##### 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, 2006
 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
 UNITED AMERICA INDEMNITY, LTD.
  Cayman Islands
(State or other jurisdiction
of incorporation or organization)
    
    98-0417107
(I.R.S. Employer Identification No.)
 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 SheetsAs of June 30, 2006 (Unaudited) and December 31, 2005 (Audited)
    
    
    1Consolidated
Statements of OperationsQuarters and Six Months Ended June 30, 2006 and 2005 (Unaudited)
    
    
    2Consolidated
Statements of Comprehensive IncomeQuarters and Six Months Ended June 30, 2006 and 2005 (Unaudited)
    
    
    3Consolidated
Statements of Changes in Shareholders EquityAs of June 30, 2006 (Unaudited) and December 31, 2005 (Audited)
    
    
    4Consolidated
Statements of Cash FlowsSix Months Ended June 30, 2006 and 2005 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4.
    
    Controls and Procedures
    
    
    41PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    42Item 1A.
    
    Risk Factors
    
    
    42Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    42Item 6.
    
    Exhibits
    
    
    44Signatures
    
    
    
    
    46Certification pursuant to Rule 13a-14(a)/15d-14(a)Certification pursuant to Rule 13a-14(a)/15d-14(a)Certification pursuant to Rule 13a-14(a)/15d-14(a)Certification pursuant to Rule 13a-14(a)/15d-14(a)Certification pursuant to 18 U.S.C. Section 1350Certification pursuant to 18 U.S.C. Section 1350Certification pursuant to 18 U.S.C. Section 1350Certification 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. (corporate name
changed from U.N. Holdings II, Inc. on September 15, 2005), U.N. Holdings Inc. (liquidated as
of May 31, 2006), Wind River Investment Corporation (liquidated as of May 31, 2006), American
Insurance Service, Inc., Emerald Insurance Company, Penn-America Group, Inc., our U.S.
Insurance Operations and our Agency Operations;3)
    
    UAI Group refers to our U.S. Insurance Operations;4)
    
    our U.S. Insurance Operations refers to the insurance and related operations conducted by
American Insurance Service, Inc.s 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)
    
    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;6)
    
    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;7)
    
    Penn-America refers to Penn-America Group, Inc. and its subsidiaries;8)
    
    the Insurance Operations refers to the U.S. Insurance Operations and the Non-U.S. Insurance
Operations;




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##### Table of Contents



9)
    
    the Agency Operations refers to Penn Independent Corporation, PIC Holdings, Inc., Penn
Independent Financial Services, Inc., Penn Oceanic Insurance Co., Ltd. (Barbados), Residential
Underwriting Agency, Inc., Stratus Insurance Services, Inc. (sold effective December 31,
2005), Stratus Web Builder, Inc. (sold effective December 31, 2005), Apex Insurance Agency,
Inc., Apex Insurance Services of Illinois, Inc., Summit Risk Services, Inc., Delaware Valley
Underwriting Agency, Inc. (DVUA), DVUA Pittsburgh, Inc., DVUA Massachusetts, Inc., DVUA of
New York, Inc., DVUA of New Jersey, Inc., DVUA West Virginia, Inc., DVUA North Carolina, Inc.,
DVUA of Ohio, Inc., DVUA South Carolina, Inc., and DVUA Virginia, Inc.;10)
    
    Penn Independent refers to Penn Independent Corporation and its subsidiaries;11)
    
    our Non-U.S. Insurance Operations refers to the insurance and reinsurance and related
operations of Wind River Barbados and Wind River Bermuda;12)
    
    our Non-U.S. Subsidiaries refers to our Non-U.S. Insurance Operations, U.A.I. (Gibraltar)
Limited (liquidated as of May 31, 2006), U.A.I. (Gibraltar) II Limited (liquidated as of May
31, 2006), the Luxembourg Companies, U.A.I. (Ireland) Limited, and Wind River Services, Ltd.;13)
    
    Wind River Barbados refers to Wind River Insurance Company (Barbados) Ltd.;14)
    
    Wind River Bermuda refers to Wind River Insurance Company, Ltd.;15)
    
    the Luxembourg Companies refers to U.A.I. (Luxembourg) I S.ar.l., U.A.I. (Luxembourg) II
S.ar.l., U.A.I. (Luxembourg) III S.ar.l., U.A.I. (Luxembourg) IV S.ar.l., U.A.I. (Luxembourg)
Investment S.ar.l., and Wind River (Luxembourg) S.ar.l.;16)
    
    AIS refers to America Insurance Service, Inc.;17)
    
    United National refers to the United National Insurance Companies, and Emerald Insurance
Company;18)
    
    Fox Paine & Company refers to Fox Paine & Company, LLC and affiliated investment funds;19)
    
    GAAP refers to accounting principles generally accepted in the United States of America;
and20)
    
    $ 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)ASSETS
    
    June 30, 2006
    
    
    December 31, 2005Bonds:Available for sale securities, at fair value
(amortized cost: $1,277,588 and $1,092,137)
    
    $
    1,238,145
    
    
    $
    1,085,624Preferred shares:Available for sale securities, at fair value
(cost: $3,744 and $6,563)
    
    
    4,060
    
    
    
    6,400Common shares:Available for sale securities, at fair value
(cost: $56,779 and $56,654)
    
    
    62,391
    
    
    
    59,602Other invested assets(cost: $24,674 and $25,942)
    
    
    56,224
    
    
    
    52,427Total investments
    
    
    1,360,820
    
    
    
    1,204,053Cash and cash equivalents
    
    
    137,894
    
    
    
    220,122Accounts receivable
    
    
    23,812
    
    
    
    24,235Agents balances, net
    
    
    89,301
    
    
    
    78,669Reinsurance receivables, net
    
    
    1,167,575
    
    
    
    1,278,156Accrued investment income
    
    
    14,076
    
    
    
    12,260Federal income taxes receivable
    
    
    247
    
    
    
    415Deferred federal income taxes, net
    
    
    25,954
    
    
    
    21,646Deferred acquisition costs, net
    
    
    60,222
    
    
    
    59,339Goodwill
    
    
    101,900
    
    
    
    101,854Intangible assets, net
    
    
    30,007
    
    
    
    30,852Prepaid reinsurance premiums
    
    
    40,129
    
    
    
    41,688Other assets
    
    
    23,656
    
    
    
    33,324Total assets
    
    $
    3,075,593
    
    
    $
    3,106,613LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Unpaid losses and loss adjustment expenses
    
    $
    1,855,890
    
    
    $
    1,914,224Unearned premiums
    
    
    279,836
    
    
    
    272,552Amounts held for the account of others
    
    
    21,869
    
    
    
    22,781Ceded balances payable
    
    
    16,003
    
    
    
    22,895Insurance premium payable
    
    
    30,211
    
    
    
    25,252Payable for securities
    
    
    6,622
    
    
    
    Contingent commissions
    
    
    7,349
    
    
    
    11,061Senior notes payable
    
    
    90,000
    
    
    
    90,000Junior subordinated debentures
    
    
    61,857
    
    
    
    61,857Notes and loans payable
    
    
    5,512
    
    
    
    6,455Other liabilities
    
    
    35,935
    
    
    
    39,547Total liabilities
    
    
    2,411,084
    
    
    
    2,466,624Commitments and contingencies (Note 8)
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    62Shareholders equity:Common shares, $0.0001 par value, 900,000,000 common
shares authorized, 24,170,437 and 23,868,402 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
    
    
    508,604
    
    
    
    504,541Accumulated other comprehensive income
    
    
    (8,042
    )
    
    
    9,471Retained earnings
    
    
    163,943
    
    
    
    125,911Total shareholders equity
    
    
    664,509
    
    
    
