##### 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, 2009
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-50891
 SPECIALTY UNDERWRITERS ALLIANCE, INC.
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    20-0432760(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)222 South Riverside Plaza,Chicago, Illinois
    
    60606(Address of Principal Executive Offices)
    
    (Zip Code)
 (888) 782-4672  (Registrants Telephone Number, Including Area Code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



SPECIALTY UNDERWRITERS ALLIANCE, INC.
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    18EX-31.1EX-31.2EX-32.1EX-32.2
  
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Specialty Underwriters Alliance, Inc.
Consolidated Balance Sheets
As of March 31, 2009 and December 31, 2008
(in thousands)
 3/31/2009
    
    
    12/31/2008(unaudited)ASSETSFixed maturity investments, at fair value (amortized cost: $222,583 and
$220,744)
    
    $
    219,462
    
    
    $
    216,708Short-term investments, at amortized cost (which approximates fair value)
    
    
    42,039
    
    
    
    46,697Total Investments
    
    $
    261,501
    
    
    $
    263,405Cash
    
    
    408
    
    
    
    208Insurance premiums receivable
    
    
    59,700
    
    
    
    60,715Reinsurance recoverable on paid and unpaid loss and loss adjustment expenses
    
    
    79,887
    
    
    
    79,598Prepaid reinsurance premiums
    
    
    539
    
    
    
    309Investment income accrued
    
    
    2,280
    
    
    
    2,467Equipment and capitalized software at cost (less accumulated depreciation
of $17,171 and $15,486)
    
    
    13,119
    
    
    
    13,562Intangible assets
    
    
    10,745
    
    
    
    10,745Deferred acquisition costs
    
    
    15,858
    
    
    
    18,156Deferred tax asset
    
    
    2,973
    
    
    
    3,146Other assets
    
    
    4,740
    
    
    
    2,426Total Assets
    
    $
    451,750
    
    
    $
    454,737LIABILITIES & STOCKHOLDERS EQUITYLiabilitiesLoss and loss adjustment expense reserves
    
    $
    216,085
    
    
    $
    214,953Unearned insurance premiums
    
    
    72,773
    
    
    
    80,600Insured deposit funds
    
    
    16,199
    
    
    
    15,806Accounts payable and other liabilities
    
    
    8,631
    
    
    
    7,089Total Liabilities
    
    $
    313,688
    
    
    $
    318,448Stockholders equityCommon stock at $0.01 par value per share  authorized: 30,000,000 shares;
issued: 14,712,355 shares; and outstanding: 14,437,355 shares
    
    $
    147
    
    
    $
    147Class B common stock at $0.01 par value per share  authorized: 2,000,000
shares; issued and outstanding: 1,371,934 shares and 1,368,562 shares
    
    
    14
    
    
    
    14Paid-in capital  Common Stock
    
    
    130,100
    
    
    
    129,926Paid-in capital  Class B Common Stock
    
    
    8,089
    
    
    
    8,077Accumulated earnings
    
    
    2,686
    
    
    
    1,693Treasury stock
    
    
    (1,347
    )
    
    
    (1,347
    )Accumulated other comprehensive income (loss)
    
    
    (1,627
    )
    
    
    (2,221
    )Total Stockholders Equity
    
    $
    138,062
    
    
    $
    136,289Total Liabilities & Stockholders Equity
    
    $
    451,750
    
    
    $
    454,737
  
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##### Table of Contents



Specialty Underwriters Alliance, Inc.
Consolidated Statements of Operations and Comprehensive Income
For the Three Months Ended March 31, 2009 and 2008
(Unaudited  in thousands, except for earnings per share)
 Three Months Ended3/31/2009
    
    
    3/31/2008RevenuesEarned insurance premiums
    
    $
    34,775
    
    
    $
    35,750Net investment income
    
    
    2,774
    
    
    
    2,653Net realized gains (losses)
    
    
    (67
    )
    
    
    31Total revenue
    
    
    37,482
    
    
    
    38,434ExpensesLoss and loss adjustment expenses
    
    
    20,934
    
    
    
    21,058Acquisition expenses
    
    
    8,525
    
    
    
    8,731Other operating expenses
    
    
    6,585
    
    
    
    5,899Total expenses
    
    
    36,044
    
    
    
