22,593
    
    
    
    99,418Adoption of SFAS 155
    
    
    296
    
    
    
    Balance at end of period
    
    $
    248,218
    
    
    $
    225,329Total shareholders equity
    
    $
    789,556
    
    
    $
    763,270
  4




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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Cash Flows
 (Unaudited)Quarter Ended March 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    22,593
    
    
    $
    17,778Adjustments to reconcile net income to net cash provided by
operating activities:Amortization of trust preferred securities issuance costs
    
    
    65
    
    
    
    65Amortization and depreciation
    
    
    254
    
    
    
    509Restricted stock expense
    
    
    861
    
    
    
    2,769Gain on extinguishment of note payable
    
    
    (277
    )
    
    
    Deferred federal income taxes
    
    
    1,093
    
    
    
    505Amortization of bond premium and discount, net
    
    
    94
    
    
    
    1,495Net realized investment gains
    
    
    (225
    )
    
    
    (43
    )Minority interest
    
    
    
    
    
    
    4Equity in net income of partnerships
    
    
    (170
    )
    
    
    (532
    )Changes in:Agents balances
    
    
    1,961
    
    
    
    (72
    )Account receivables
    
    
    1,285
    
    
    
    3,896Reinsurance receivables
    
    
    33,777
    
    
    
    65,707Unpaid losses and loss adjustment expenses
    
    
    (2,303
    )
    
    
    (51,932
    )Unearned premiums
    
    
    (6,478
    )
    
    
    (1,431
    )Ceded balances payable
    
    
    1,186
    
    
    
    (3,000
    )Insurance premiums payable
    
    
    (364
    )
    
    
    (473
    )Other assets and liabilities, net
    
    
    (7,095
    )
    
    
    9,722Amounts held for the account of others
    
    
    133
    
    
    
    (3,305
    )Contingent commissions
    
    
    (4,984
    )
    
    
    (4,770
    )Prepaid reinsurance premiums
    
    
    2,098
    
    
    
    1,338Federal income taxes receivable
    
    
    2,920
    
    
    
    643Deferred acquisition costs
    
    
    (355
    )
    
    
    496Other  net
    
    
    102
    
    
    
    627Net cash provided by operating activities
    
    
    46,171
    
    
    
    39,996Cash flows from investing activities:Proceeds from sale of bonds
    
    
    27,464
    
    
    
    35,414Proceeds from sale of stocks
    
    
    8,957
    
    
    
    12,339Proceeds from maturity of bonds
    
    
    29,500
    
    
    
    5,020Proceeds from sale of other invested assets
    
    
    
    
    
    
    861Purchase of bonds
    
    
    (59,117
    )
    
    
    (157,339
    )Purchase of stocks
    
    
    (8,507
    )
    
    
    (10,673
    )Purchase of other invested assets
    
    
    
    
    
    
    (6
    )Net cash used for investing activities
    
    
    (1,703
    )
    
    
    (114,384
    )Cash flows from financing activities:Borrowing under credit facility
    
    
    6
    
    
    
    907Repayments of credit facility
    
    
    (1,229
    )
    
    
    (1,222
    )Proceeds from exercises of stock options
    
    
    1,405
    
    
    
    Tax benefits associated with SFAS 123R
    
    
    148
    
    
    
    199Principal payments of term debt
    
    
    (266
    )
    
    
    (137
    )Net cash provided by (used for) financing activities
    
    
    64
    
    
    
    (253
    )Net change in cash and cash equivalents
    
    
    44,532
    
    
    
    (74,641
    )Cash and cash equivalents at beginning of period
    
    
    273,745
    
    
    
    220,122Cash and cash equivalents at end of period
    
    $
    318,277
    
    
    $
    145,481
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UNITED AMERICA INDEMNITY, LTD.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Principles of Consolidation and Basis of Presentation
       2. Investments
   6




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
    Gross Unrealized LossesCost or
    
    
    
    
    
    
    Six
    
    
    Between
    
    
    Greater(Dollars in
    
    Number of
    
    
    Estimated
    
    
    Amortized
    
    
    
    
    
