----

----

| Delaware                                                      |   | 56-2393241                        |
|---------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporationor organization) |   | (IRS Employer Identification No.) |

| Class                         |   | Shares outstanding as of May 5, 2011 |
|-------------------------------|--------|--------------------------------------|
| Common Stock, $0.01 Par Value |   | 22,377,714                           |

----

Index

|       |                                                                                                                  |   | Page     |
|------------|-----------------------------------------------------------------------------------------------------------------------|--------|----------|
| Part I.    | Financial Information                                                                                                 |   |     |
|       |                                                                                                                  |   |     |
| Item 1.    | Financial Statements (unaudited)                                                                                      |   | 2        |
|       |                                                                                                                  |   |     |
|       | Condensed Consolidated Balance Sheets as of March 31, 2011 and     December 31, 2010                   |   |   2 |
|       |                                                                                                                  |   |     |
|       | Condensed Consolidated Statements of Operations for the Three Months     Ended March 31, 2011 and 2010 |   |   3 |
|       |                                                                                                                  |   |     |
|       | Condensed Consolidated Statements of Cash Flows for the Three Months     Ended March 31, 2011 and 2010 |   |   4 |
|       |                                                                                                                  |   |     |
|       | Notes to Unaudited Condensed Consolidated Financial Statements                                                        |   | 5        |
|       |                                                                                                                  |   |     |
| Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                           |   | 14       |
|       |                                                                                                                  |   |     |
| Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                                                            |   | 20       |
|       |                                                                                                                  |   |     |
| Item 4.    | Controls and Procedures                                                                                               |   | 21       |
|       |                                                                                                                  |   |     |
| Part II.   | Other Information                                                                                                     |   |     |
|       |                                                                                                                  |   |     |
| Item 1A.   | Risk Factors                                                                                                          |   | 21       |
|       |                                                                                                                  |   |     |
| Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |   | 21       |
|       |                                                                                                                  |   |     |
| Item 6.    | Exhibits                                                                                                              |   | 21       |
|       |                                                                                                                  |   |     |
| Signatures |                                                                                                                  |   |  22 |