    35,688Pretax income
    
    
    1,438
    
    
    
    2,746Income tax (expense) benefit
    
    
    (445
    )
    
    
    719Net income
    
    
    993
    
    
    
    3,465Net change in unrealized gains and losses for
investments held, after tax
    
    
    594
    
    
    
    452Comprehensive income
    
    $
    1,587
    
    
    $
    3,917Earnings per share available to common
stockholders (in dollars)Basic
    
    $
    0.06
    
    
    $
    0.22Diluted
    
    $
    0.06
    
    
    $
    0.22Weighted average shares outstandingBasic
    
    
    15,808
    
    
    
    15,579Diluted
    
    
    15,945
    
    
    
    15,579
  
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##### Table of Contents



Specialty Underwriters Alliance, Inc.
Consolidated Statement of Stockholders EquityAs of March 31, 2009(Unaudited  in thousands)
 Accum.Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Common
    
    
    Paid-in
    
    
    
    
    
    
    
    
    
    
    Comp.
    
    
    Stock-Stock
    
    
    Capital
    
    
    Stock
    
    
    Capital
    
    
    Retained
    
    
    Treasury
    
    
    Income
    
    
    holders'Class A
    
    
    Class A
    
    
    Class B
    
    
    Class B
    
    
    Earnings
    
    
    Stock
    
    
    (Loss)
    
    
    EquityBalance at Dec. 31, 2008
    
    $
    147
    
    
    $
    129,926
    
    
    $
    14
    
    
    $
    8,077
    
    
    $
    1,693
    
    
    $
    (1,347
    )
    
    $
    (2,221
    )
    
    $
    136,289Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    993
    
    
    
    -
    
    
    
    -
    
    
    
    993Net change in unrealized
investment gains, net of
tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    594
    
    
    
    594Stock issuance
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    12
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    12Stock based compensation
    
    
    -
    
    
    
    174
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    174Balance at March 31, 2009
    
    $
    147
    
    
    $
    130,100
    
    
    $
    14
    
    
    $
    8,089
    
    
    $
    2,686
    
    
    $
    (1,347
    )
    
    $
    (1,627
    )
    
    $
    138,062
  
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Specialty Underwriters Alliance, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2009 and 2008
(Unaudited  in thousands)
 Three Months Ended3/31/2009
    
    
    3/31/2008Cash flows from operationsNet income
    
    $
    993
    
    
    $
    3,465Charges (credits) to reconcile net income to cash flows from operations:Change in deferred income tax
    
    
    (147
    )
    
    
    (756
    )Net realized losses (gains)
    
    
    67
    
    
    
    (31
    )Amortization of bond premium (discount)
    
    
    46
    
    
    
    (25
    )Depreciation
    
    
    1,685
    
    
    
    1,524Net change in:Reinsurance recoverable on unpaid loss and loss adjustment
expense reserves
    
    
    (289
    )
    
    
    2,382Loss and loss adjustment expense reserves
    
    
    1,132
    
    
    
    4,874Insurance premiums receivable
    
    
    1,015
    
    
    
    8,344Unearned insurance premiums
    
    
    (7,827
    )
    
    
    (14,040
    )Deferred acquisition costs
    
    
    2,298
    
    
    
    3,083Prepaid reinsurance premiums
    
    
    (230
    )
    
    
    (381
    )Insured deposit funds
    
    
    393
    
    
    
    1,236Other, net
    
    
    (413
    )
    
    
    2,056Total adjustments
    
    
    (2,270
    )
    
    
    8,266Net cash flows provided by (used for) operations
    
    
    (1,277
    )
    
    
    11,731Cash flows from investing activitiesNet decrease in short-term investments
    
    
    4,658
    
    
    
    15,199Redemptions, calls and maturities of fixed maturity investments
    
    
    12,636
    
    
    
    10,712Purchases of fixed maturity investments
    
    
    (14,587
    )
    
    
    (35,279
    )Purchases of equipment and capitalized software
    
    
    (1,242
    )
    
    
    (1,992
    )Net cash flows (used for) provided by investing activities
    
    
    1,465
    
    
    
    (11,360
    )Cash flows from financing activitiesIssuance of common stock
    
    
    12
    
    
    
