##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the quarterly period ended March 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission File Number: 000-51530
 North Pointe Holdings Corporation
  Michigan
    
    38-3615047(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)28819 Franklin Road, Southfield, MI
    
    48034(Address of Principal Executive Offices)
    
    (Zip Code)
 (248) 358-1171  (Registrants Telephone Number, Including Area Code)
 þ o
  o o þ
 o þ




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##### 



NORTH POINTE HOLDINGS CORPORATION
FORM 10-Q
 TABLE OF CONTENTS
  
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29Part II. Other InformationItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30Section 302 Certification of Chief Executive OfficerSection 302 Certification of Chief Executive OfficerSection 906 Certification of Chief Executive OfficerSection 906 Certification of Chief Financial Officer
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 North Pointe Holdings Corporation and Subsidiaries
 Condensed Consolidated Balance Sheets
As of March 31, 2007 (Unaudited) and December 31, 2006
  2007
    
    
    2006(Dollars in thousands,except share data)ASSETSInvestmentsDebt securities, available for sale, at fair value (amortized cost of $106,474 and
$108,911in 2007 and 2006, respectively)
    
    $
    105,460
    
    
    $
    107,334Common stocks, at fair value (cost of $9,635 and $9,302 in 2007 and 2006, respectively)
    
    
    11,604
    
    
    
    11,376Other investment
    
    
    1,360
    
    
    
    1,088Total investments
    
    
    118,424
    
    
    
    119,798Cash and cash equivalents
    
    
    60,456
    
    
    
    46,039Accrued investment income
    
    
    1,103
    
    
    
    1,236Premiums and agent balances receivable, net
    
    
    18,276
    
    
    
    18,088Reinsurance recoverables on:Paid losses
    
    
    3,178
    
    
    
    4,168Unpaid losses
    
    
    27,337
    
    
    
    33,321Prepaid reinsurance premiums
    
    
    8,497
    
    
    
    11,881Deferred policy acquisition costs
    
    
    10,341
    
    
    
    8,848Deferred federal income taxes, net
    
    
    5,148
    
    
    
    5,061Federal income tax recoverable
    
    
    
    
    
    
    523Fixed assets, net of accumulated depreciation
    
    
    5,913
    
    
    
    5,946Prepaid expenses and other assets
    
    
    2,665
    
    
    
    2,668Total assets
    
    $
    261,338
    
    
    $
    257,577LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS EQUITYLiabilitiesUnpaid losses and loss adjustment expenses
    
    $
    83,758
    
    
    $
    89,755Unearned premiums
    
    
    55,845
    
    
    
    42,320Debt
    
    
    23,156
    
    
    
    23,131Federal income tax payable
    
    
    388
    
    
    
    Amounts due to reinsurers
    
    
    1,308
    
    
    
    1,930Accrued expenses and other liabilities
    
    
    5,807
    
    
    
    7,236Premiums in advance
    
    
    1,013
    
    
    
    4,970Total liabilities
    
    
    171,275
    
    
    
    169,342Commitments and contingent liabilitiesShareholders equityCommon stock, no par value; 50,000,000 shares authorized; 9,122,687issued and outstanding in 2007 and 2006, respectively
    
    
    50,761
    
    
    
    50,578Preferred stock, no par value; 5,000,000 shares authorized; and 0 shares issued
and outstanding in 2007 and 2006, respectively
    
    
    
    
    
    
    Retained earnings
    
    
    38,671
    
    
    
    37,329Accumulated other comprehensive income:Net unrealized gains on investments, net of deferred federal income
tax expense of ($323) and ($169), respectively
    
    
    631
    
    
    
    328Total shareholders equity
    
    
    90,063
    
    
    
    88,235Total liabilities and shareholders equity
    
    $
    261,338
    
    
    $
    257,577
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##### Table of Contents



North Pointe Holdings Corporation and Subsidiaries
 Unaudited Condensed Consolidated Statements of Income
For the Three Months Ended March 31, 2007 and 2006
 2007
    
    
    2006(Dollars in thousands,except share data)RevenuesDirect premiums written
    
    $
    38,856
    
    
    $
    45,564Assumed premiums written
    
    
    2
    
    
    