----

Index 

Financial Statements

CONDENSED CONSOLIDATED 

|                                                                                                                                                                                                                                       |   | March 31,2011                                     |      |   | December 31,2010 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|------------------|--------|
|                                                                                                                                                                                                                                       |   | (Unaudited)                                       |      |   | (Audited)        |   |
|                                                                                                                                                                                                                                       |   | (in thousands, except share andper share amounts) |      |
|                                                                                                                                                                                                                                       |   |                                              |      |   |             |   |
| ASSETS                                                                                                                                                                                                                                     |   |                                              |      |   |             |   |
|                                                                                                                                                                                                                                       |   |                                              |      |   |             |   |
| Fixed income securities available for sale, at fair value (amortized cost     $661,385 in 2011 and $665,761 in 2010)                                                                                                   |   | $                                                 | 666,976   |   |             | $      | 672,968 |   |
| Cash and cash equivalents                                                                                                                                                                                                                  |   |                                              | 24,198    |   |             |   | 15,958 |   |
| Premiums receivable, net                                                                                                                                                                                                                   |   |                                              | 14,815    |   |             |   | 15,023 |   |
| Deferred premiums, net                                                                                                                                                                                                                     |   |                                              | 171,203   |   |             |   | 168,842 |   |
| Reinsurance recoverables                                                                                                                                                                                                                   |   |                                              | 64,073    |   |             |   | 56,746 |   |
| Federal income tax recoverable                                                                                                                                                                                                             |   |                                              | 7,283     |   |             |   | 11,749 |   |
| Deferred income taxes, net                                                                                                                                                                                                                 |   |                                              | 24,268    |   |             |   | 23,458 |   |
| Deferred policy acquisition costs, net                                                                                                                                                                                                     |   |                                              | 26,985    |   |             |   | 25,574 |   |
| Goodwill                                                                                                                                                                                                                                   |   |                                              | 2,794     |   |             |   | 2,794 |   |
| Other assets                                                                                                                                                                                                                               |   |                                              | 30,980    |   |             |   | 33,450 |   |
| Total assets                                                                                                                                                                                                                               |   | $                                                 | 1,033,575 |   |             | $      | 1,026,562 |   |
|                                                                                                                                                                                                                                       |   |                                              |      |   |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                 |   |                                              |      |   |             |   |   |   |
|                                                                                                                                                                                                                                       |   |                                              |      |   |             |   |   |   |
| Liabilities:                                                                                                                                                                                                                               |   |                                              |      |   |             |   |   |   |
| Unpaid loss and loss adjustment expense                                                                                                                                                                                                    |   | $                                                 | 446,977   |   |             | $      | 440,919 |   |
| Unearned premiums                                                                                                                                                                                                                          |   |                                              | 158,769   |   |             |   | 155,786 |   |
| Reinsurance funds withheld and balances payable                                                                                                                                                                                            |   |                                              | 6,528     |   |             |   | 6,739 |   |
| Premiums payable                                                                                                                                                                                                                           |   |                                              | 7,946     |   |             |   | 8,645 |   |
| Accrued expenses and other liabilities                                                                                                                                                                                                     |   |                                              | 51,509    |   |             |   | 51,456 |   |
| Surplus notes                                                                                                                                                                                                                              |   |                                              | 12,000    |   |             |   | 12,000 |   |
| Total liabilities                                                                                                                                                                                                                          |   |                                              | 683,729   |   |             |   | 675,545 |   |
|                                                                                                                                                                                                                                       |   |                                              |      |   |             |   |   |   |
| Contingencies (Note 7)                                                                                                                                                                                                                     |   |                                              |      |   |             |   |   |   |
|                                                                                                                                                                                                                                       |   |                                              |      |   |             |   |   |   |
| Stockholders’ equity:                                                                                                                                                                                                                |   |                                              |      |   |             |   |   |   |
| Series A preferred stock, $0.01 par value; 750,000 shares authorized;     no shares issued and outstanding                                                                                                             |   |                                              | −   |   |             |   | − |   |
| Undesignated preferred stock, $0.01 par value; 10,000,000 shares     authorized; no shares issued and outstanding                                                                                                      |   |                                              | –   |   |             |   | – |   |
| Common stock, $0.01 par value; 75,000,000 shares authorized;     issued and outstanding – 22,289,344 shares at  March 31, 2011 and     22,025,450 shares at December 31, 2010 |   |                                              | 223       |   |             |   | 220 |   |
| Paid-in capital                                                                                                                                                                                                                            |   |                                              | 210,661   |   |             |   | 209,941 |   |
| Accumulated other comprehensive income                                                                                                                                                                                                     |   |                                              | 4,551     |   |             |   | 5,591 |   |
| Retained earnings                                                                                                                                                                                                                          |   |                                              | 134,411   |   |             |   | 135,265 |   |
| Total stockholders’ equity                                                                                                                                                                                                           |   |                                              | 349,846   |   |             |   | 351,017 |   |
| Total liabilities and stockholders’ equity                                                                                                                                                                                           |   | $                                                 | 1,033,575 |   |             | $      | 1,026,562 |   |