    405Net cash provided by financing activities
    
    
    12
    
    
    
    405Net increase in cash during the period
    
    
    200
    
    
    
    776Cash at beginning of the period
    
    $
    208
    
    
    $
    968Cash at the end of the period
    
    $
    408
    
    
    $
    1,744
  
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Note 1. Basis of Presentation
    Note 2. Recent Accounting Pronouncements
 Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Interim Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of
Financial Instruments
 Amendments to the Impairment Guidance of EITF Issue No. 99-20 Accounting for Certain Investments in Debt and Equity Securities"
 
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Note 3. Earnings Per Share
  Three Months Ended3/31/2009
    
    
    3/31/2008Numerator for earnings per shareNet income
    
    $
    993
    
    
    $
    3,465Denominator for earnings per shareWeighted average shares outstanding used in

computation of earnings per shareCommon stock (class A and B) issued
    
    
    16,083
    
    
    
    15,579Common stock in treasury
    
    
    275
    
    
    
    -Weighted
average shares outstanding - basic
    
    
    15,808
    
    
    
    15,579Effect of dilutive securities1

Stock awards
    
    
    137
    
    
    
    -Weighted
average shares outstanding - diluted
    
    
    15,945
    
    
    
    15,579Earnings per shareBasic
    
    $
    0.06
    
    
    $
    0.22Diluted
    
    $
    0.06
    
    
    $
    0.22
 
 1
    
    Outstanding options of 718 and 732 as of March 31, 2009 and March 31,
2008, respectively, have been excluded from the diluted earnings per share calculation for
the three months ended March 31, 2009 and March 31, 2008, as they were anti-dilutive. Note 4. Income Taxes
    Three Months Ended3/31/09
    
    
    3/31/08Current tax (expense)
    
    $
    (592
    )
    
    $
    (37
    )Deferred tax benefit (expense)
    
    
    147
    
    
    
    756Total income tax benefit (expense)
    
    $
    (445
    )
    
    $
    719
 Note 5. Unpaid Loss and Loss Adjustment Expense Reserves
  
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Note 6. Investments
   Fair Value Measurement Using:Quoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantFair
    
    
    Identical
    
    
    Observable
    
    
    UnobservableValue at
    
    
    Assets
    
    
    Inputs
    
    
    InputsCategory
    
    3/31/2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)U.S. Treasury
    
    $
    10,764
    
    
    $
    -
    
    
    $
    10,764
    
    
    $
    -U.S. Government Agency
    
    
    32,039
    
    
    
    -
    
    
    
    32,039
    
    
    
    -Municipal
    
    
    57,743
    
    
    
    -
    
    
    
    57,743
    
    
    
    -Corporate Fixed Maturity
    
    
    62,116
    
    
    
    -
    
    
    
    62,116
    
    
    
    -Agency Mortgage Backed
    
    
    40,214
    
    
    
    -
    
    
    
    40,214
    
    
    
    -Non-Agency Mortgage Backed
    
    
    5,271
    
    
    
    -
    
    
    
    -
    
    
    
    5,271Commercial Mortgage Backed
    
    
    9,586
    
    
    
    -
    
    
    
    -
    
    
    
    9,586Asset-Backed
    
    
    1,729
    
    
    
    -
    
    
    
    -
    
    
    
    1,729Total Fixed Maturity Investments
    
    $
    219,462
    
    
    $
    -
    
    
    $
    202,876
    
    
    $
    16,586
  
    
    First, the Company requests a single non-binding price from our independent pricing
service.
    
    Second, if no price is available from the pricing service for the instrument, the
Company requests one or more non-binding broker-dealer quotes. A single quote is
sought from a broker-dealer who has significant knowledge of the instrument being
priced. If such broker-dealer is not available to quote, then an average is used from
quotes solicited from multiple broker-dealers.
 