    639,927Total liabilities and shareholders equity
    
    $
    3,075,593
    
    
    $
    3,106,613
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Operations
 (Unaudited)
    
    
    (Unaudited)Quarter Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Gross premiums written
    
    $
    167,295
    
    
    $
    163,902
    
    
    $
    326,853
    
    
    $
    299,362Net premiums written
    
    $
    142,688
    
    
    $
    136,294
    
    
    $
    278,025
    
    
    $
    245,815Net premiums earned
    
    $
    133,751
    
    
    $
    119,802
    
    
    $
    269,181
    
    
    $
    221,914Agency commission and fee revenues
    
    
    8,804
    
    
    
    10,115
    
    
    
    18,351
    
    
    
    16,367Net investment income
    
    
    17,936
    
    
    
    11,114
    
    
    
    31,615
    
    
    
    22,982Net realized investment (losses) gains
    
    
    (4
    )
    
    
    394
    
    
    
    39
    
    
    
    (222
    )Total revenues
    
    
    160,487
    
    
    
    141,425
    
    
    
    319,186
    
    
    
    261,041Losses and Expenses:Net losses and loss adjustment expenses
    
    
    80,464
    
    
    
    71,221
    
    
    
    159,428
    
    
    
    134,818Acquisition costs and other underwriting expenses
    
    
    41,775
    
    
    
    34,907
    
    
    
    86,088
    
    
    
    64,446Agency commission and operating expenses
    
    
    8,863
    
    
    
    10,174
    
    
    
    18,731
    
    
    
    17,093Corporate and other operating expenses
    
    
    3,902
    
    
    
    4,633
    
    
    
    8,201
    
    
    
    8,175Interest expense
    
    
    2,958
    
    
    
    2,180
    
    
    
    5,678
    
    
    
    4,096Income before income taxes
    
    
    22,525
    
    
    
    18,310
    
    
    
    41,060
    
    
    
    32,413Income tax expense
    
    
    2,315
    
    
    
    145
    
    
    
    3,600
    
    
    
    226Net income before minority interest and
equity in net income of partnerships
    
    
    20,210
    
    
    
    18,165
    
    
    
    37,460
    
    
    
    32,187Minority interest, net of taxes
    
    
    4
    
    
    
    (23
    )
    
    
    
    
    
    
    9Equity in net income of partnerships
    
    
    40
    
    
    
    314
    
    
    
    572
    
    
    
    425Net income before extraordinary gain
    
    
    20,254
    
    
    
    18,456
    
    
    
    38,032
    
    
    
    32,621Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,426Net income
    
    $
    20,254
    
    
    $
    18,456
    
    
    $
    38,032
    
    
    $
    34,047Per share data:Net income before extraordinary gain:Basic
    
    $
    0.55
    
    
    $
    0.51
    
    
    $
    1.04
    
    
    $
    0.92Diluted
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    1.03
    
    
    $
    0.91Extraordinary gain:Basic
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.04Diluted
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.04Net income:Basic
    
    $
    0.55
    
    
    $
    0.51
    
    
    $
    1.04
    
    
    $
    0.96Diluted
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    1.03
    
    
    $
    0.95Weighted-average number of shares outstanding:Basic
    
    
    36,664,626
    
    
    
    36,392,539
    
    
    
    36,615,325
    
    
    
    35,331,277Diluted
    
    
    37,115,922
    
    
    
    37,045,044
    
    
    
    37,047,091
    
    
    
    36,015,474
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Comprehensive Income
 (Unaudited)
    
    
    (Unaudited)Quarter Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    20,254
    
    
    $
    18,456
    
    
    $
    38,032
    
    
    $
    34,047Other comprehensive (loss) income before tax:Unrealized (losses) gains on securities:Unrealized holding (losses) gains arising during period
    
    
    (14,883
    )
    
    
    13,927
    
    
    
    (21,262
    )
    
    
    2,332Less: Reclassification adjustment for losses
included in net income
    
    
    (19
    )
    
    
    (498
    )
    
    
    118
    
    
    
    (1,030
    )Other comprehensive (loss) income, before tax
    
    
    (14,864
    )
    
    
    14,425
    
    
    
    (21,380
    )
    
    
    3,362Income tax (benefit) expense related to items of other
comprehensive (loss) income
    
    
    (3,537
    )
    
    
    3,584
    
    
    
    (3,867
    )
    
    
    93Other comprehensive (loss) income, net of tax
    
    
    (11,327
    )
    
    
    10,841
    
    
    
    (17,513
    )
    
    
    3,269Comprehensive income, net of tax
    
    $
    8,927
    
    
    $
    29,297
    
    
    $
    20,519
    
    
    $
    37,316
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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Changes in Shareholders Equity
 (Unaudited)Six Months Ended
    
    
    Year EndedJune 30, 2006
    
    
    December 31, 2005Number of Class A common shares:Number at beginning of period
    
    
    23,868,402
    
    
    
    15,585,653Class A common shares issued in merger
    
    
    
    
    
    
    7,930,536Class A common shares issued under share
incentive plans
    
    
    289,918
    
    
    
    322,479Class A common shares issued to directors
    
    
    12,117
    
    
    
    29,734Number at end of period
    
    
    24,170,437
    
    
    
    23,868,402Number 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
    
    
    $
    2Class A common shares issued
    
    
    
    
    
    
    1Balance 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
    
    $
    504,541
    
    
    $
    356,725Contributed capital from common shares
    
    
    
    
    
    
    142,925Share compensation plans
    
    
    4,063
    
    
    
    5,865Other
    
    
    
    
    
    
    (974
    )Balance at end of period
    
    $
    508,604
    
    
    $
    504,541Accumulated other comprehensive income,
net of deferred income tax:Balance at beginning of period
    
    $
    9,471
    
    
    $
    15,507Other comprehensive loss
    
    
    (17,513
    )
    
    
    (6,036
    )Balance at end of period
    
    $
    (8,042
    )
    
    $
    9,471Retained earnings:Balance at beginning of period
    
    $
    125,911
    
    
    $
    60,318Net income
    
    
    38,032
    
    
    
    65,593Balance at end of period
    
    $
    163,943
    
    
    $
    125,911Total shareholders equity
    
    $
    664,509
    
    
    $
    639,927
  4




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UNITED AMERICA INDEMNITY, LTD.
 
 Consolidated Statements of Cash Flows
 (Unaudited)Six Months Ended June 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    38,032
    
    
    $
    34,047Adjustments to reconcile net income to net cash provided by
operating activities:Amortization of trust preferred securities issuance costs
    
    
    131
    
    
    
    90Amortization and depreciation
    
    
    1,009
    
    
    
    882Restricted stock expense
    
    
    3,864
    
    
    
    2,155Extraordinary gain
    
    
    
    
    
    
    (1,426
    )Deferred federal income taxes
    
    
    (783
    )
    
    
    (1,178
    )Amortization of bond premium and discount, net
    
    
    2,714
    
    
    
    3,290Net realized investment (gains) losses
    
    
    (39
    )
    
    
    222Equity in net earnings of minority interest and net
income of partnerships
    
    
    (572
    )
    
    
    (434
    )Changes in:Agents balances
    
    
    (8,577
    )
    
    
    (9,185
    )Account receivables
    
    
    423
    
    
    
    14,179Reinsurance receivables
    
    
    110,581
    
    
    
    146,925Unpaid losses and loss adjustment expenses
    
    
    (58,334
    )
    
    
    (113,312
    )Unearned premiums
    
    
    7,284
    
    
    
    20,821Ceded balances payable
    
    
    (6,892
    )
    
    
    (2,984
    )Insurance premiums payable
    
    
    2,969
    
    
    
    (15,036
    )Other assets and liabilities, net
    
    
    7,207
    
    
    
    (1,501
    )Amounts held for the account of others
    
    
    (912
    )
    