----

Index

CONDENSED CONSOLIDATED 

|                                             |   | Three Months Ended March 31,                                   |       |
|--------------------------------------------------|--------|----------------------------------------------------------------|------------|
|                                             |   | 2011                                                           |       |   | 2010 |   |
|                                             |   | (in thousands, except share andearnings per share information) |       |
|                                             |   |                                                           |       |   |   |   |
| Revenue:                                         |   |                                                           |       |   |   |   |
| Premiums earned                                  |   | $                                                              | 56,730     |   |   | $ | 60,630 |   |
| Claims service income                            |   |                                                           | 243        |   |   |   | 213 |   |
| Other service income                             |   |                                                           | 90         |   |   |   | 33 |   |
| Net investment income                            |   |                                                           | 5,375      |   |   |   | 6,079 |   |
| Net realized gains                               |   |                                                           | 298        |   |   |   | 6,532 |   |
| Other income                                     |   |                                                           | 1,064      |   |   |   | 1,205 |   |
|                                             |   |                                                           | 63,800     |   |   |   | 74,692 |   |
| Losses and expenses:                             |   |                                                           |       |   |   |   |   |   |
| Loss and loss adjustment expenses                |   |                                                           | 43,266     |   |   |   | 43,577 |   |
| Underwriting, acquisition and insurance expenses |   |                                                           | 18,414     |   |   |   | 18,757 |   |
| Interest expense                                 |   |                                                           | 130        |   |   |   | 128 |   |
| Other expenses                                   |   |                                                           | 1,970      |   |   |   | 2,037 |   |
|                                             |   |                                                           | 63,780     |   |   |   | 64,499 |   |
| Income before taxes                              |   |                                                           | 20         |   |   |   | 10,193 |   |
|                                             |   |                                                           |       |   |   |   |   |   |
| Income tax expense (benefit)                     |   |                                                           | (228       | ) |   |   | 2,606 |   |
| Net income                                       |   | $                                                              | 248        |   |   | $ | 7,587 |   |
|                                             |   |                                                           |       |   |   |   |   |   |
| Basic earnings per share                         |   | $                                                              | 0.01       |   |   | $ | 0.37 |   |
| Diluted earnings per share                       |   | $                                                              | 0.01       |   |   | $ | 0.35 |   |
|                                             |   |                                                           |       |   |   |   |   |   |
| Dividends declared per share                     |   | $                                                              | 0.05       |   |   | $ | 0.05 |   |
|                                             |   |                                                           |       |   |   |   |   |   |
| Weighted average basic shares outstanding        |   |                                                           | 20,950,808 |   |   |   | 20,745,761 |   |
| Weighted average diluted shares outstanding      |   |                                                           | 21,740,586 |   |   |   | 21,605,704 |   |
|                                             |   |                                                           |       |   |   |   |   |   |

----

Index

CONDENSED CONSOLIDATED 

|                                                                                        |   | Three Months Ended March 31, |    |
|---------------------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                                        |   | 2011                         |    |   | 2010 |   |
|                                                                                        |   | (in thousands)               |    |
|                                                                                        |   |                         |    |   |   |   |
| Cash flows from operating activities:                                                       |   |                         |    |   |   |   |
| Net income                                                                                  |   | $                            | 248     |   |   | $ | 7,587 |   |
| Adjustments to reconcile net income to cash provided by operating activities:               |   |                         |    |   |   |   |   |   |
| Amortization of deferred policy acquisition costs                                           |   |                         | 12,017  |   |   |   | 10,810 |   |
| Policy acquisition costs deferred                                                           |   |                         | (13,428 | ) |   |   | (12,786 | ) |
| Depreciation and amortization                                                               |   |                         | 2,145   |   |   |   | 1,479 |   |
| Compensation cost on restricted shares of common stock                                      |   |                         | 1,368   |   |   |   | 1,109 |   |
| Compensation cost on stock options                                                          |   |                         | 183     |   |   |   | 196 |   |
| Net realized gain on investments                                                            |   |                         | (298    | ) |   |   | (6,532 | ) |
| Deferred income tax (benefit) expense                                                       |   |                         | (233    | ) |   |   | 1,649 |   |
| Changes in certain assets and liabilities:                                                  |   |                         |    |   |   |   |   |   |
| Unpaid loss and loss adjustment expense                                                     |   |                         | 6,058   |   |   |   | 10,443 |   |
| Income taxes payable                                                                        |   |                         | 4,467   |   |   |   | 1,006 |   |
| Reinsurance recoverables, net of reinsurance withheld                                       |   |                         | (8,213  | ) |   |   | (2,000 | ) |
| Unearned premiums, net of deferred premiums     and premiums receivable |   |                         | 830     |   |   |   | (914 | ) |
|  Other assets and other liabilities                                                    |   |                         | 2,432   |   |   |   | 6,139 |   |
| Net cash provided by operating activities                                                   |   |                         | 7,576   |   |   |   | 18,186 |   |
|                                                                                        |   |                         |    |   |   |   |   |   |
| Cash flows from investing activities:                                                       |   |                         |    |   |   |   |   |   |
| Purchases of investments                                                                    |   |                         | (45,936 | ) |   |   | (120,512 | ) |
| Sales of investments                                                                        |   |                         | 36,893  |   |   |   | 116,113 |   |
| Maturities and redemption of investments                                                    |   |                         | 12,005  |   |   |   | 11,053 |   |
| Purchases of property and equipment                                                         |   |                         | (367    | ) |   |   | (44 | ) |
| Net cash provided by investing activities                                                   |   |                         | 2,595   |   |   |   | 6,610 |   |
|                                                                                        |   |                         |    |   |   |   |   |   |
| Cash flows from financing activities:                                                       |   |                         |    |   |   |   |   |   |
| Proceeds from grant of restricted shares of common stock                                    |   |                         | – |   |   |   | 3 |   |
| Stockholder dividends paid                                                                  |   |                         | (1,101  | ) |   |   | – |   |
| Surrender of stock in connection with restricted stock vesting                              |   |                         | (830    | ) |   |   | (526 | ) |
| Net cash used in financing activities                                                       |   |                         | (1,931  | ) |   |   | (523 | ) |
|                                                                                        |   |                         |    |   |   |   |   |   |
| Net increase in cash and cash equivalents                                                   |   |                         | 8,240   |   |   |   | 24,273 |   |
| Cash and cash equivalents at beginning of period                                            |   |                         | 15,958  |   |   |   | 12,896 |   |
| Cash and cash equivalents at end of period                                                  |   | $                            | 24,198  |   |   | $ | 37,169 |   |
|                                                                                        |   |                         |    |   |   |   |   |   |
| Supplemental disclosures:                                                                   |   |                         |    |   |   |   |   |   |
| Interest paid on surplus notes                                                              |   | $                            | 131     |   |   | $ | 131 |   |
| Accrued expenses for purchases of investments                                               |   |                         | – |   |   |   | 19,835 |   |
| Receivable from sale of investments                                                         |   |                         | – |   |   |   | (6,119 | ) |
| Federal income taxes recovered                                                              |   |                         | (4,470  | ) |   |   | – |   |