    
    Months or
    
    
    Seven Months
    
    
    than Onethousands)
    
    Securities
    
    
    Fair Value
    
    
    Cost
    
    
    Total
    
    
    Less
    
    
    and One Year
    
    
    Year (1)Bonds
    
    
    379
    
    
    $
    685,725
    
    
    $
    696,541
    
    
    $
    10,816
    
    
    $
    475
    
    
    $
    962
    
    
    $
    9,379Common Stock
    
    
    18
    
    
    
    7,743
    
    
    
    8,052
    
    
    
    309
    
    
    
    281
    
    
    
    28
    
    
    
    $
    11,125
    
    
    $
    756
    
    
    $
    990
    
    
    $
    9,379
 
 (1)
    
    At March 31, 2007, the Company had 292 bonds that were in an unrealized loss position for
greater than one year. The estimated fair value and amortized cost of these securities was
$462.6 million and $472.0 million, respectively. The Company has analyzed these securities
and has determined that they are not impaired. The Company has the ability to hold these
investments until maturity or until recovery. All of these securities are investment grade.  Gross Unrealized LossesCost or
    
    
    
    
    
    
    Six
    
    
    Between
    
    
    Greater(Dollars in
    
    Number of
    
    
    Estimated
    
    
    Amortized
    
    
    
    
    
    
    Months or
    
    
    Seven Months
    
    
    than Onethousands)
    
    Securities
    
    
    Fair Value
    
    
    Cost
    
    
    Total
    
    
    Less
    
    
    and One Year
    
    
    Year (1)Bonds
    
    
    414
    
    
    $
    725,155
    
    
    $
    738,781
    
    
    $
    13,626
    
    
    $
    981
    
    
    $
    1,548
    
    
    $
    11,097Common Stock
    
    
    7
    
    
    
    2,362
    
    
    
    2,410
    
    
    
    48
    
    
    
    29
    
    
    
    19
    
    
    
    $
    13,674
    
    
    $
    1,010
    
    
    $
    1,567
    
    
    $
    11,097
 
 (1)
    
    At December 31, 2006, the Company had 299 bonds that were in an unrealized loss position for
greater than one year. The estimated fair value and amortized cost of these securities was
$436.7 million and $447.8 million, respectively. The Company has analyzed these securities
and has determined that they are not impaired. The Company has the ability to hold these
investments until maturity or until recovery. 99.8% of the value of these securities are
investment grade.    7




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
     Quarter Ended March 31,(Dollars in thousands)
    
    2007
    
    
    2006Bonds
    
    $
    21
    
    
    $
    Preferred stock
    
    
    
    
    
    
    167Total
    
    $
    21
    
    
    $
    167
 3. Reinsurance
    8




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
   Quarter Ended March 31,(Dollars in thousands)
    
    2007
    
    2006Earned premium
    
    $
    20,577
    
    
    $
    25,558Commissions
    
    
    4,529
    
    
    
    5,666Incurred losses
    
    
    11,355
    
    
    
    14,708
   4. Income Taxes
  Quarter Ended March 31, 2007:
    
    Non-U.S.
    
    
    U.S.(Dollars in thousands)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalRevenues:Gross premiums written
    
    $
    77,919
    
    
    $
    145,602
    
    
    $
    (70,985
    )
    
    $
    152,536Net premiums written
    
    $
    74,482
    
    
    $
    59,573
    
    
    $
    
    
    
    $
    134,055Net premiums earned
    
    $
    69,580
    
    
    $
    68,857
    
    
    $
    
    
    
    $
    138,437Net investment income
    
    
    10,403
    
    
    
    13,011
    
    
    
    (4,546
    )
    
    
    18,868Net realized investment gains
    
    
    
    
    
    
    246
    
    
    
    (21
    )
    
    
    225Total revenues
    
    
    79,983
    
    
    
    82,114
    
    
    
    (4,567
    )
    
    
    157,530Losses and Expenses:Net losses and loss adjustment expenses
    
    
    42,726
    
    
    
    39,115
    
    
    
    
    
    
    
    81,841Acquisition costs and other
underwriting expenses
    
    
    24,799
    
    
    
    18,414
    
    
    
    (331
    )
    
    
    42,882Corporate and other operating expenses
    
    
    1,547
    
    
    
    1,841
    
    
    
    176
    
    
    
    3,564Interest expense
    
    
    
    
    
    
    7,451
    
    
    
    (4,546
    )
    
    
    2,905Income before income taxes
    
    $
    10,911
    
    
    $
    15,293
    
    
    $
    134
    
    
    $
    26,338
 9




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Quarter Ended March 31, 2006:
    
    Non-U.S.
    