    
    3,400Contingent commissions
    
    
    (3,817
    )
    
    
    (2,334
    )Prepaid reinsurance premiums
    
    
    1,559
    
    
    
    3,079Deferred acquisition costs, net
    
    
    (1,486
    )
    
    
    (19,012
    )Other  net
    
    
    (2,347
    )
    
    
    (2,298
    )Net cash provided by operating activities
    
    
    92,014
    
    
    
    60,390Cash flows from investing activities:Proceeds from sale of bonds
    
    
    41,256
    
    
    
    145,443Proceeds from sale of stocks
    
    
    22,153
    
    
    
    22,925Proceeds from maturity of bonds
    
    
    85,773
    
    
    
    27,379Proceeds from sale of other invested assets
    
    
    1,293
    
    
    
    5,914Purchase of bonds
    
    
    (302,876
    )
    
    
    (284,163
    )Purchase of stocks
    
    
    (21,085
    )
    
    
    (10,906
    )Purchase of other invested assets
    
    
    (12
    )
    
    
    (148
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (58,529
    )Net cash used for investing activities
    
    
    (173,498
    )
    
    
    (152,085
    )Cash flows from financing activities:Borrowing under credit facility
    
    
    1,865
    
    
    
    1,954Repayments of credit facility
    
    
    (2,322
    )
    
    
    (2,583
    )Tax benefits associated with SFAS 123R
    
    
    199
    
    
    
    Dividends paid to minority shareholders
    
    
    
    
    
    
    (22
    )Capital lease obligations
    
    
    
    
    
    
    (149
    )Decrease in term debt
    
    
    
    
    
    
    (336
    )Principal payments of term debt
    
    
    (486
    )
    
    
    Net cash used for financing activities
    
    
    (744
    )
    
    
    (1,136
    )Net change in cash and cash equivalents
    
    
    (82,228
    )
    
    
    (92,831
    )Cash and cash equivalents at beginning of period
    
    
    220,122
    
    
    
    242,123Cash and cash equivalents at end of period
    
    $
    137,894
    
    
    $
    149,292
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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
    
    
    
    
    
    
    
    
    
    
    Between(Dollars in
    
    Number of
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    Six Months
    
    
    Seven Months
    
    
    Greater thanthousands)
    
    Securities
    
    
    Fair Value
    
    
    Cost
    
    
    Total
    
    
    or Less
    
    
    and One Year
    
    
    One Year (1)Bonds
    
    
    589
    
    
    $
    1,060,060
    
    
    $
    1,095,817
    
    
    $
    34,757
    
    
    $
    7,858
    
    
    $
    14,242
    
    
    $
    13,657Preferred Stock
    
    
    3
    
    
    
    1,606
    
    
    
    1,687
    
    
    
    81
    
    
    
    63
    
    
    
    18
    
    
    
    Common Stock
    
    
    26
    
    
    
    14,155
    
    
    
    14,956
    
    
    
    801
    
    
    
    9
    
    
    
    792
    
    
    
    $
    35,639
    
    
    $
    7,930
    
    
    $
    15,052
    
    
    $
    13,657
 (1)
    
    At June 30, 2006, the Company had 386 bonds that were in an unrealized loss position for
greater than one year. 96% of these securities are investment grade, and the remaining 4% are
convertible securities.
  Gross Unrealized LossesCost or
    
    
    
    
    
    
    
    
    
    
    Between(Dollars in
    
    Number of
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    Six Months
    
    
    Seven Months
    
    
    Greater thanthousands)
    
    Securities
    
    
    Fair Value
    
    
    Cost
    
    
    Total
    
    
    or Less
    
    
    and One Year
    
    
    One YearBonds
    
    
    815
    
    
    $
    725,048
    
    
    $
    737,510
    
    
    $
    12,462
    
    
    $
    5,554
    
    
    $
    6,877
    
    
    $
    31Preferred Stock
    
    
    5
    
    
    
    3,039
    
    
    
    3,423
    
    
    
    384
    
    
    
    36
    
    
    
    348
    
    
    
    Common Stock
    
    
    138
    
    
    
    29,673
    
    
    
    30,483
    
    
    
    810
    
    
    
    746
    
    
    
    64
    
    
    
    $
    13,656
    
    
    $
    6,336
    
    
    $
    7,289
    
    
    $
    31
   7




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Quarter Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Preferred stock
    
    $
    
    
    
    $
    
    
    
    $
    167
    
    
    $
    Common stock
    
    
    37
    
    
    
    50
    
    
    
    37
    
    
    
    100Total
    
    $
    37
    
    
    $
    50
    
    
    $
    204
    
    
    $
    100
 3. Reinsurance
     Quarter Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Earned premium
    
    $
    24,831
    
    
    $
    27,804
    
    
    $
    50,389
    
    
    $
    56,626Commissions
    
    
    6,099
    
    
    
    6,195
    
    
    
    11,870
    
    
    
    11,029Incurred losses (1)
    
    
    13,094
    
    
    
    (56,646
    )
    
    
    27,802
    
    
    
    (37,303
    )
 (1)
    
    
    
    As a result of the Companys quarterly review of unpaid losses and loss adjustment
expenses in the second quarter of 2005, the Company reduced gross and ceded unpaid loss
and loss adjustment expenses related to prior periods by $79.2 million.
    8




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
      4. Income Taxes
  9




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Quarter Ended
    
    
    Quarter EndedJune 30, 2006
    
    
    June 30, 2005% of Pre-
    
    
    
    
    
    
    % of Pre-Amount
    
    
    Tax Income
    
    
    Amount
    
    
    Tax IncomeExpected tax
provision at
weighted average
rate
    
    $
    3,598
    
    
    
    16.0
    %
    
    $
    1,448
    
    
    
    7.9
    %Adjustments:Tax exempt interest
    
    
    (1,349
    )
    
    
    (6.0
    )
    
    
    (1,308
    )
    
    
    (0.4
    )Dividend exclusion
    
    
    (111
    )
    
    
    (0.5
    )
    
    
    (75
    )
    
    
    (0.6
    )Other
    
    
    177
    
    
    
    0.8
    
    
    
    80
    
    
    
    0.4Actual Taxes
    
    $
    2,315
    
    
    
    10.3
    %
    
    $
    145
    
    
    
    0.8
    %
 Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005% of Pre-
    
    
    
    
    
    
    % of Pre-Amount
    
    
    Tax Income
    
    
    Amount
    
    
    Tax IncomeExpected tax
provision at
weighted average
rate
    
    $
    6,257
    
    
    
    15.2
    %
    
    $
    2,079
    
    
    
    6.4
    %Adjustments:Tax exempt interest
    
    
    (2,601
    )
    
    
    (6.3
    )
    
    
    (2,561
    )
    
    
    (7.9
    )Dividend exclusion
    
    
    (236
    )
    
    
    (0.5
    )
    
    
    (156
    )
    
    
    (0.5
    )Other
    
    
    180
    
    
    
    0.4
    
    
    
    864
    
    
    
    2.7Actual Taxes
    
    $
    3,600
    
    
    
    8.8
    %
    
    $
    226
    
    
    
    0.7
    %
  5. Liability for Unpaid Losses and Loss Adjustment Expenses
  10




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  (Dollars in thousands)
    
    June 30, 2006
    
    
    December 31, 2005
    
    
    Increase/ (Decrease)Katrina first landfall
    
    $
    650
    
    
    $
    1,250
    
    
    $
    (600
    )Katrina second landfall
    
    
    36,929
    
    
    
    30,600
    
    
    
    6,329Rita
    
    
    4,500
    
    
    
    3,400
    
    
    
    1,100Wilma
    
    
    8,900
    
    
    
    7,700
    
    
    