----

Index

NOTES TO 

| 2. | Summary of Significant Accounting Policies |
|----|--------------------------------------------|

|                                                                                                                                          |   | Three Months Ended March 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                                                                          |   | 2011                         |   |   | 2010 |   |
|                                                                                                                                          |   | (in thousands)               |   |
| Basic weighted average shares outstanding                                                                                                     |   |                         | 20,951 |   |   |   | 20,746 |   |
| Weighted average shares issuable upon exercise of outstanding stock     options and vesting of nonvested restricted stock |   |                         | 790    |   |   |   | 860 |   |
| Diluted weighted average shares outstanding                                                                                                   |   |                         | 21,741 |   |   |   | 21,606 |   |

----

Index

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Three Months Ended March 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2011                         |   |   | 2010 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (in thousands)               |   |
| Net income                                                                                             |   | $                            | 248    |   |   | $ | 7,587 |   |
| Reclassification adjustment for net realized gains recorded into income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                         | (298   | ) |   |   | (6,532 | ) |
| Tax expense related to reclassification adjustment for gains                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                         | 106    |   |   |   | 2,286 |   |
| Change in net unrealized gains on investment securities available for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                         | (1,320 | ) |   |   | 1,518 |   |
| Tax benefit (expense) related to change in net unrealized gains                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                         | 472    |   |   |   | (532 | ) |
| Total comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $                            | (792   | ) |   | $ | 4,327 |   |

| 3. | Investments |
|----|-------------|

|                                 |   | Cost orAmortizedCost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   |   EstimatedFair Value |   |
|------------------------------------------------|--------|----------------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|----------------------------|--------|
|                                           |   |  (in thousands) |    |
| March 31, 2011:                                |   |                 |    |
|  U.S. Treasury securities                 |   | $                    | 26,002  |   |                 | $      | 493    |                  |   | $      | (224                       | )      |   | $ | 26,271 |   |
| Government sponsored agency securities         |   |                 | 20,722  |   |                 |   | 785    |                  |   |   | (31                        | )      |   |   | 21,476 |   |
| Corporate securities                           |   |                 | 162,398 |   |                 |   | 2,886  |                  |   |   | (1,925                     | )      |   |   | 163,359 |   |
| Tax-exempt municipal securities                |   |                 | 292,384 |   |                 |   | 5,206  |                  |   |   | (4,193                     | )      |   |   | 293,397 |   |
| Mortgage pass-through securities               |   |                 | 71,053  |   |                 |   | 2,326  |                  |   |   | (924                       | )      |   |   | 72,455 |   |
| Collateralized mortgage obligations            |   |                 | 15,834  |   |                 |   | 205    |                  |   |   | (34                        | )      |   |   | 16,005 |   |
| Asset-backed securities                        |   |                 | 72,992  |   |                 |   | 1,226  |                  |   |   | (205                       | )      |   |   | 74,013 |   |
| Total investment securities available for sale |   | $                    | 661,385 |   |                 | $      | 13,127 |                  |   | $      | (7,536                     | )      |   | $ | 666,976 |   |
|                                           |   |                 |    |   |                 |   |   |                  |   |   |                       |   |   |   |   |   |