    
    U.S.(Dollars in thousands)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalRevenues:Gross premiums written
    
    $
    64,199
    
    
    $
    159,503
    
    
    $
    (64,144
    )
    
    $
    159,558Net premiums written
    
    $
    64,193
    
    
    $
    71,144
    
    
    $
    
    
    
    $
    135,337Net premiums earned
    
    $
    63,881
    
    
    $
    71,549
    
    
    $
    
    
    
    $
    135,430Net investment income
    
    
    8,898
    
    
    
    9,327
    
    
    
    (4,546
    )
    
    
    13,679Net realized investment gains (losses)
    
    
    88
    
    
    
    (82
    )
    
    
    37
    
    
    
    43Total revenues
    
    
    72,867
    
    
    
    80,794
    
    
    
    (4,509
    )
    
    
    149,152Losses and Expenses:Net losses and loss adjustment expenses
    
    
    36,841
    
    
    
    42,123
    
    
    
    
    
    
    
    78,964Acquisition costs and other
underwriting expenses
    
    
    23,031
    
    
    
    21,641
    
    
    
    316
    
    
    
    44,988Corporate and other operating expenses
    
    
    2,000
    
    
    
    2,065
    
    
    
    193
    
    
    
    4,258Interest expense
    
    
    
    
    
    
    7,266
    
    
    
    (4,546
    )
    
    
    2,720Income before income taxes
    
    $
    10,995
    
    
    $
    7,699
    
    
    $
    (472
    )
    
    $
    18,222
  Quarter Ended
    
    
    Quarter EndedMarch 31, 2007
    
    
    March 31, 2006% of Pre-
    
    
    
    
    
    
    % of Pre-Amount
    
    
    Tax Income
    
    
    Amount
    
    
    Tax IncomeExpected tax
provision at
weighted average
rate
    
    $
    5,420
    
    
    
    20.6
    %
    
    $
    2,549
    
    
    
    14.0
    %Adjustments:Tax exempt interest
    
    
    (600
    )
    
    
    (2.3
    )
    
    
    (1,252
    )
    
    
    (6.9
    )Dividend exclusion
    
    
    (116
    )
    
    
    (0.4
    )
    
    
    (125
    )
    
    
    (0.7
    )Other
    
    
    (630
    )
    
    
    (2.4
    )
    
    
    (79
    )
    
    
    (0.4
    )Income tax expense
    
    $
    4,074
    
    
    
    15.5
    %
    
    $
    1,093
    
    
    
    6.0
    %
      10




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
    5. Liability for Unpaid Losses and Loss Adjustment Expenses
   6. Notes and Loans Payable
 Notes Payable
  Loans Payable
  7. Related Party Transactions
   11




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
     8. Commitments and Contingencies
 Legal Proceedings
   9. Shareholders Equity
  12




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 10. Share-Based Compensation Plans
  11. Earnings Per Share
   Quarter Ended March 31,(Dollars in thousands, except per share data)
    
    2007
    
    
    2006Income from continuing operations
    
    $
    22,434
    
    
    $
    17,657Discontinued operations
    
    
    159
    
    
    
    121Net income
    
    $
    22,593
    
    
    $
    17,778Basic earnings per share:Weighted average shares for basic earnings per share
    
    
    37,112,783
    
    
    
    36,565,476Income from continuing operations
    
    $
    0.61
    
    
    $
    0.49Discontinued operations
    
    
    0.00
    
    
    
    0.00Net income
    
    $
    0.61
    
    
    $
    0.49Diluted earnings per share:Weighted average shares for diluted earnings per
share
    
    
    37,521,712
    
    
    