    1,200Total
    
    $
    50,979
    
    
    $
    42,950
    
    
    $
    8,029
  (Dollars in thousands)
    
    June 30, 2006
    
    
    December 31, 2005
    
    
    Increase/ (Decrease)Katrina first landfall
    
    $
    207
    
    
    $
    560
    
    
    $
    (353
    )Katrina second landfall
    
    
    5,833
    
    
    
    2,400
    
    
    
    3,433Rita
    
    
    4,100
    
    
    
    3,000
    
    
    
    1,100Wilma
    
    
    2,000
    
    
    
    2,000
    
    
    
    Total
    
    $
    12,140
    
    
    $
    7,960
    
    
    $
    4,180
  6. Notes and Loans Payable
 Notes Payable
  Loans Payable
  11




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 7. Related Party Transactions
        8. Commitments and Contingencies
 Legal Proceedings
   12




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  9. Share-Based Compensation
        13




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 WeightedAverageNumber of
    
    Exercise PriceShares
    
    Per ShareOptions outstanding at December 31, 2005
    
    
    1,545,055
    
    
    $
    11.35Options issued
    
    
    
    
    
    
    Options forfeited
    
    
    (125,162
    )
    
    $
    14.99Options cancelled (reversed)
    
    
    
    
    
    
    Options exercised
    
    
    (116,858
    )
    
    $
    9.65Options outstanding at June 30, 2006
    
    
    1,303,035
    
    
    $
    13.00Options exercisable at June 30, 2006
    
    
    538,119
    
    
    $
    11.82
  Number of options
    
    Weighted AverageOption Price
    
    exercisable
    
    Remaining Life$6.50
    
    
    56,074$8.49
    
    
    12,834$10.00
    
    
    305,500$14.62
    
    
    2,000$17.00
    
    
    109,894$17.81
    
    
    25,817$18.27
    
    
    25,000$18.40
    
    
    1,000Options exercisable
at June 30, 2006
    
    
    538,119
    
    
    7.4 years
  Six Months Ended June 30,2006
    
    2005Dividend yield
    
    
    N/A
    
    
    
    0.0
    %Expected volatility
    
    
    N/A
    
    
    
    23.0
    %Risk-free interest rate
    
    
    N/A
    
    
    
    3.8
    %Expected option life
    
    
    N/A
    
    
    5 yearsForfeiture rate
    
    
    10.2
    %
    
    
    N/A
  Weighted AverageRanges of
    
    Outstanding at
    
    Per Share Exercise
    
    Weighted AverageExercise Prices
    
    June 30, 2006
    
    Price
    
    Remaining Life$5.50  $9.99
    
    
    68,908
    
    
    $
    6.87
    
    
    6.1 years$10.00  $16.00
    
    
    704,875
    
    
    $
    10.07
    
    
    7.2 years$17.00  $20.00
    
    
    529,252
    
    
    $
    17.68
    
    
    8.2 yearsTotal
    
    
    1,303,035
  14




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
    WeightedAverageNumber of
    
    Exercise PriceShares
    
    Per ShareNon-vested restricted stock at December 31, 2005
    
    
    83,571
    
    
    $
    17.96Stock issued
    
    
    185,818
    
    
    $
    21.68Stock vested
    
    
    (80,349
    )
    
    $
    21.23Stock forfeited
    
    
    (750
    )
    
    $
    17.00Stock returned
    
    
    750
    
    
    $
    17.00Non-vested restricted stock at June 30, 2006
    
    
    189,040
    
    
    $
    20.74
 10. Earnings Per Share
   Quarter Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands, except per share data)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Income available to common shareholders before
extraordinary gain
    
    $
    20,254
    
    
    $
    18,456
    
    
    $
    38,032
    
    
    $
    32,621Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,426Net income
    
    $
    20,254
    
    
    $
    18,456
    
    
    $
    38,032
    
    
    $
    34,047Basic earnings per share:Weighted average shares for basic earnings per share
    
    
    36,664,626
    
    
    
    36,392,539
    
    
    
    36,615,325
    
    
    
    35,331,277Net income available to common shareholders before
extraordinary gain
    
    $
    0.55
    
    
    $
    0.51
    
    
    $
    1.04
    
    
    $
    0.92Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.04Net income
    
    $
    0.55
    
    
    $
    0.51
    
    
    $
    1.04
    
    
    $
    0.96Diluted earnings per share:Weighted average shares for diluted earnings per
share
    
    
    37,115,922
    
    
    
    37,045,044
    
    
    
    37,047,091
    
    
    
    36,015,474Net income available to common shareholders before
extraordinary gain
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    1.03
    
    
    $
    0.91Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.04Net income
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    1.03
    
    
    $
    0.95
 15




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Quarter Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Weighted average shares for basic earnings per share
    
    
    36,664,626
    
    
    
    36,392,539
    
    
    
    36,615,325
    
    
    
    35,331,277Non-vested restricted stock
    
    
    23,219
    
    
    
    
    
    
    
    19,311
    
    
    
    Options and warrants
    
    
    428,077
    
    
    
    652,505
    
    
    
    412,455
    
    
    
    684,197Weighted average shares for diluted earnings per
share
    
    
    37,115,922
    
    
    
    37,045,044
    
    
    
    37,047,091
    
    
    
    36,015,474
 11. Segment Information
  16




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
  Quarter Ended June 30, 2006:
    
    Insurance
    
    


    Agency(Dollars in thousands)
    
    Operations
    
    
    Operations
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalRevenues:Gross premiums written
    
    $
    167,295
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    167,295Net premiums written
    
    $
    142,688
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    142,688Net premiums earned
    
    $
    133,751
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    133,751Agency commission and fee revenues
    
    
    
    
    
    
    9,583
    
    
    
    
    
    
    
    (779
    )
    
    
    8,804Net investment income
    
    
    
    
    
    
    
    
    
    
    17,936
    
    
    
    
    
    
    
    17,936Net realized investment losses
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Total revenues
    
    
    133,751
    
    
    
    9,583
    
    
    
    17,932
    
    
    
    (779
    )
    
    
    160,487Losses and Expenses:Net losses and loss adjustment expenses
    
    
    80,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,464Acquisition costs and other
underwriting expenses
    
    
    42,606
    
    
    
    
    
    
    
    
    
    
    
    (831
    )
    
    
    41,775Agency commission and operating expenses
    
    
    
    
    
    
    9,533
    
    
    
    
    
    
    
    (670
    )
    
    
    8,863Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    3,708
    
    
    
    194
    
    
    
    3,902Interest expense
    
    
    
    
    
    
    
    
    
    
    2,958
    
    
    
    
    
    
    
    2,958Income (loss) before income taxes
    
    $
    10,681
    
    
    $
    50
    
    
    $
    11,266
    
    
    $
    528
    
    
    
    22,525Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,315Net income before minority interest
and equity in net income of
partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,210Minority interest and equity in net
income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,254
 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) gains
    
    
    
    
    
    
    
    
    
    
    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
    
    
    35,079
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    34,907Agency commission and operating expense
    
    
    
    
    
    
    10,573
    
    
    
    
    
    
    
    (399
    )
    
    
    10,174Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    4,633
    
    
    
    
    
    
    
    4,633Interest expense
    
    
    
    
    
    
    
    
    
    
    2,180
    
    
    
    
    
    
    
    2,180Income before income taxes
    
    $
    13,502
    
    
    $
    367
    
    
    $
    4,695
    
    
    $
    (254
    )
    
    
    18,310Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Net income before equity in net
income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,165Equity in net income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,456
 17




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 Six Months Ended June 30, 2006:
    
    Insurance
    
    
    Agency(Dollars in thousands)
    
    Operations
    
    
    Operations
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalRevenues:Gross premiums written
    
    $
    326,853
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    326,853Net premiums written
    