    4Gross premiums written
    
    
    38,858
    
    
    
    45,568Premiums ceded
    
    
    (2,198
    )
    
    
    (8,412
    )Net premiums written
    
    
    36,660
    
    
    
    37,156Increase in net unearned premiums
    
    
    (16,581
    )
    
    
    (16,965
    )Net premiums earned
    
    
    20,079
    
    
    
    20,191Investment income, net of investment expenses
    
    
    2,041
    
    
    
    1,298Net realized capital gains (losses)
    
    
    247
    
    
    
    (369
    )Other income
    
    
    398
    
    
    
    453Total revenues
    
    
    22,765
    
    
    
    21,573ExpensesLosses and loss adjustment expenses, net
    
    
    9,861
    
    
    
    9,494Policy acquisition costs
    
    
    5,991
    
    
    
    5,647Other underwriting and operating expenses
    
    
    4,415
    
    
    
    3,706Interest expense
    
    
    486
    
    
    
    249Total expenses
    
    
    20,753
    
    
    
    19,096Income before federal income tax expense
    
    
    2,012
    
    
    
    2,477Federal income tax expense
    
    
    670
    
    
    
    850Net income
    
    $
    1,342
    
    
    $
    1,627Earnings Per ShareBasic
    
    $
    0.15
    
    
    $
    0.18Diluted
    
    
    0.15
    
    
    
    0.18Weighted average number of common shares outstandingBasic
    
    
    9,114,687
    
    
    
    9,114,187Diluted
    
    
    9,118,222
    
    
    
    9,114,631
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##### Table of Contents



North Pointe Holdings Corporation and Subsidiaries
 Unaudited Condensed Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss)
For the Three Months Ended March 31, 2007 and 2006
 AccumulatedOtherCommon
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Total(Dollars in thousands)Balances, December 31, 2005
    
    $
    50,233
    
    
    $
    32,653
    
    
    $
    (659
    )
    
    $
    82,227Stock-based employee compensation
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    82Comprehensive income:Net income
    
    
    
    
    
    
    1,627
    
    
    
    
    
    
    
    1,627Unrealized losses on investments, net of
deferred federal income tax benefit of $171
    
    
    
    
    
    
    
    
    
    
    (331
    )
    
    
    (331
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,296Balances, March 31, 2006
    
    $
    50,315
    
    
    $
    34,280
    
    
    $
    (990
    )
    
    $
    83,605Balances, December 31, 2006
    
    $
    50,578
    
    
    $
    37,329
    
    
    $
    328
    
    
    $
    88,235Stock-based employee compensation
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    183Comprehensive income:Net income
    
    
    
    
    
    
    1,342
    
    
    
    
    
    
    
    1,342Unrealized gain on investments, net of
deferred federal income tax expense of $154
    
    
    
    
    
    
    
    
    
    
    303
    
    
    
    303Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,645Balances, March 31, 2007
    
    $
    50,761
    
    
    $
    38,671
    
    
    $
    631
    
    
    $
    90,063
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North Pointe North Pointe Holdings Corporation and Subsidiaries
 Unaudited Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2007 and 2006
 2007
    
    
    2006(Dollars in thousands)Cash flows from operating activitiesNet income
    
    $
    1,342
    
    
    $
    1,627Adjustments to reconcile net income to cash provided by operating activitiesDepreciation and amortization
    
    
    217
    
    
    
    180Net realized (gains) losses on sales and other dispositions of investments
    
    
    (247
    )
    
    
    369Undistributed earnings of equity method investees
    
    
    (272
    )
    
    
    Stock compensation expense
    
    
    183
    
    
    
    82Deferred federal income tax expense
    
    
    (241
    )
    
    
    (75
    )Change in assets and liabilities:Premiums and agents balances receivable, net
    
    
    (188
    )
    
    
    180Accrued investment income
    
    
    133
    
    
    
    37Reinsurance recoverable, net
    
    
    6,352
    
    
    
    13,866Prepaid reinsurance premiums
    
    
    3,384
    
    
    
    599Deferred policy acquisition costs
    
    
    (1,493
    )
    