    36,949,146Income from continuing operations
    
    $
    0.60
    
    
    $
    0.48Discontinued operations
    
    
    0.00
    
    
    
    0.00Net income
    
    $
    0.60
    
    
    $
    0.48
  Quarter Ended March 31,2007
    
    2006Weighted average shares for basic earnings per share
    
    
    37,112,783
    
    
    
    36,565,476Non-vested restricted stock
    
    
    29,371
    
    
    
    13,313Options and warrants
    
    
    379,558
    
    
    
    370,357Weighted average shares for diluted earnings per
share
    
    
    37,521,712
    
    
    
    36,949,146
 12. Segment Information
   13




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
    Quarter Ended March 31, 2007:
    
    Insurance(Dollars in thousands)
    
    Operations
    
    
    Reinsurance(1)
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalRevenues:Gross premiums written
    
    $
    145,602
    
    
    $
    6,934
    
    
    $
    
    
    
    $
    
    
    
    $
    152,536Net premiums written
    
    $
    130,558
    
    
    $
    3,497
    
    
    $
    
    
    
    $
    
    
    
    $
    134,055Net premiums earned
    
    $
    137,714
    
    
    $
    723
    
    
    $
    
    
    
    $
    
    
    
    $
    138,437Net investment income
    
    
    
    
    
    
    
    
    
    
    18,868
    
    
    
    
    
    
    
    18,868Net realized investment gains
    
    
    
    
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    225Total revenues
    
    
    137,714
    
    
    
    723
    
    
    
    19,093
    
    
    
    
    
    
    
    157,530Losses and Expenses:Net losses and loss adjustment expenses
    
    
    81,377
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    81,841Acquisition costs and other
underwriting expenses
    
    
    42,082
    
    
    
    1,131
    (2)
    
    
    
    
    
    
    (331
    )
    
    
    42,882Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    3,388
    
    
    
    176
    
    
    
    3,564Interest expense
    
    
    
    
    
    
    
    
    
    
    2,905
    
    
    
    
    
    
    
    2,905Income before income taxes
    
    $
    14,255
    
    
    $
    (872
    )
    
    $
    12,800
    
    
    $
    155
    
    
    
    26,338Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,074Income before equity in net income
of partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,264Equity in net income of partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170Income before discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,434Discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22,593Total Assets
    
    $
    
    
    
    $
    
    
    
    $
    3,001,791
    
    
    $
    
    
    
    $
    3,001,791
 
 (1)
    
     Direct business only, excluding business assumed from affiliates.(2)
    
     Includes excise tax of $743. 14




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UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Quarter Ended March 31, 2006:
    
    Insurance(Dollars in thousands)
    
    Operations
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalRevenues:Gross premiums written
    
    $
    159,558
    
    
    $
    
    
    
    $
    
    
    
    $
    159,558Net premiums written
    
    $
    135,337
    
    
    $
    
    
    
    $
    
    
    
    $
    135,337Net premiums earned
    
    $
    135,430
    
    
    $
    
    
    
    $
    
    
    
    $
    135,430Net investment income
    
    
    
    
    
    
    13,679
    
    
    
    
    
    
    
    13,679Net realized investment gains
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    43Total revenues
    
    
    135,430
    
    
    
    13,722
    
    
    
    
    
    
    
    149,152Losses and Expenses:Net losses and loss adjustment expenses
    
    
    78,964
    
    
    
    
    
    
    
    
    
    
    
    78,964Acquisition costs and other underwriting
expenses
    
    
    44,672
    
    
    
    
    
    
    
    316
    
    
    
    44,988Corporate and other operating expenses
    
    
    
    
    
    
    4,258
    
    
    
    
    
    
    
    4,258Interest expense
    
    
    
    
    
    
    2,720
    
    
    
    
    
    
    
    2,720Income before income taxes
    
    $
    11,794
    
    
    $
    6,744
    
    
    $
    (316
    )
    
    
    18,222Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,093Income before minority interest and
equity in net income of partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,129Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Equity in net income of partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532Income before discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,657Discontinued operations, net of eliminations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,778Total Assets
    