    $
    278,025
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    278,025Net premiums earned
    
    $
    269,181
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    269,181Agency commission and fee revenues
    
    
    
    
    
    
    20,144
    
    
    
    
    
    
    
    (1,793
    )
    
    
    18,351Net investment income
    
    
    
    
    
    
    
    
    
    
    31,615
    
    
    
    
    
    
    
    31,615Net realized investment losses
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    39Total revenues
    
    
    269,181
    
    
    
    20,144
    
    
    
    31,654
    
    
    
    (1,793
    )
    
    
    319,186Losses and Expenses:Net losses and loss adjustment expenses
    
    
    159,428
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,428Acquisition costs and other
underwriting expenses
    
    
    87,237
    
    
    
    
    
    
    
    
    
    
    
    (1,149
    )
    
    
    86,088Agency commission and operating expenses
    
    
    
    
    
    
    19,628
    
    
    
    
    
    
    
    (897
    )
    
    
    18,731Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    7,814
    
    
    
    387
    
    
    
    8,201Interest expense
    
    
    
    
    
    
    
    
    
    
    5,678
    
    
    
    
    
    
    
    5,678Income (loss) before income taxes
    
    $
    22,516
    
    
    $
    516
    
    
    $
    18,162
    
    
    $
    (134
    )
    
    
    41,060Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600Net income before minority interest
and equity in net income of
partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,460Minority interest and equity in net
income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    572Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38,032Total Assets
    
    $
    3,017,060
    
    
    $
    58,533
    
    
    $
    
    
    
    $
    
    
    
    $
    3,075,593
 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) gains
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    64,755
    
    
    
    
    
    
    
    
    
    
    
    (309
    )
    
    
    64,446Agency commission and operating expense
    
    
    
    
    
    
    17,750
    
    
    
    
    
    
    
    (657
    )
    
    
    17,093Corporate and other operating expenses
    
    
    
    
    
    
    
    
    
    
    8,175
    
    
    
    
    
    
    
    8,175Interest expense
    
    
    
    
    
    
    
    
    
    
    4,096
    
    
    
    
    
    
    
    4,096Income before income taxes
    
    $
    22,341
    
    
    $
    (27
    )
    
    $
    10,489
    
    
    $
    (390
    )
    
    
    32,413Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226Net income before equity in net
income of partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,187Equity 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
 18




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  (Unaudited)
 12. Supplemental Cash Flow Information
 Taxes and Interest Paid
 Quarter Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net federal income taxes paid
    
    $
    4,000
    
    
    $
    2,983
    
    
    $
    4,000
    
    
    $
    1,603Interest paid
    
    
    1,470
    
    
    
    1,158
    
    
    
    2,719
    
    
    
    2,239
 13. Restructuring
   14. Subsequent Events
  19




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Recent Developments
     Overview
     20




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UNITED AMERICA INDEMNITY, LTD.
   Critical Accounting Estimates and Policies
  Liability For Unpaid Losses And Loss Adjustment Expenses
     21




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
    (Dollars in thousands)PercentageBalance of Net
    
    Change In Net
    
    IncreaseLoss and Net
    
    Loss and Net
    
    (Decrease) inHypothetical Change in Net Loss and
    
    Loss Adjustment
    
    Loss Adjustment
    
    Shareholders'Loss Adjustment Expense Reserves
    
    Expense Reserves
    
    Expense Reserves
    
    Equity (1)7.5% increase
    
    $
    746,534
    
    
    $
    52,084
    
    
    
    (6.4
    )%5.0% increase
    
    
    729,173
    
    
    
    34,723
    
    
    
    (4.3
    )%2.5% increase
    
    
    711,811
    
    
    
    17,361
    
    
    
    (2.1
    )%As recorded on June 30, 2006
    
    
    694,450
    
    
    
    
    
    
    
    2.5% decrease
    
    
    677,089
    
    
    
    (17,361
    )
    
    
    2.1
    %5.0% decrease
    
    
    659,728
    
    
    
    (34,723
    )
    
    
    4.3
    %7.5% decrease
    
    
    642,366
    
    
    
    (52,084
    )
    
    
    6.4
    %
 (1)
    
    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
  22




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
    Gross Unrealized LossesCost or
    
    
    
    
    
    Six
    
    Between(Dollars in
    
    Number of
    
    
    
    
    
    Amortized
    
    
    
    
    
    Months or
    
    Seven Months
    
    Greater thanthousands)
    
    Securities
    
    Fair Value
    
    Cost
    
    Total
    
    Less
    
    and One Year
    
    One Year (1)Bonds
    
    
    589
    
    
    $
    1,060,060
    
    
    $
    1,095,817
    
    
    $
    34,757
    
    
    $
    7,858
    
    
    $
    14,242
    
    
    $
    13,657Preferred Stock
    
    
    3
    
    
    
    1,606
    
    
    
    1,687
    
    
    
    81
    
    
    
    63
    
    
    
    18
    
    
    
    Common Stock
    
    
    26
    
    
    
    14,155
    
    
    
    14,956
    
    
    
    801
    
    
    
    9
    
    
    
    792
    
    
    
    $
    35,639
    
    
    $
    7,930
    
    
    $
    15,052
    
    
    $
    13,657
 (1)
    
    At June 30, 2006, the Company had 386 bonds that were in an unrealized loss position for
greater than one year. 96% of these securities are investment grade, and the remaining 4% are
convertible securities.
   Quarter Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Preferred stock
    
    $
    
    
    
    $
    
    
    
    $
    167
    
    
    $
    Common stock
    
    
    37
    
    
    
    50
    
    
    
    37
    
    
    
    100Total
    
    $
    37
    
    
    $
    50
    
    
    $
    204
    
    
    $
    100
 Goodwill and Intangible Assets
   Taxation
  23




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
    Our Business Segments
   24




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
  Quarter Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Insurance Operations premiums written:Gross premiums written
    
    $
    167,295
    
    
    $
    163,902
    
    
    $
    326,853
    
    
    $
    299,362Ceded premiums written
    
    
    24,607
    
    
    
    27,608
    
    
    
    48,828
    
    
    
    53,547Net premiums written
    
    $
    142,688
    
    
    $
    136,294
    
    
    $
    278,025
    
    
    $
    245,815Revenues:Insurance Operations
    
    $
    133,751
    
    
    $
    119,802
    
    
    $
    269,181
    
    
    $
    221,914Agency Operations
    
    
    9,583
    
    
    
    10,940
    
    
    
    20,144
    
    
    
    17,723Corporate
    
    
    17,932
    
    
    
    11,508
    
    
    
    31,654
    
    
    
    22,760Subtotal
    
    
    161,266
    
    
    
    142,250
    
    
    
    320,979
    
    
    
    262,397Intercompany eliminations
    
    
    (779
    )
    
    
    (825
    )
    
    
    (1,793
    )
    
    
    (1,356
    )Total revenues
    
    $
    160,487
    
    
    $
    141,425
    
    
    $
    319,186
    
    
    $
    261,041Expenses:Insurance Operations
    
    $
    123,070
    
    
    $
    106,300
    
    
    $
    246,665
    
    
    $
    199,573Agency Operations
    
    
    9,533
    
    
    
    10,573
    
    
    
    19,628
    
    
    
    17,750Corporate
    
    
    6,666
    
    
    
    6,813
    
    
    
    13,492
    
    
    
    12,271Subtotal
    
    
    139,269
    
    
    
    123,686
    
    
    
    279,785
    
    
    
    229,594Intercompany eliminations
    
    
    (1,307
    )
    
    
    (571
    )
    
    
    (1,659
    )
    