    
    (1,849
    )Federal income tax payable and recoverable
    
    
    911
    
    
    
    925Prepaid expenses and other assets
    
    
    3
    
    
    
    (8
    )Losses and loss adjustment expenses
    
    
    (5,997
    )
    
    
    (9,969
    )Unearned premiums
    
    
    13,525
    
    
    
    18,040Accrued expenses and other liabilities
    
    
    (1,394
    )
    
    
    (4,716
    )Premiums in advance
    
    
    (3,957
    )
    
    
    (6,016
    )Net cash provided by operating activities
    
    
    12,261
    
    
    
    13,272Cash flows from investing activitiesProceeds from maturities of debt securities
    
    
    1,760
    
    
    
    1,562Proceeds from sales of debt securities
    
    
    3,789
    
    
    
    15,889Proceeds from sales of equity securities
    
    
    1,540
    
    
    
    953Purchases of debt securities
    
    
    (3,215
    )
    
    
    (16,018
    )Purchases of equity securities
    
    
    (1,592
    )
    
    
    (947
    )Purchases of fixed assets
    
    
    (151
    )
    
    
    (634
    )Capital Contribution to NP Capital Trust I
    
    
    
    
    
    
    (620
    )Net cash provided by investing activities
    
    
    2,131
    
    
    
    185Cash flows from financing activitiesProceeds from issuance of debt (net of $627 of issuance costs paid in 2006)
    
    
    
    
    
    
    20,234Proceeds from borrowings
    
    
    210Repayments of debt
    
    
    (185
    )
    
    
    (2,656
    )Net cash provided by financing activities
    
    
    25
    
    
    
    17,578Increase in cash and cash equivalents
    
    
    14,417
    
    
    
    31,035Cash and cash equivalentsBeginning of period
    
    
    46,039
    
    
    
    34,119End of period
    
    $
    60,456
    
    
    $
    65,154Supplemental cash flow information  cash paid during the period forInterest
    
    $
    523
    
    
    $
    194
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North Pointe Holdings Corporation And Subsidiaries
 Notes To Condensed Consolidated Financial Statements
 1. Basis of Financial Presentation and Principles of Consolidation
      Recent Accounting Pronouncements
 SFAS Statement No. 157, Fair Value Measurements
 Fair Value Measurements,
 FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities
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##### Table of Contents



Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS
No. 109
  8




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2. Earnings Per Share
  Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    1,342
    
    
    $
    1,627Weighted average shares outstanding
    
    
    9,122,687
    
    
    
    9,116,687Unvested restricted stock
    
    
    (8,000
    )
    
    
    (2,500
    )Weighted average shares outstanding used for Basic EPS
    
    
    9,114,687
    
    
    
    9,114,187Dilutive effect of restricted stock
    
    
    3,535
    
    
    
    444Weighted average shares outstanding used for Diluted EPS
    
    
    9,118,222
    
    
    
    9,114,631Basic earnings per share
    
    $
    0.15
    
    
    $
    0.18Diluted earnings per share
    
    $
    0.15
    
    
    $
    0.18
  3. Income Taxes
   9




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Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Current tax expense
    
    $
    911
    
    
    $
    925Deferred tax expense relating to
NOL carryforwardsNOL carryforwards
    
    
    326
    
    
    
    358Other deferred tax benefit
    
    
    (567
    )
    
    
    (433
    )Total federal income tax expense
    
    $
    670
    
    
    $
    850
    March 31,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands)Deferred federal income tax assetsLoss and loss adjustment expenses
    
    $
    2,183
    
    
    $
    2,214Unearned premiums
    
    
    3,610
    
    
    
    2,483Net operating loss carryforwards
    
    
    1,945
    
    
    
    2,271Premiums receivable
    
    
    323
    
    
    
    323Lease obligation
    
    
    108
    
    
    
    120Intangible asset
    
    
    298
    
    
    
    306Other
    
    
    630
    
    
    
    544Total deferred tax assets
    
    
    9,097
    
    
    
    8,261Deferred federal income tax liabilitiesDeferred policy acquisition costs
    
    
    3,516
    
    
    