    $
    
    
    
    $
    3,068,162
    
    
    $
    
    
    
    $
    3,068,162
 13. Supplemental Cash Flow Information
 Interest Paid
 Quarter Ended March 31,(Dollars in thousands)
    
    2007
    
    2006Interest paid
    
    $
    4,236
    
    
    $
    3,986
 14. Subsequent Events
  15




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UNITED AMERICA INDEMNITY, LTD.
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Recent Developments
       Overview
    16




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UNITED AMERICA INDEMNITY, LTD.
   Critical Accounting Estimates and Policies
  Liability For Unpaid Losses And Loss Adjustment Expenses
     17




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
  
    
    For property losses, we generally employ an expected loss ratio approach for more recent
months in the current accident year and employ a blend of expected loss ratios and incurred
development methods for older months in the current accident year. For older accident
years, we generally employ incurred loss development tests.
    
    For primary casualty losses, we generally employ an expected loss ratio approach for the
current accident year. For more recent prior accident years, we generally employ a blend
of expected loss ratios and incurred development methods. For older accident years, we
generally employ a variety of paid and incurred loss development tests.
    
    For excess and umbrella losses, we generally employ an expected loss ratio approach for
both the current accident year as well as more recent prior accident years. For older
accident years, we generally employ a variety of paid and incurred loss development tests.
   Gross Reserves(Dollars in thousands)
    
    Case
    
    
    IBNR
    
    
    TotalSmall Business
    
    $
    157,157
    
    
    $
    399,492
    
    
    $
    556,649Program
    
    
    313,742
    
    
    
    802,423
    
    
    
    1,116,165Specialty Wholesale
    
    
    13,985
    
    
    
    12,289
    
    
    
    26,274Insurance Operations
    
    
    484,884
    
    
    
    1,214,204
    
    
    
    1,699,088Reinsurance Operations
    
    
    
    
    
    
    619
    
    
    
    619Total
    
    $
    484,884
    
    
    $
    1,214,823
    
    
    $
    1,699,707
 Net Reserves (1)(Dollars in thousands)
    
    Case
    
    
    IBNR
    
    
    TotalSmall Business
    
    $
    141,263
    
    
    $
    336,820
    
    
    $
    478,083Program
    
    
    76,966
    
    
    
    198,542
    
    
    
    275,508Specialty Wholesale
    
    
    7,167
    
    
    
    9,714
    
    
    
    16,881Insurance Operations
    
    
    225,396
    
    
    
    545,076
    
    
    
    770,472Reinsurance Operations
    
    
    
    
    
    
    463
    
    
    
    463Total
    
    $
    225,396
    
    
    $
    545,539
    
    
    $
    770,935
 
 (1)
    
     Does not include reinsurance receivable on paid losses or reserve for
uncollectible reinsurance.  18




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
  PercentageIncreaseBalance of Net Loss
    
    Change In Net
    
    (Decrease) in(Dollars in thousands)
    
    and Net Loss
    
    Loss and Net
    
    ShareholdersHypothetical Change in Net Loss and
    
    Adjustment Expense
    
    Loss Adjustment
    
    (2)Loss Adjustment Expense Reserves
    
    Reserves (1)
    
    Expense Reserves
    
    Equity7.5% increase
    
    $
    828,755
    
    
    $
    57,820
    
    
    
    (6.2
    )%5.0% increase
    
    
    809,482
    
    
    
    38,547
    
    
    
    (4.1
    )%2.5% increase
    
    
    790,208
    
    
    
    19,273
    
    
    
    (2.1
    )%As recorded on March 31, 2007
    
    
    770,935
    
    
    
    
    
    
    
    2.5% decrease
    
    
    751,661
    
    
    
    (19,273
    )
    
    
    2.1
    %5.0% decrease
    
    
    732,388
    
    
    
    (38,547
    )
    
    
    4.1
    %7.5% decrease
    
    
    713,115
    
    
    
    (57,820
    )
    
    
    6.2
    %
 
 (1)
    
    Does not include reinsurance receivable on paid losses or reserve for
uncollectible reinsurance.(2)
    