    
    (966
    )Net expenses
    
    $
    137,962
    
    
    $
    123,115
    
    
    $
    278,126
    
    
    $
    228,628Income before income taxes:Insurance Operations
    
    $
    10,681
    
    
    $
    13,502
    
    
    $
    22,516
    
    
    $
    22,341Agency Operations
    
    
    50
    
    
    
    367
    
    
    
    516
    
    
    
    (27
    )Corporate
    
    
    11,266
    
    
    
    4,695
    
    
    
    18,162
    
    
    
    10,489Subtotal
    
    
    21,997
    
    
    
    18,564
    
    
    
    41,194
    
    
    
    32,803Intercompany eliminations
    
    
    528
    
    
    
    (254
    )
    
    
    (134
    )
    
    
    (390
    )Total income before income taxes
    
    $
    22,525
    
    
    $
    18,310
    
    
    $
    41,060
    
    
    $
    32,413Insurance combined ratio analysis: (1)Before purchase accounting adjustments:Net losses and loss adjustment expense ratio
    
    
    60.2
    
    
    
    56.1
    
    
    
    59.2
    
    
    
    57.1Other underwriting expense ratio
    
    
    31.2
    
    
    
    33.1
    
    
    
    32.0
    
    
    
    33.3Combined ratio
    
    
    91.4
    
    
    
    89.2
    
    
    
    91.2
    
    
    
    90.4Impact of purchase accounting adjustmentsNet losses and loss adjustment expense ratio
    
    
    
    
    
    
    3.3
    
    
    
    
    
    
    
    3.7Other underwriting expense ratio
    
    
    
    
    
    
    (4.0
    )
    
    
    
    
    
    
    (4.3
    )Combined ratio
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    (0.6
    )As reported, after purchase accounting adjustments:Net losses and loss adjustment expense ratio
    
    
    60.2
    
    
    
    59.4
    
    
    
    59.2
    
    
    
    60.8Other underwriting expense ratio
    
    
    31.2
    
    
    
    29.1
    
    
    
    32.0
    
    
    
    29.0Combined ratio
    
    
    91.4
    
    
    
    88.5
    
    
    
    91.2
    
    
    
    89.8
 (1)
    
    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.
 Results of Operations
 Quarter ended June 30, 2006 Compared with the Quarter ended June 30, 2005
 Premiums
  25




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UNITED AMERICA INDEMNITY, LTD.
  Quarter Ended
    
    
    Quarter Ended
    
    
    Increase /(Dollars in thousands)
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    (Decrease)Penn-America product
    
    $
    106,370
    
    
    $
    105,629
    
    
    $
    741United National Class Specific (1)
    
    
    29,740
    
    
    
    29,106
    
    
    
    634United National Professional
    
    
    17,563
    
    
    
    18,956
    
    
    
    (1,393
    )United National Brokerage
    
    
    6,717
    
    
    
    3,361
    
    
    
    3,356United National Umbrella / Excess
    
    
    6,905
    
    
    
    6,850
    
    
    
    55Total United National products
    
    
    60,925
    
    
    
    58,273
    
    
    
    2,652Total
    
    $
    167,295
    
    
    $
    163,902
    
    
    $
    3,393
 (1)
    
    This product class includes gross written premiums of the Non-U.S.
Insurance Operations of $(0.01) million and $0.6 million for the quarters ended
June 30, 2006 and 2005, respectively.
 
    
    Penn-America gross premiums written increased slightly as increased property
premium were offset by a reduction in casualty premium
    
    United National gross premiums written increased due to an increase in property
brokerage premium partially offset by a decline in the professional product class resulting
from a reduction in public officials premium.
  Quarter Ended
    
    
    Quarter Ended
    
    
    Increase /(Dollars in thousands)
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    (Decrease)Penn-America product
    
    $
    96,746
    
    
    $
    93,701
    
    
    $
    3,045United National Class Specific (1)
    
    
    24,072
    
    
    
    22,053
    
    
    
    2,019United National Professional
    
    
    15,228
    
    
    
    16,387
    
    
    
    (1,159
    )United National Brokerage
    
    
    4,712
    
    
    
    2,896
    
    
    
    1,816United National Umbrella / Excess
    
    
    1,930
    
    
    
    1,257
    
    
    
    673Total United National products
    
    
    45,942
    
    
    
    42,593
    
    
    
    3,349Total
    
    $
    142,688
    
    
    $
    136,294
    
    
    $
    6,394
 (1)
    
    This product class includes net premiums written of the Non-U.S. Insurance
Operations of $(0.01) million and $0.5 million for the quarters ended June 30,
2006 and 2005, respectively.
 
    
    Penn-America net premiums written increased due to an increase in property premium
and increased retentions relating to Penn-Americas casualty reinsurance treaties.
    
    United National net premiums written increased primarily due to an increase in property
brokerage premium, increased retentions relating to United Nationals casualty reinsurance
treaties, and new product offerings within our class specific product class partially
offset by a decline in our professional product class resulting from a reduction in public
officials premium.
  26




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 Agency Commission and Fee Revenues
  Net Investment Income
    Net Realized Investment Gains (Losses)
  Net Losses and Loss Adjustment Expenses
   27




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
  (Dollars in thousands)
    
    June 30, 2006
    
    
    March 31, 2006
    
    
    Increase/ (DecreaseKatrina first landfall
    
    $
    650
    
    
    $
    650
    
    
    $
    Katrina second landfall
    
    
    36,929
    
    
    
    36,927
    
    
    
    2Rita
    
    
    4,500
    
    
    
    4,508
    
    
    
    (8
    )Wilma
    
    
    8,900
    
    
    
    8,897
    
    
    
    3Total
    
    $
    50,979
    
    
    $
    50,982
    
    
    $
    (3
    )
  (Dollars in thousands)
    
    June 30, 2006
    
    
    March 31, 2006
    
    
    Increase/ (DecreaseKatrina first landfall
    
    $
    207
    
    
    $
    194
    
    
    $
    13Katrina second landfall
    
    
    5,833
    
    
    
    5,837
    
    
    
    (4
    )Rita
    
    
    4,100
    
    
    
    4,108
    
    
    
    (8
    )Wilma
    
    
    2,000
    
    
    
    1,997
    
    
    
    3Total
    
    $
    12,140
    
    
    $
    12,136
    
    
    $
    4
   Acquisition Costs and Other Underwriting Expenses
  
    
    The increase in acquisition expense is primarily due to the fact that Penn-America
Insurance Companies deferred acquisition costs were written off at January 24, 2005 as a
result of their merger with us, thereby reducing acquisition costs in 2005.
    
    Other underwriting expenses increased $0.2 million.
 Agency Commission and Operating Expenses
  Corporate and Other Operating Expenses
  28




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 Expense and Combined Ratios
   Interest Expense
  Income Tax Expense (Benefit)
   Equity in Net Income of Partnerships
  Net Income and Operating Income
  29




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
  Quarter Ended
    
    
    Quarter Ended(Dollars in thousands)
    
    June 30, 2006
    
    
    June 30, 2005Operating income
    
    $
    20,327
    
    
    $
    18,187Adjustments:Net realized investment gains (losses), net of tax
    
    
    (73
    )
    
    
    269Net income
    
    $
    20,254
    
    
    $
    18,456
 Six Months Ended June 30, 2006 Compared with the Six Months Ended June 30, 2005
 Premiums
  Six Months Ended
    
    
    Six Months Ended
    
    
    Increase /(Dollars in thousands)
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    (Decrease)Penn-America product
    
    $
    206,041
    
    
    $
    183,949
    
    
    $
    22,092United National Class Specific (1)
    
    
    61,635
    
    
    
    58,816
    
    
    
    2,819United National Professional
    
    
    33,825
    
    
    
    36,077
    
    
    
    (2,252
    )United National Brokerage
    
    
    12,444
    
    
    
    6,331
    
    
    
    6,113United National Umbrella / Excess
    
    
    12,908
    
    
    
    14,189
    
    
    
    (1,281
    )Total United National products
    
    
    120,812
    
    
    
    115,413
    
    
    
    5,399Total
    
    $
    326,853
    
    
    $
    299,362
    
    
    $
    27,491
 (1)
    
    This product class includes gross written premiums of the Non-U.S.
Insurance Operations of $0.05 million and $2.2 million for the six months ended
June 30, 2006 and 2005, respectively.
 