    3,008Net unrealized gains on investments
    
    
    323
    
    
    
    169Other
    
    
    110
    
    
    
    23Total deferred tax liabilities
    
    
    3,949
    
    
    
    3,200Net deferred federal income tax
assets
    
    $
    5,148
    
    
    $
    5,061
 10




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##### Table of Contents



4. Outstanding Debt
  (Dollars inYear
    
    thousands)2007
    
    $
    922008
    
    
    1302009
    
    
    1932010
    
    
    1462011 and thereafter
    
    
    22,595$
    23,156
 5. Commitments and Contingent Liabilities
  Minimum
    
    
    MinimumLease
    
    
    Sublease
    
    
    Net FutureYear Ended
    
    Commitments
    
    
    Revenue
    
    
    Commitments(Dollars in thousands)2007
    
    $
    654
    
    
    $
    (170
    )
    
    $
    4842008
    
    
    815
    
    
    
    (276
    )
    
    
    5392009
    
    
    660
    
    
    
    (184
    )
    
    
    4762010
    
    
    262
    
    
    
    
    
    
    
    2622011
    
    
    101
    
    
    
    
    
    
    
    101$
    2,492
    
    
    $
    (630
    )
    
    $
    1,862
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##### Table of Contents



6. Segment Reporting
   Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Total revenuesCommercial lines productsLiability
    
    $
    10,021
    
    
    $
    5,702Property
    
    
    2,805
    
    
    
    1,674Commercial multi-peril
    
    
    332
    
    
    
    5,883Commercial automobile
    
    
    1,423
    
    
    
    1,569Other
    
    
    879
    
    
    
    628Total commercial lines
    
    
    15,460
    
    
    
    15,456Personal lines-homeowners
    
    
    4,619
    
    
    
    4,735Administrative servicesAffiliated companies
    
    
    10,267
    
    
    
    11,706Non-affiliated companies
    
    
    398
    
    
    
    453Total administrative services
    
    
    10,665
    
    
    
    12,159CorporateInvestment activity
    
    
    2,288
    
    
    
    929Eliminations
    
    
    (10,267
    )
    
    
    (11,706
    )Total revenues
    
    $
    22,765
    
    
    $
    21,573Income (loss) before federal income tax expenseCommercial linesLiability
    
    $
    4,075
    
    
    $
    4,741Property
    
    
    (1,540
    )
    
    
    (943
    )Commercial multi-peril
    
    
    (3,722
    )
    
    
    (1,352
    )Commercial automobile
    
    
    (579
    )
    
    
    (515
    )Other
    
    
    (426
    )
    
    
    (293
    )Total commercial lines
    
    
    (2,192
    )
    
    
    1,638Personal linesPersonal automobile
    
    
    (81
    )
    
    
    (1,263
    )Homeowners
    
    
    756
    
    
    
    (1,390
    )Total personal lines
    
    
    675
    
    
    
    (2,653
    )Administrative services
    
    
    2,216
    
    
    
    2,830CorporateInvestment activity
    
    
    2,288
    
    
    
    929Other expense, net
    
    
    (975
    )
    
    
    (267
    )Income before federal income tax expense
    
    $
    2,012
    
    
    $
    2,477
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7. Subsequent
Event
 Capital
City Holding Company, Inc.
    13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The discussion and analysis of our financial condition and results of operations contained
herein should be read in conjunction with our consolidated financial statements and accompanying
notes which appear elsewhere in this report. It contains forward-looking statements that involve
risks and uncertainties. Please see Note on Forward-Looking Statements for more information. Our
actual results could differ materially from those anticipated in these forward-looking statements
as a result of various factors, including those discussed below and elsewhere in this report.
 Note on Forward-Looking Statements
  §
    
    the availability and pricing of reinsurance and the potential for non-payment or delay in payment by reinsurers;§
    
    our ability to accurately price the risks we underwrite;§
    
    the establishment of adequate loss and loss adjustment expense reserves;§
    
    possible assessments for guaranty funds, other insurance-related assessments and
mandatory reinsurance arrangements and our ability to recover such assessments through
future surcharges or other rate changes;§
    