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##### Table of Contents




    
    Third, if a broker-dealer quote is unavailable for the instrument, the Company uses
a matrix pricing formula based on various factors provided from multiple broker-dealers
including yield spreads, reported trades, sector or grouping information and for
certain securities, other factors such as timeliness of payment, default experience and
prepayment speed assumptions.
    Three MonthsEnded3/31/2009Level 3 investments as of beginning of period
    
    $
    8,789Transfers into (out of) level 3 (at beginning period value)
    
    
    8,677Purchases, sales, issuances, and settlements, net
    
    
    (159
    )Total gains or losses (realized/unrealized):Included in earnings
    
    
    (211
    )Included in comprehensive income
    
    
    (510
    )Level 3 investments as of March 31, 2009
    
    $
    16,586
    Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCategory
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury
    
    $
    9,793
    
    
    $
    971
    
    
    $
    -
    
    
    $
    10,764U.S. Government Agencies
    
    
    30,248
    
    
    
    1,815
    
    
    
    (24
    )
    
    
    32,039Municipals
    
    
    55,817
    
    
    
    2,114
    
    
    
    (188
    )
    
    
    57,743Corporate Fixed Maturity
    
    
    63,307
    
    
    
    1,196
    
    
    
    (2,387
    )
    
    
    62,116Agency Mortgage Backed
    
    
    38,218
    
    
    
    1,996
    
    
    
    -
    
    
    
    40,214Non-Agency Mortgage Backed
    
    
    7,460
    
    
    
    -
    
    
    
    (2,189
    )
    
    
    5,271Commercial Mortgage Backed
    
    
    13,306
    
    
    
    -
    
    
    
    (3,720
    )
    
    
    9,586Asset Backed
    
    
    4,434
    
    
    
    -
    
    
    
    (2,705
    )
    
    
    1,729Total Fixed Maturities
    
    $
    222,583
    
    
    $
    8,092
    
    
    $
    (11,213
    )
    
    $
    219,462
 
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Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCategory
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury
    
    $
    9,794
    
    
    $
    1,109
    
    
    $
    -
    
    
    $
    10,903U.S. Government Agencies
    
    
    35,109
    
    
    
    2,118
    
    
    
    -
    
    
    
    37,227Municipals
    
    
    54,655
    
    
    
    959
    
    
    
    (679
    )
    
    
    54,935Corporate Fixed Maturity
    
    
    56,368
    
    
    
    858
    
    
    
    (1,691
    )
    
    
    55,535Agency Mortgage Backed
    
    
    39,066
    
    
    
    1,373
    
    
    
    -
    
    
    
    40,439Non-Agency Mortgage Backed
    
    
    7,781
    
    
    
    -
    
    
    
    (2,617
    )
    
    
    5,164Commercial Mortgage Backed
    
    
    13,301
    
    
    
    -
    
    
    
    (3,412
    )
    
    
    9,889Asset Backed
    
    
    4,670
    
    
    
    -
    
    
    
    (2,054
    )
    
    
    2,616Total Fixed Maturities
    
    $
    220,744
    
    
    $
    6,417
    
    
    $
    (10,453
    )
    
    $
    216,708
 Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial
Assets
 Note 7. Equity-Based Compensation
      
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Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
the federal securities laws, which are intended to be covered by the safe harbors created thereby.
Those statements include, but may not be limited to, the discussions of our operating and growth
strategy. Investors are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, those set forth under the caption Risk Factors in
Item 1A of this Quarterly Report on Form 10-Q and in the Business section of our Annual Report on
Form 10-K for the year ended December 31, 2008. Although we believe that the assumptions
underlying the forward-looking statements contained herein are reasonable, any of the assumptions
could prove to be inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by us or any other person
that our objectives and plans will be achieved. We undertake no obligation to publicly release any
revisions to any forward-looking statements contained herein to reflect events and circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated events.
 Overview
   
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Three Months Ended March 31, 2009 as compared to the Three Months Ended March 31, 2008
 RESULTS OF OPERATIONS
 Three Months Ended3/31/2009
    
    
    3/31/2008
    
    
    % Change(in millions, except for earningsper share)Gross written premiums
    
    $
    29.0
    
    
    $
    24.1
    
    
    
    20.3%Net written premiums
    
    
    27.0
    
    
    
    21.7
    
    
    
    24.4%Earned premiums
    
    $
    34.8
    
    
    $
    35.8
    
    
    
    -2.8%Net investment income
    
    
    2.8
    
    
    
    2.7
    
    
    
    3.7%Net realized gains (losses)
    
    
    (0.1
    )
    
    
    
    
    
    
    *Total revenues
    
    
    37.5
    
    
    