    
    Penn-America gross premiums written increased primarily as a result of the
inclusion of premium written by the Penn-America Insurance Companies for a full six months
in 2006 whereas our 2005 results only included premium written by the Penn-America
Insurance Companies from January 25, 2005, the date of their merger with us.
    
    United National gross premiums written increased primarily due to an increase in
property brokerage premium.
 30




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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
  Six Months Ended
    
    
    Six Months Ended
    
    
    Increase /(Dollars in thousands)
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    (Decrease)Penn-America product
    
    $
    187,034
    
    
    $
    163,180
    
    
    $
    23,854United National Class Specific (1)
    
    
    49,721
    
    
    
    43,622
    
    
    
    6,099United National Professional
    
    
    29,187
    
    
    
    30,903
    
    
    
    (1,716
    )United National Brokerage
    
    
    9,011
    
    
    
    5,451
    
    
    
    3,560United National Umbrella / Excess
    
    
    3,072
    
    
    
    2,659
    
    
    
    413Total United National products
    
    
    90,991
    
    
    
    82,635
    
    
    
    8,356Total
    
    $
    278,025
    
    
    $
    245,815
    
    
    $
    32,210
 (1)
    
    This product class includes net premiums written of the Non-U.S.
Insurance Operations of $0.04 million and $1.9 million for the six months ended
June 30, 2006 and 2005, respectively.
 
    
    Penn-America net premiums written increased primarily resulting from the inclusion
of premium written by the Penn-America Insurance Companies for a full six months in 2006
whereas our 2005 results only included premium written by the Penn-America Insurance
Companies from January 25, 2005, the date of their merger with us, combined with an
increase in property premium and increase retentions relating to Penn-Americas casualty
reinsurance treaties.
    
    United National net premiums written increased primarily due an increase in property
brokerage premium, increased retentions relating to United Nationals casualty reinsurance
treaties, and new product offerings within our class specific product class partially
offset by a decline in our professional product class resulting from a reduction in public
officials premium.
  Agency Commission and Fee Revenues
  Net Investment Income
  31




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UNITED AMERICA INDEMNITY, LTD.
   Net Realized Investment Gains (Losses)
  Net Losses and Loss Adjustment Expenses
    (Dollars in thousands)
    
    June 30, 2006
    
    
    December 31, 2005
    
    
    Increase/ (Decrease)Katrina first landfall
    
    $
    650
    
    
    $
    1,250
    
    
    $
    600Katrina second landfall
    
    
    36,929
    
    
    
    30,600
    
    
    
    6,329Rita
    
    
    4,500
    
    
    
    3,400
    
    
    
    1,100Wilma
    
    
    8,900
    
    
    
    7,700
    
    
    
    1,200Total
    
    $
    50,979
    
    
    $
    42,950
    
    
    $
    8,029
  (Dollars in thousands)
    
    June 30, 2006
    
    
    December 31, 2005
    
    
    Increase/ (Decrease)Katrina first landfall
    
    $
    207
    
    
    $
    560
    
    
    $
    (353
    )Katrina second landfall
    
    
    5,833
    
    
    
    2,400
    
    
    
    3,433Rita
    
    
    4,100
    
    
    
    3,000
    
    
    
    1,100Wilma
    
    
    2,000
    
    
    
    2,000
    
    
    
    Total
    
    $
    12,140
    
    
    $
    7,960
    
    
    $
    4,180
  32




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UNITED AMERICA INDEMNITY, LTD.
   Acquisition Costs and Other Underwriting Expenses
  
    
    The $21.3 million increase in acquisition costs was primarily the result of the fact
that $14.1 million of Penn-America Insurance Companies deferred acquisition costs were
written off as a result of its merger with us on January 24, 2005. In addition, 2006
includes Penn-Americas results for a full six months. For the six months ended June 30,
2005, the results of Penn-America are only included from the date of its acquisition,
January 25, 2005.
    
    Other underwriting expenses increased $0.3 million.
 Agency Commission and Operating Expenses
  Corporate and Other Operating Expenses
  Expense and Combined Ratios
   33




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UNITED AMERICA INDEMNITY, LTD.
 Interest Expense
  Income Tax Expense (Benefit)
   Equity in Net Earnings of Partnerships
  Extraordinary Gain
  Net Income and Operating Income
  34




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UNITED AMERICA INDEMNITY, LTD.
  Six Months Ended
    
    
    Six Months Ended(Dollars in thousands)
    
    June 30, 2006
    
    
    June 30, 2005Operating income
    
    $
    38,046
    
    
    $
    32,728Adjustments:Net realized investment gains (losses), net of tax
    
    
    (14
    )
    
    
    (107
    )Extraordinary gain
    
    
    
    
    
    
    1,426Total after-tax adjustments
    
    
    (14
    )
    
    
    1,319Net income
    
    $
    38,032
    
    
    $
    34,047
 Liquidity and Capital Resources
 Sources and Uses of Funds
     35




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UNITED AMERICA INDEMNITY, LTD.
  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.
   Liquidity
    36




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UNITED AMERICA INDEMNITY, LTD.
           37




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UNITED AMERICA INDEMNITY, LTD.
     Capital Resources
     Issuer
    
    Amount
    
    Maturity
    
    Interest Rate
    
    Call ProvisionsAIS through its
wholly owned
subsidiary UNG
Trust 1
    
    $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 2
    
    $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 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, 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, 2009
 (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.
   38




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UNITED AMERICA INDEMNITY, LTD.
   Off Balance Sheet Arrangements
  Inflation
   Cautionary Note Regarding Forward-Looking Statements
    39




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UNITED AMERICA INDEMNITY, LTD.
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Change in(Dollars in thousands)
    
    
    
    
    
    Market ValueBasis Point Change
    
    Market Value
    
    $
    
    %200
    
    $
    1,146,205
    
    
    $
    (91,940
    )
    
    
    (7.4
    )%100
    
    
    1,191,996
    
    
    
    (46,149
    )
    
    
    (3.7
    )No change
    
    
    1,238,145
    
    
    
    
    
    
    
    (100)
    
    
    1,283,490
    
    
    
    45,345
    
    
    
    3.7(200)
    
    
    1,326,549
    
    
    
    88,404
    
    
    
    7.1
 Credit Risk
    Equity Price Risk
   40




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UNITED AMERICA INDEMNITY, LTD.
    (Dollars in thousands)HypotheticalEstimated Fair Value
    
    Percentage IncreaseHypothetical Price
    
    after Hypothetical
    
    (Decrease) inChange
    
    Change in Prices
    
    Shareholders' Equity(20%)
    
    $
    53,161
    
    
    
    (1.3
    %)(10%)
    
    
    59,806
    
    
    
    (0.7
    %)No change
    
    
    66,451
    
    
    
    10%
    
    
    73,096
    
    
    
    0.7
    %20%
    
    
    79,741
    
    
    
    1.3
    %
 
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  41




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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 Hire and Retain a Chief Executive
Officer or Other Key Personnel Could Adversely Affect Our
Business.
    