    This presumes that the change in reserves is pro-rata across the entire
portfolio of loss reserves for the purpose of determining the net effect on
shareholders equity. Recoverability of Reinsurance Receivables
  Investments
     19




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 Goodwill and Intangible Assets
   Taxation
     Our Business Segments
  20




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
    Quarter EndedMarch 31,(Dollars in thousands)
    
    2007
    
    
    2006Insurance Operations premiums written:Gross premiums written
    
    $
    145,602
    
    
    $
    159,558Ceded premiums written
    
    
    15,044
    
    
    
    24,221Net premiums written
    
    $
    130,558
    
    
    $
    135,337Reinsurance Operations premiums written:Gross premiums written
    
    $
    6,934
    
    
    $
    Ceded premiums written
    
    
    3,437
    
    
    
    Net premiums written
    
    $
    3,497
    
    
    $
    Revenues: (1)Insurance Operations
    
    $
    137,714
    
    
    $
    135,430Reinsurance Operations
    
    
    723
    
    
    
    Corporate
    
    
    19,093
    
    
    
    13,722Total revenues
    
    $
    157,530
    
    
    $
    149,152Expenses: (1)Insurance Operations
    
    $
    123,459
    
    
    $
    123,636Reinsurance Operations
    
    
    1,595
    
    
    
    Corporate
    
    
    6,293
    
    
    
    6,978Subtotal
    
    
    131,347
    
    
    
    130,614Intercompany eliminations
    
    
    (155
    )
    
    
    316Net expenses
    
    $
    131,192
    
    
    $
    130,930Income (loss) before income taxes: (1)Insurance Operations
    
    $
    14,255
    
    
    $
    11,794Reinsurance Operations
    
    
    (872
    )
    
    
    Corporate
    
    
    12,800
    
    
    
    6,744Subtotal
    
    
    26,183
    
    
    
    18,538Intercompany eliminations
    
    
    155
    
    
    
    (316
    )Total income before income taxes
    
    $
    26,338
    
    
    $
    18,222Insurance combined ratio analysis: (2)Net losses and loss adjustment expense ratio
    
    
    59.1
    
    
    
    58.3Other underwriting expense ratio
    
    
    31.0
    
    
    
    33.2Combined ratio
    
    
    90.1
    
    
    
    91.5
 
 (1)
    
    Excludes the results of our Agency Operations, which have been classified as discontinued
operations for 2007 and 2006.(2)
    
    Our insurance combined ratios are non-GAAP financial measures that are generally viewed
as indicators of underwriting profitability. The net losses and loss adjustment expense
ratio is the ratio of net losses and loss adjustment expenses to net premiums earned. The
underwriting expense ratio is the ratio of acquisition costs and other underwriting
expenses to net premiums earned. The combined ratio is the ratio of the sum of net losses,
loss adjustment expenses, acquisition costs, and other underwriting expenses to net
premiums earned. 21




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 Results of Operations
 Quarter Ended March 31, 2007 Compared with the Quarter Ended March 31, 2006
 Premiums
   Quarter Ended
    
    
    Quarter Ended
    
    
    Increase /(Dollars in thousands)
    
    March 31, 2007
    
    
    March 31, 2006
    
    
    (Decrease)Small Business
    
    $
    80,617
    
    
    $
    95,055
    
    
    $
    (14,438
    )Program
    
    
    53,558
    
    
    
    58,446
    
    
    
    (4,888
    )Specialty Wholesale
    
    
    11,427
    
    
    
    6,057
    
    
    
    5,370Reinsurance
    
    
    6,934
    
    
    
    
    
    
    
    6,934Total
    
    $
    152,536
    
    
    $
    159,558
    
    
    $
    (7,022
    )
 
    
    Small Business gross premiums written decreased $14.4 million due to a decrease in
casualty premiums caused by increased competition from both surplus lines and standard
carriers and the recent cancellation of business that did not meet our profitability
standards.
    
    Program gross premiums written decreased $4.9 million primarily due to decreases in a
1st Party program premium in our property product line and decreases in our
umbrella product line as a result of pricing pressures in the market.
    