    38.5
    
    
    
    -2.6%Net loss and loss adjustment expense
    
    
    20.9
    
    
    
    21.1
    
    
    
    -0.9%Acquisition expenses
    
    
    8.6
    
    
    
    8.7
    
    
    
    -1.1%Other operating expenses
    
    
    6.6
    
    
    
    5.9
    
    
    
    11.9%Total expenses
    
    
    36.1
    
    
    
    35.7
    
    
    
    1.1%Pre-tax income
    
    
    1.4
    
    
    
    2.8
    
    
    
    -50.0%Federal income tax
    
    
    (0.4
    )
    
    
    0.7
    
    
    
    *Net income
    
    $
    1.0
    
    
    $
    3.5
    
    
    
    -71.4%Basic
    
    $
    0.06
    
    
    $
    0.22
    
    
    
    -72.7%Diluted
    
    $
    0.06
    
    
    $
    0.22
    
    
    
    -72.7%Basic
    
    
    15.8
    
    
    
    15.6
    
    
    
    1.3%Diluted
    
    
    15.9
    
    
    
    15.6
    
    
    
    1.9%Key operating ratiosNet loss and loss adjustment expense ratio
    
    
    60.1%
    
    
    
    58.9%
    
    
    
    1.9%Ratio of acquisition expense to earned premiums
    
    
    24.7%
    
    
    
    24.3%
    
    
    
    1.7%Ratio of all other expenses to gross written premiums
    
    
    22.8%
    
    
    
    24.5%
    
    
    
    -7.0%
 
 *
    
    Not meaningful   
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##### Table of Contents



3/31/2009
    
    
    3/31/2008Gross Written
    
    
    % of Total Gross
    
    
    Gross Written
    
    
    % of Total GrossPremium
    
    
    Written Premium
    
    
    Premium
    
    
    Written Premium(in millions)Risk Transfer Holdings, Inc.
    
    $
    11.0
    
    
    
    37.9%
    
    
    $
    9.2
    
    
    
    38.2%American Team Managers
    
    
    5.5
    
    
    
    19.0%
    
    
    
    6.2
    
    
    
    25.7%Appalachian Underwriters, Inc.
    
    
    5.5
    
    
    
    19.0%
    
    
    
    1.8
    
    
    
    7.5%AEON Insurance Group, Inc.
    
    
    4.0
    
    
    
    13.8%
    
    
    
    5.6
    
    
    
    23.2%First Light Program Manager, Inc.
    
    
    1.3
    
    
    
    4.5%
    
    
    
    0.4
    
    
    
    1.7%Northern Star Management, Inc.
    
    
    1.1
    
    
    
    3.8%
    
    
    
    -
    
    
    
    0.0%Insential, Inc
    
    
    0.2
    
    
    
    0.7%
    
    
    
    0.3
    
    
    
    1.2%Flying Eagle Insurance Service, Inc
    
    
    0.1
    
    
    
    0.3%
    
    
    
    0.2
    
    
    
    0.8%Specialty Risk Solutions, LLC
    
    
    -
    
    
    
    0.0%
    
    
    
    -
    
    
    
    0.0%Other
    
    
    0.3
    
    
    
    1.0%
    
    
    
    0.4
    
    
    
    1.7%Total
    
    $
    29.0
    
    
    
    100.0%
    
    
    $
    24.1
    
    
    
    100.0%
  3/31/2009
    
    
    3/31/2008% of Total
    
    
    
    
    
    
    % of TotalGross Written
    
    
    Gross Written
    
    
    Gross Written
    
    
    Gross WrittenPremium
    
    
    Premium
    
    
    Premium
    
    
    Premium(in millions)California
    
    $
    8.9
    
    
    
    30.7%
    
    
    $
    11.5
    
    
    
    47.7%Texas
    
    
    2.6
    
    
    
    9.0%
    
    
    
    4.9
    
    
    
    20.3%Florida
    
    
    1.4
    
    
    
    4.8%
    
    
    
    1.7
    
    
    
    7.1%Other States
    
    
    16.1
    
    
    
    55.5%
    
    
    
    6.0
    
    
    
    24.9%Total
    
    $
    29.0
    
    
    
    100.0%
    
    
    $
    24.1
    
    
    