    retention and recruiting of independent agents and the potential loss of key personnel;§
    
    failure to pay claims accurately;§
    
    risks associated with high concentration of our business in certain geographic markets;§
    
    inability to implement our growth strategies;§
    
    the occurrence of severe weather conditions and other catastrophes;§
    
    the cyclical and seasonal nature of the industries within which we operate;§
    
    intense competition with other insurance companies;§
    
    our ability to obtain and retain trade association endorsements;§
    
    performance of our various operating subsidiaries and restrictions that may limit the
ability of our subsidiaries to pay dividends to North Pointe Holdings;§
    
    existing and future regulations by local, state and federal governments;§
    
    the compliance of our insurance company subsidiaries with minimum capital and surplus requirements;§
    
    ratings of our insurance company subsidiaries by A.M. Best;§
    
    the outcome of current industry investigations and potential regulation limiting the use
of undisclosed contingent commission arrangements with independent agents;§
    
    adverse market conditions that could negatively impact our investment portfolio;§
    
    reliance on information technology and telecommunication systems;
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##### Table of Contents



§
    
    our limited history writing homeowners insurance policies to homeowners in Florida;§
    
    changes in insurance-related laws and regulations;§
    
    our ability to implement and maintain adequate internal controls in our business;§
    
    other risks that we identify in past and future filings with the Securities and Exchange
Commission, including without limitation the risks described under the caption Risk
Factors in the Prospectus constituting part of our Registration Statement on Form S-1 (Reg.
No. 333-122220) and any past or subsequent filings on Forms 10-K, 10-Q and 8-K.
  Description of Business
   Critical Accounting Estimates
  15




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Results of Operations for the Three Months Ended March 31, 2007 and 2006
 Results of Operations
  Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Gross premiums written:Commercial lines
    
    $
    19,267
    
    
    $
    20,991Personal lines
    
    
    19,591
    
    
    
    24,577Total gross premiums written
    
    
    38,858
    
    
    
    45,568Net premiums written:Commercial lines
    
    
    19,270
    
    
    
    15,675Personal lines
    
    
    17,390
    
    
    
    21,481Total net premiums written
    
    
    36,660
    
    
    
    37,156Revenues:Net premiums earned:Commercial lines
    
    
    15,460
    
    
    
    15,456Personal lines
    
    
    4,619
    
    
    
    4,735Total net premiums earned
    
    
    20,079
    
    
    
    20,191Investment income, net
    
    
    2,041
    
    
    
    1,298Net realized capital gains (losses)
    
    
    247
    
    
    
    (369
    )Fees and other income
    
    
    398
    
    
    
    453Total revenues
    
    
    22,765
    
    
    
    21,573Expenses:Losses and loss adjustment expenses,
net
    
    
    9,861
    
    
    
    9,494Policy acquisition costs
    
    
    5,991
    
    
    
    5,647Other underwriting and operating
expenses
    
    
    4,415
    
    
    
    3,706Interest expense
    
    
    486
    
    
    
    249Total expenses
    
    
    20,753
    
    
    
    19,096Income before federal income tax
expense
    
    
    2,012
    
    
    
    2,477Federal income tax expense
    
    
    670
    
    
    
    850Net income
    
    $
    1,342
    
    
    $
    1,627Loss ratio:Commercial lines
    
    
    58.1
    %
    
    
    33.8
    %Personal lines
    
    
    19.0
    %
    
    
    90.1
    %Aggregate
    
    
    48.2
    %
    
    
    46.0
    %Expense ratio
    
    
    50.8
    %
    
    
    45.3
    %Combined ratio
    
    
    99.0
    %
    
    
    91.3
    %
 16




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Overview
  Gross Premiums Written
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
   Net Premiums Written
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 Net Premiums Earned
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 17




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Gross premiums earned:Commercial lines
    
    $
    18,304
    
    
    $
    19,718Personal lines
    
    
    7,030
    
    
    
    7,810Total
    
    
    25,334
    
    
    
    27,528Ceded premiums earned:Commercial lines
    
    
    2,844
    
    
    
    4,262Personal lines
    
    
    2,411
    
    
    