    Specialty Wholesale gross premiums written increased $5.4 million primarily due to
continued growth in our property and allied health product writings.
    
    Reinsurance gross premiums written were $6.9 million. Our Reinsurance Operations
segment began offering third party reinsurance in the third quarter of 2006 and entered
into its initial third party reinsurance contracts during the quarter ended March 31, 2007;
therefore there were no gross premiums written for our Reinsurance Operations segment for
the prior year.
   Quarter Ended
    
    
    Quarter Ended
    
    
    Increase /(Dollars in thousands)
    
    March 31, 2007
    
    
    March 31, 2006
    
    
    (Decrease)Small Business
    
    $
    75,680
    
    
    $
    86,384
    
    
    $
    (10,704
    )Program
    
    
    44,681
    
    
    
    44,429
    
    
    
    252Specialty Wholesale
    
    
    10,197
    
    
    
    4,524
    
    
    
    5,673Reinsurance
    
    
    3,497
    
    
    
    
    
    
    
    3,497Total
    
    $
    134,055
    
    
    $
    135,337
    
    
    $
    (1,282
    )
 
    
    Small Business net premiums written decreased $10.7 million primarily due to a
decrease in casualty premiums caused by increased competition from both surplus lines and
standard carriers and the recent cancellation of business that did not meet our
profitability standards.
 22




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 
    
    Program net premiums written increased $0.3 million primarily as a result of an increase
in habitational general liability premium offset by decreases in product writings in our
umbrella line.
    
    Specialty Wholesale net premiums written increased $5.7 million due to continued growth
in our property and allied health product writings.
    
    Reinsurance net premiums written were $3.5 million. Our Reinsurance Operations segment
began offering third party reinsurance in the third quarter of 2006 and entered into its
initial third party reinsurance contracts during the quarter ended March 31, 2007;
therefore there were no net premiums written for our Reinsurance Operations segment for the
prior year.
  
    
    The increase in our Insurance Operations segment is due to a $5.5 million increase in
prior year net premiums written that are being earned in the current year, offset by a $3.2
million decrease in current year net premiums written that are being earned in the current
year.
    
    Net premiums earned of our Reinsurance Operations segment were $0.7 million for the
quarter ended March 31, 2007. Our Reinsurance Operations segment began offering third
party reinsurance in the third quarter of 2006 and entered into its initial third party
reinsurance contracts during the quarter ended March 31, 2007; therefore there were no net
premiums earned for our Reinsurance Operations segment for the prior year.
 Net Investment Income
  
    
    Gross investment income, excluding realized gains and losses, was $20.4 million for the
quarter ended March 31, 2007, compared with $15.2 million for the quarter ended March 31,
2006, an increase of $5.2 million or 34.1%. The increase was primarily due to $2.5 million
of additional income earned as a result of the growth in the average market value of our
cash and invested assets, and $2.7 million due to an increase in the investment yields on
both our bond and short term investment portfolios. Cash and invested assets grew to
$1,716.8 million as of March 31, 2007, from $1,656.7 million as of December 31, 2006, an
increase of $60.1 million or 3.6%. Our limited partnership investments generated gross
investment income of $0.3 million in each of the quarters ended March 31, 2007 and 2006.
    
    Investment expenses were $1.5 million for each of the quarters ended March 31, 2007 and
2006.
  Net Realized Investment Gains (Losses)
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UNITED AMERICA INDEMNITY, LTD.
  Net Losses and Loss Adjustment Expenses
   Acquisition Costs and Other Underwriting Expenses
  
    
    The decrease in our Insurance Operations segment is due to a $1.9 million decrease in
acquisition costs primarily due to lower premium-based taxes and lower internal costs and a
$0.7 million decrease in other underwriting expenses primarily due to lower compensation
costs and related benefits. Other underwriting expenses for the
quarter ended March 31, 2006 included $0.3 million of
severance costs resulting from our restructuring in 2006.
    