    100.0%
  3/31/2009
    
    
    3/31/2008% of Total
    
    
    
    
    
    
    % of TotalGross Written
    
    
    Gross Written
    
    
    Gross Written
    
    
    Gross WrittenPremium
    
    
    Premium
    
    
    Premium
    
    
    Premium(in millions)Workers compensation
    
    $
    18.4
    
    
    
    63.4%
    
    
    $
    11.9
    
    
    
    49.4%Commercial automobile
    
    
    8.4
    
    
    
    29.0%
    
    
    
    7.6
    
    
    
    31.5%General liability
    
    
    1.6
    
    
    
    5.5%
    
    
    
    3.9
    
    
    
    16.2%All Other
    
    
    0.6
    
    
    
    2.1%
    
    
    
    0.7
    
    
    
    2.9%Total
    
    $
    29.0
    
    
    
    100.0%
    
    
    $
    24.1
    
    
    
    100.0%
   
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##### Table of Contents



Liquidity and Capital Resources
   Cash Flows
  Three Months Ended3/31/2009
    
    
    3/31/2008(in millions)Cash provided by (used in)Operating activities
    
    $
    (1.3
    )
    
    $
    11.7Investing activities
    
    
    1.5
    
    
    
    (11.3
    )Financing activities
    
    
    0.0
    
    
    
    0.4Change in cash
    
    
    0.2
    
    
    
    0.8
    
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##### Table of Contents



Fixed Maturity Investments
   Item 1. Financial Statements
 
 Item 3: Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
   EstimatedFair ValueAssumed Change
    
    After Change
    
    IncreaseFair Value at
    
    in Relevant
    
    in Interest
    
    (Decrease) in3/31/2009
    
    Interest Rate
    
    Rate
    
    Fair Value(in thousands)Total Investments
    
    $
    261,501
    
    
    100 bp decrease
    
    $
    270,952
    
    
    $
    9,45150 bp decrease
    
    
    266,170
    
    
    
    4,66950 bp increase
    
    
    256,939
    
    
    
    (4,562
    )100 bp increase
    
    
    252,488
    
    
    
    (9,013
    )
  Credit Risk
   
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##### Table of Contents



As of 3/31/2009Percent ofBond Ratings
    
    Amount
    
    
    Portfolio(in thousands)AAA rated and U.S. Government and affiliated agency securities
    
    $
    144,593
    
    
    
    55.3
    %AA rated
    
    
    53,804
    
    
    
    20.6
    %A rated
    
    
    58,043
    
    
    
    22.2
    %BBB rated
    
    
    4,153
    
    
    
    1.6
    %BB rated
    
    
    763
    
    
    
    0.3
    %B Rated
    
    
    145
    
    
    
    0.0
    %Total
    
    $
    261,501
    
    
    
    100.0
    %
  
 Item 4: Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures.
  Changes in Internal Control Over Financial Reporting
 Inherent Limitations on Effectiveness of Controls.
 
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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1: Legal Proceedings
  
 Item 1A: Risk Factors
  
 Item 2: Recent Sales of Unregistered Securities
  
 Item 3: Defaults Upon Senior Securities
  
 Item 4: Submission of Matters to a Vote of Security Holders
  
 Item 5: Other Information
  
 Item 6: Exhibits
 Exhibits:
 ExhibitNumber
    
    Description31.1
    
    
    Certification of Courtney C. Smith, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    
    Certification of Peter E. Jokiel, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Courtney C. Smith, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Peter E. Jokiel, Chief Financial Officer, 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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##### Table of Contents



Signatures
  SPECIALTY UNDERWRITERS ALLIANCE, INC.
(Registrant)By:
    
    /s/ Courtney C. Smith

Name: Courtney C. SmithTitle: President and Chief Executive OfficerDate: May 8, 2009By:
    
    /s/ Peter E. Jokiel

Name: Peter E. JokielTitle: Executive Vice President and
Chief Financial OfficerDate: May 8, 2009
 
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##### Table of Contents



Exhibits Index:
 ExhibitNumber
    
    Description31.1
    
    
    Certification of Courtney C. Smith, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    
    Certification of Peter E. Jokiel, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Courtney C. Smith, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Peter E. Jokiel, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 
 20