    3,075Total
    
    
    5,255
    
    
    
    7,337Net premiums earned:Commercial lines
    
    
    15,460
    
    
    
    15,456Personal lines
    
    
    4,619
    
    
    
    4,735Total
    
    $
    20,079
    
    
    $
    20,191
 18




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##### Table of Contents



Net Investment Income
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
  Net Realized Gains and Losses on Investments
 Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 Other Income
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 19




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##### Table of Contents



Losses and Loss Adjustment Expenses
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
  All Lines
    
    2007
    
    
    2006Loss ratios before effects of reserve development
    
    
    54.9
    %
    
    
    57.3
    %Decrease in loss ratios attributable to reserve
development
    
    
    (6.7
    )
    
    
    (11.3
    )Total lines loss ratios
    
    
    48.2
    %
    
    
    46.0
    %
    Commercial Lines
    
    2007
    
    
    2006Loss ratios before effects of reserve development
    
    
    60.1
    %
    
    
    55.0
    %Decrease in loss ratios attributable to reserve
development
    
    
    (2.0
    )
    
    
    (21.2
    )Total commerical lines loss ratios
    
    
    58.1
    %
    
    
    33.8
    %
   20




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##### Table of Contents



Personal Lines
    
    2007
    
    
    2006Loss ratios before effects of reserve
development
    
    
    42.3
    %
    
    
    70.3
    %(Decrease) increase in loss ratios attributable to
reserve development
    
    
    (23.3
    )
    
    
    19.8Total personal lines loss ratios
    
    
    19.0
    %
    
    
    90.1
    %
 Policy Acquisition Costs
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 Other Underwriting and Operating Expenses
  Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 Interest Expense
 Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 Federal Income Tax Expense
 Three Months Ended March 31, 2007 as Compared to Three Months Ended March 31, 2006.
 21




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##### Table of Contents



Liquidity and Capital Resources
 Sources and Uses of Funds
    Cash Flows
     22




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##### Table of Contents



Contractual Obligations and Commitments
  2007
    
    2008
    
    2009
    
    2010
    
    2,011
    
    TotalOperating leases
    
    $
    654
    
    
    $
    815
    
    
    $
    660
    
    
    $
    262
    
    
    $
    101
    
    
    $
    2,492
 Investments
    As of March 31, 2007
    
    
    As of December 31, 2006Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    portfolio
    
    
    Amount
    
    
    portfolio(Dollars in thousands)Fixed Income:U.S. governmental and agency securities
    
    $
    28,284
    
    
    
    15.8
    %
    
    $
    30,526
    
    
    
    18.4
    %Foreign governmental
    
    
    302
    
    
    
    0.2
    %
    
    
    300
    
    
    
    0.1
    %Corporate securities
    
    
    28,787
    
    
    
    16.1
    %
    
    
    29,421
    
    
    
    17.7
    %Municipal securities
    
    
    7,007
    
    
    
    3.9
    %
    
    
    7,035
    
    
    
    4.2
    %Mortgage-backed securities
    
    
    33,586
    
    
    
    18.8
    %
    
    
    32,360
    
    
    
    19.5
    %Asset-backed
    
    
    7,494
    
    
    
    4.2
    %
    
    
    7,692
    
    
    
    4.7
    %Total
fixed-income
    
    
    105,460
    
    
    
    59.0
    %
    
    
    107,334
    
    
    
    64.6
    %Cash and cash equivalents
    
    
    60,456
    
    
    
    33.8
    %
    
    
    46,039
    
    
    
    27.8
    %Equity securities  common shares
    
    
    11,604
    
    
    
    6.5
    %
    
    
    11,376
    
    
    
    6.9
    %Other investments
    
    
    1,360
    
    
    
    0.7
    %
    
    
    1,088
    
    
    
    0.7
    %Total
    
    $
    178,880
    
    
    
    100.0
    %
    
    $
    165,837
    
    
    
    100.0
    %
  23




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##### Table of Contents



As of March 31, 2007Less than 12 months
    
    
    12 months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss(Dollars in thousands)U.S. governmental and agency securities
    