    The increase in our Reinsurance Operations segment is due to a $0.5 million increase in
other underwriting expenses. Our Reinsurance Operations segment began offering third party
reinsurance in the third quarter of 2006 and entered into its initial third party
reinsurance contracts during the quarter ended March 31, 2007.
 Corporate and Other Operating Expenses
  Expense and Combined Ratios
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UNITED AMERICA INDEMNITY, LTD.
 Interest Expense
  Income Tax Expense (Benefit)
   Equity in Net Income of Partnership
  Discontinued Operations
  Net Income and Operating Income
   Quarter Ended
    
    
    Quarter Ended(Dollars in thousands)
    
    March 31, 2007
    
    
    March 31, 2006Operating income
    
    $
    22,447
    
    
    $
    17,719Adjustments:Net realized investment gains, net of tax
    
    
    146
    
    
    
    59Net income
    
    $
    22,593
    
    
    $
    17,778
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UNITED AMERICA INDEMNITY, LTD.
 Liquidity and Capital Resources
 Sources and Uses of Funds
     Surplus Levels
  Cash Flows
   
    
    the fact that we collect premiums in advance of losses paid;
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UNITED AMERICA INDEMNITY, LTD.
 
    
    the timing of our settlements with our reinsurers; and
    
    the timing of our loss payments.
  
    
    an increase in net premiums collected of $7.3 million and a decrease in net losses paid
of $14.8 million, offset by an increase in acquisition costs and other underwriting
expenses of $17.6 million;
    
    an increase in net investment income collected of $4.8 million; and
    
    a decrease in agency commissions and fee revenues of $12.0 million offset by a decrease
in agency commission and operating expense of $9.2 million.
  Liquidity
  Capital Resources
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UNITED AMERICA INDEMNITY, LTD.
  Issuer
    
    Amount
    
    Maturity
    
    Interest Rate
    
    Call ProvisionsAIS through its
wholly owned
subsidiary UNG Trust I
    
    $10.0 million
issued September
30, 2003
    
    September 30, 2033
    
    Payable quarterly
at the three month
London Interbank
Offered Rate
(LIBOR) plus 4.05%
    
    At par after September 30,
2008AIS through its
wholly owned
subsidiary UNG
Trust II
    
    $20.0 million
issued October 29,
2003
    
    October 29, 2033
    
    Payable quarterly
at the three month
LIBOR plus 3.85%
    
    At par after October 29, 2008PAGI through its
wholly owned
subsidiary Penn
Trust I
    
    $15.0 million
issued December 4,
2002
    
    December 4, 2032
    
    Payable quarterly
at the three month
LIBOR plus 4.0%
(1)
    
    At par after December 4, 2007PAGI through its
wholly owned
subsidiary Penn
Trust II
    
    $15.0 million
issued May 15, 2003
    
    May 15, 2033
    
    Payable quarterly
at the three month
LIBOR plus 4.1%
    
    At par after May 15, 2008
 
 (1)
    
    To protect against increases in interest rates, we have a fixed rate interest rate swap on
these securities that locks the interest at an annual rate of 7.4%. The swap agreement
expires on December 4, 2007.     Off Balance Sheet Arrangements
  Cautionary Note Regarding Forward-Looking Statements
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UNITED AMERICA INDEMNITY, LTD.
   
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
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UNITED AMERICA INDEMNITY, LTD.
 
 PART II-OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  We Are Dependent on Our Senior Executives and the Loss of Any of These Executives or Our Inability
to Attract and Retain Other Key Personnel Could Adversely Affect Our Business.
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UNITED AMERICA INDEMNITY, LTD.
   
 Item 5. Other Information
 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
       Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing
  
 Item 6. Exhibits
 10.1+*
    
    Employment Agreement, dated May 9, 2007, between United America Indemnity, Ltd. and Larry A. Frakes31.1+
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) 15d-14 (a) of the
Securities Exchange 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 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.*
    
    Management contract or compensatory plan or arrangement 31




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UNITED AMERICA INDEMNITY, LTD.
 
 SIGNATURE
  UNITED AMERICA INDEMNITY, LTD.
RegistrantMay 10, 2007
    
    By:
    
    /s/ Kevin L. TateDate: May 10, 2007
    
    Kevin L. TateChief Financial Officer(Authorized Signatory and
Principal Financial and
Accounting Officer)
 32