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    Election of the following nominees to our Board of Directors.
 Nominee
    
    Votes For
    
    Votes Against
    
    Votes AbstainedSaul A. Fox
    
    
    140,031,774
    
    
    
    83,905
    
    
    
    2,042Edward J. Noonan
    
    
    140,030,265
    
    
    
    83,740
    
    
    
    3,716Troy W. Thacker
    
    
    140,029,016
    
    
    
    85,988
    
    
    
    2,716John J. Hendrickson
    
    
    140,109,636
    
    
    
    6,292
    
    
    
    1,792Kenneth J. Singleton
    
    
    140,110,689
    
    
    
    5,153
    
    
    
    1,878Stephen A. Cozen
    
    
    140,108,836
    
    
    
    7,093
    
    
    
    1,792Richard L. Duszak
    
    
    140,110,592
    
    
    
    5,336
    
    
    
    1,792
 2.
    
    Approval of an amendment to our Share Incentive Plan.
 Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes133,193,424
    
    2,049,518
    
    77,681
    
    4,797,098
 3.
    
    Approval of an amendment to our Amended and Restated Annual Incentive Awards Program.
 Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes139,607,017
    
    431,308
    
    79,395
    
    1
 4.
    
    Ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditor
for 2006 and the authorization of our Board of Directors acting by its Audit Committee to set
the fees for the independent auditor.
 Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes140,016,349
    
    99,517
    
    1,855
    
    0
 42




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UNITED AMERICA INDEMNITY, LTD.
 5.
    
    Election of the following nominees to the Wind River Insurance Company (Barbados) Ltd.
Board of Directors.
 Nominee
    
    Votes For
    
    Votes WithheldTroy W. Thacker
    
    
    140,035,807
    
    
    
    81,914David N. King
    
    
    140,111,782
    
    
    
    5,939Nicholas Crichlow
    
    
    140,111,982
    
    
    
    5,739Joseph F. Morris
    
    
    140,035,807
    
    
    
    81,914Alan Bossin
    
    
    140,111,982
    
    
    
    5,739Michael J. Tait
    
    
    140,111,982
    
    
    
    5,739Kevin L. Tate
    
    
    140,035,433
    
    
    
    82,288David R. Whiting
    
    
    140,035,807
    
    
    
    81,914Janita Burke Waldron
(Alternate Director)
    
    
    140,114,001
    
    
    
    3,720Kaela Keen
(Alternate Director)
    
    
    140,114,001
    
    
    
    3,720
 6.
    
    Approval of the appointment of PricewaterhouseCoopers, St. Michael, Barbados, as the
independent auditor of Wind River Insurance Company (Barbados) Ltd. for 2006 and of the
setting of fees for the independent auditor by the Board of Directors of Wind River Insurance
Company (Barbados) Ltd.
 Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes139,963,734
    
    98,440
    
    55,547
    
    0
 7.
    
    Approval of the amendment to the organizational documents of Wind River Insurance Company
(Barbados) Ltd., the change of jurisdiction of Wind River Insurance Company (Barbados) Ltd. to
Bermuda, and the amalgamation of Wind River Insurance Company (Barbados) Ltd. with Wind River
Insurance Company, Ltd.
 Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes135,292,377
    
    26,720
    
    1,524
    
    4,797,100
 8.
    
    Approval of the financial statements of Wind River Insurance Company (Barbados) Ltd. and
the report of the independent auditors on these financial statements.
 Votes For
    
    Votes Against
    
    Votes Abstained110,015,996
    
    0
    
    0
 9.
    
    Election of the following nominees to the Wind River Insurance Company, Ltd. Board of
Directors.
 Nominee
    
    Votes For
    
    Votes WithheldAlan Bossin
    
    
    138,072,581
    
    
    
    6,474Michael J. Tait
    
    
    138,072,598
    
    
    
    6,457Troy W. Thacker
    
    
    137,996,036
    
    
    
    83,019Kevin L. Tate
    
    
    137,996,249
    
    
    
    82,806Joseph F. Morris
    
    
    137,996,423
    
    
    
    82,632David R. Whiting
    
    
    138,072,598
    
    
    
    6,457Janita Burke Waldron
(Alternate Director)
    
    
    138,074,617
    
    
    
    4,438Kaela Keen
(Alternate Director)
    
    
    138,074,617
    
    
    
    4,438
 10.
    
    Approval of the appointment of PricewaterhouseCoopers, Hamilton, Bermuda, as the
independent auditor of Wind River Insurance Company, Ltd. for 2006.
 Votes For
    
    Votes Against
    
    Votes Abstained
    
    Broker Non Votes137,924,900
    
    98,440
    
    55,715
    
    2,038,666
 11.
    
    Approval of the financial statements of Wind River Insurance Company, Ltd. and the report
of the independent auditors on these financial statements.
 Votes For
    
    Votes Against
    
    Votes Abstained110,015,996
    
    0
    
    0
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##### Table of Contents



UNITED AMERICA INDEMNITY, LTD.
 12.
    
    Election of the following nominees to the Wind River Services, Ltd. Board of Directors.
 Nominee
    
    Votes For
    
    
    Votes WithheldTroy W. Thacker
    
    
    137,996,423
    
    
    
    82,632Kevin L. Tate
    
    
    137,996,636
    
    
    
    82,419Alan Bossin
    
    
    138,072,985
    
    
    
    6,070Michael J. Tait
    
    
    138,072,985
    
    
    
    6,070Joseph F. Morris
    
    
    137,996,810
    
    
    
    82,245David R. Whiting
    
    
    137,996,810
    
    
    
    82,245Janita Burke Waldron
(Alternate Director)
    
    
    138,075,004
    
    
    
    4,051Kaela Keen
(Alternate Director)
    
    
    138,075,004
    
    
    
    4,051
 13.
    
    Approval of the appointment of PricewaterhouseCoopers, Hamilton, Bermuda, as the
independent auditor of Wind River Services, Ltd. for 2006.
 Votes For
    
    Votes Against
    
    Votes Abstained135,442,045
    
    79,740
    
    55,328
 12.
    
    Approval of the proposal to waive the presentation of the financial statements of Wind
River Services, Ltd. and the report of the independent auditors on these financial statements
for approval by shareholders.
 Votes For
    
    Votes Against
    
    Votes Abstained135,475,211
    
    99,567
    
    2,334
 
 Item 6. Exhibits
 10.1*
    
    Executive Employment Agreement, dated as of April 1, 2006, between Wind River
Insurance Company (Bermuda), Ltd. and David R. Whiting (incorporated herein by reference to
Exhibit 10.1 of our Current Report on Form 8-K filed on May 17, 2006).10.2*
    
    Amendment No. 3 to the United America Indemnity, Ltd. Share Incentive Plan
(incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed
on June 1, 2006).10.3*
    
    Amendment No. 1 to the Amended and Restated United America Indemnity, Ltd. Annual
Incentive Awards Program (incorporated herein by reference to Exhibit 10.2 of our Current
Report on Form 8-K filed on June 1, 2006).10.4*
    
    Amendment No. 1 to the Management Agreement, dated as of May 25, 2006, by and among
United America Indemnity, Ltd., Fox Paine & Company, LLC and Wind River Holdings, L.P.,
formerly The AMC Group, L.P. (incorporated herein by reference to Exhibit 10.3 of our
Current Report on Form 8-K filed on June 1, 2006).31.1+
    
    Certification 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 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 2002.31.3+
    
    Certification 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 2002.31.4+
    
    Certification 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 pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2+
    
    Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
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UNITED AMERICA INDEMNITY, LTD.
 32.3+
    
    Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.4+
    
    Certification 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
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UNITED AMERICA INDEMNITY, LTD.
 
 SIGNATURE
  UNITED AMERICA INDEMNITY, LTD.RegistrantAugust 9, 2006
    
    By:
    
    /s/ Kevin L. TateDate: August 9, 2006
    
    Kevin L. TateChief Financial Officer(Authorized Signatory andPrincipal Financial and AccountingOfficer)
 46