    $
    1,980
    
    
    $
    1
    
    
    $
    14,458
    
    
    $
    185
    
    
    $
    16,438
    
    
    $
    186Foreign governmental
    
    
    
    
    
    
    
    
    
    
    302
    
    
    
    5
    
    
    
    302
    
    
    
    5Corporate securities
    
    
    2,704
    
    
    
    14
    
    
    
    21,285
    
    
    
    511
    
    
    
    23,989
    
    
    
    525Municipal securities
    
    
    2,793
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2,793
    
    
    
    2Mortgage-backed securities
    
    
    1,093
    
    
    
    2
    
    
    
    25,353
    
    
    
    650
    
    
    
    26,446
    
    
    
    652Asset-backed
    
    
    116
    
    
    
    
    
    
    
    4,803
    
    
    
    70
    
    
    
    4,919
    
    
    
    70Total debt
securities
    
    $
    8,686
    
    
    $
    19
    
    
    $
    66,201
    
    
    $
    1,421
    
    
    $
    74,887
    
    
    $
    1,440Equity securities
    
    $
    864
    
    
    $
    49
    
    
    $
    88
    
    
    $
    6
    
    
    $
    952
    
    
    $
    55
 As of March 31, 2007Less than 12 months
    
    
    12 months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss(Dollars in thousands)U.S. governmental and agency securities
    
    $
    2,062
    
    
    $
    6
    
    
    $
    16,670
    
    
    $
    294
    
    
    $
    18,732
    
    
    $
    300Foreign governmental
    
    
    
    
    
    
    
    
    
    
    299
    
    
    
    9
    
    
    
    299
    
    
    
    9Corporate securities
    
    
    3,416
    
    
    
    25
    
    
    
    22,272
    
    
    
    675
    
    
    
    25,688
    
    
    
    700Municipal securities
    
    
    1,426
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1,426
    
    
    
    2Mortgage-backed securities
    
    
    1,164
    
    
    
    5
    
    
    
    26,248
    
    
    
    805
    
    
    
    27,412
    
    
    
    810Asset-backed
    
    
    73
    
    
    
    
    
    
    
    6,007
    
    
    
    89
    
    
    
    6,080
    
    
    
    89Total debt
securities
    
    $
    8,141
    
    
    $
    38
    
    
    $
    71,496
    
    
    $
    1,872
    
    
    $
    79,637
    
    
    $
    1,910Equity securities
    
    $
    761
    
    
    $
    44
    
    
    $
    40
    
    
    $
    5
    
    
    $
    801
    
    
    $
    49
 24




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##### Table of Contents



Unpaid Losses and Loss Adjustment Expenses
      Net Reserves at March 31, 2007
    
    Total NetPersonal
    
    Commercial
    
    
    
    
    
    Reserves atLines
    
    Lines
    
    
    
    
    
    December 31,Segment
    
    Segment
    
    Total
    
    2006(Dollars in thousands)High end of range
    
    $
    4,806
    
    
    $
    55,784
    
    
    $
    60,590
    
    
    $
    60,715Carried reserves
    
    
    4,616
    
    
    
    51,805
    
    
    
    56,421
    
    
    
    56,434Low end of range
    
    
    4,456
    
    
    
    49,309
    
    
    
    53,765
    
    
    
    53,672
  25




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##### Table of Contents



March 31,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands)Case:Commercial lines productsLiability
    
    $
    12,738
    
    
    $
    12,061Property
    
    
    7,506
    
    
    
    9,643Commercial multi-peril
    
    
    12,772
    
    
    
    14,483Commercial automobile
    
    
    4,461
    
    
    
    3,705Other
    
    
    1,232
    
    
    
    1,063Total commercial lines
    
    
    38,709
    
    
    
    40,955Personal lines productsPersonal automobile
    
    
    4,329
    
    
    
    4,758Homeowners
    
    
    2,543
    
    
    
    2,713Total personal lines
    
    
    6,872
    
    
    
    7,471Total case reserves
    
    $
    45,581
    
    
    $
    48,426IBNR:Commercial lines productsLiability
    
    $
    12,190
    
    
    $
    12,042Property
    
    
    715
    
    
    
    786Commercial multi-peril
    
    
    16,623
    
    
    
    18,628Commercial automobile
    
    
    2,870
    
    
    
    2,851Other
    
    
    891
    
    
    
    511Total commercial lines
    
    
    33,289
    
    
    
    34,818Personal lines productsPersonal automobile
    
    
    3,755
    
    
    
    4,015Homeowners
    
    
    1,133
    
    
    
    2,496Total personal lines
    
    
    4,888
    
    
    
    6,511Total IBNR reserves
    
    $
    38,177
    
    
    $
    41,329Gross:Commercial lines productsLiability
    
    $
    24,928
    
    
    $
    24,103Property
    
    
    8,221
    
    
    
    10,429Commercial multi-peril
    
    
    29,395
    
    
    
    33,111Commercial automobile
    
    
    7,331
    
    
    
    6,556Other
    
    
    2,123
    
    
    
    1,574Total commercial lines
    
    
    71,998
    
    
    
    75,773Personal lines productsPersonal automobile
    
    
    8,084
    
    
    
    8,773Homeowners
    
    
    3,676
    
    
    
    5,209Total personal lines
    
    
    11,760
    
    
    
    13,982Total gross reserves
    
    $
    83,758
    
    
    $
    89,755
   26




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Gross reserves, beginning of period
    
    $
    89,755
    
    
    $
    117,778Less reinsurance recoverables, excluding Citizens assessment (1)
    
    
    ,321
    
    
    
    60,034Net balance
    
    
    56,434
    
    
    
    57,744Incurred related toCurrent year
    
    
    11,241
    
    
    
    11,837Prior years
    
    
    (1,380
    )
    
    
    (2,343
    )Total incurred
    
    
    9,861
    
    
    
    9,494Paid related toCurrent year
    
    
    1,885
    
    
    
    2,136Prior years
    
    
    7,989
    
    
    
    7,191Total paid
    
    
    9,874
    
    
    
    9,327Net balance, end of period
    
    
    56,421
    
    
    
    57,911Plus reinsurance recoverables, excluding Citizens assessment (1)
    
    
    27,337
    
    
    
    49,898Gross reserves, end of period
    
    $
    83,758
    
    
    $
    107,809
 
 (1)
    
    For the purpose of comparability at March 31, 2006 the Citizens assessment of $3,429,000 is
excluded from the reinsurance recoverable amounts in the above summary. Contingencies
 Citizens Property Insurance Company
  27




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Interest Rate Risk
   Hypothetical PercentageEstimated
    
    Increase (Decrease) inHypothetical Change in Interest Rates
    
    Estimated
    
    Change in
    
    
    
    
    
    Shareholders'As of March 31, 2007
    
    Fair Value
    
    Fair Value
    
    Fair Value
    
    Equity(Dollars in thousands)200 basis point increase
    
    $
    97,907
    
    
    $
    (7,553
    )
    
    
    (7.2)
    %
    
    
    (5.5)
    %100 basis point increase
    
    
    101,683
    
    
    
    (3,777
    )
    
    
    (3.6
    )
    
    
    (2.8
    )No Change
    
    
    105,460
    
    
    
    
    
    
    
    
    
    
    
    100 basis point decrease
    
    
    109,062
    
    
    
    3,602
    
    
    
    3.4
    
    
    
    2.6200 basis point decrease
    
    
    112,304
    
    
    
    6,844
    
    
    
    6.5
    
    
    
    5.0
 Credit Risk
    Effects of Inflation
  28




---



##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls over Financial Reporting
  29




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 30




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##### Table of Contents



ExhibitNumber
    
    Exhibit31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the
Securities Exchange Act of 1934.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350 and Rule 13a-14(b) under the
Securities Exchange Act of 1934.
 31




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##### Table of Contents



NORTH POINTE HOLDINGS CORPORATIONDate: May 14, 2007
    By:
    /s/ James G. PetcoffJames G. PetcoffChief Executive Officer, President & Chairman of the BoardDate: May 14, 2007
    By:
    /s/ Brian J. RoneyBrian J. RoneyChief Financial Officer & Vice President -- Finance (Principal Accounting Officer) 32