| U.S. Treasury securities                       |   | $      | 26,514  |   |   | $      | 635    |   |   | $      | (172   | ) |   | $      | 26,977  |   |
|------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|---|--------|--------|---------|--------|
| Government sponsored agency securities         |   |   | 23,159  |   |   |   | 943    |   |   |   | (31    | ) |   |   | 24,071  |   |
| Corporate securities                           |   |   | 154,652 |   |   |   | 3,532  |   |   |   | (1,915 | ) |   |   | 156,269 |   |
| Tax-exempt municipal securities                |   |   | 309,935 |   |   |   | 5,555  |   |   |   | (4,778 | ) |   |   | 310,712 |   |
| Mortgage pass-through securities               |   |   | 73,501  |   |   |   | 2,548  |   |   |   | (745   | ) |   |   | 75,304  |   |
| Collateralized mortgage obligations            |   |   | 17,260  |   |   |   | 233    |   |   |   | (28    | ) |   |   | 17,465  |   |
| Asset-backed securities                        |   |   | 60,740  |   |   |   | 1,577  |   |   |   | (147   | ) |   |   | 62,170  |   |
| Total investment securities available for sale |   | $      | 665,761 |   |   | $      | 15,023 |   |   | $      | (7,816 | ) |   | $      | 672,968 |   |

----

Index

|                                       |   | Less Than 12 Months |    |   | 12 Months or More       |   |    | Total               |   |
|--------------------------------------------|--------|---------------------|---------|--------|-------------------------|--------|---------|---------------------|--------|
| Investment Category                        |   | AggregateFair Value |    |   | AggregateUnrealizedLoss |   |    | AggregateFair Value |   |   | AggregateUnrealizedLoss |   |   | AggregateFair Value |   |   | AggregateUnrealizedLoss |   |
|                                       |   |                |    |   |                    |   |    | (in thousands)      |   |   |   |   |   |   |   |
| U.S. Treasury securities                   |   | $                   | 8,323   |   |                    | $      | (224    | )                   |   | $ | – |   |   | $ | – |   |   | $ | 8,323 |   |   | $ | (224 | ) |
| Government sponsored agency securities (1) |   |                | 2,076   |   |                    |   | (31     | )                   |   |   | – |   |   |   | – |   |   |   | 2,076 |   |   |   | (31 | ) |
| Corporate securities                       |   |                | 60,627  |   |                    |   | (1,925  | )                   |   |   | – |   |   |   | – |   |   |   | 60,627 |   |   |   | (1,925 | ) |
| Tax-exempt municipal securities            |   |                | 147,565 |   |                    |   | (4,193  | )                   |   |   | – |   |   |   | – |   |   |   | 147,565 |   |   |   | (4,193 | ) |
| Mortgage pass-through securities (2)       |   |                | 28,961  |   |                    |   | (924    | )                   |   |   | – |   |   |   | – |   |   |   | 28,961 |   |   |   | (924 | ) |
| Collateralized mortgage obligations        |   |                | 336     |   |                    |   | – |                |   |   | 159 |   |   |   | (34 | ) |   |   | 495 |   |   |   | (34 | ) |
| Asset-backed securities                    |   |                | 18,423  |   |                    |   | (205    | )                   |   |   | – |   |   |   | – |   |   |   | 18,423 |   |   |   | (205 | ) |
| Total                                      |   | $                   | 266,311 |   |                    | $      | (7,502  | )                   |   | $ | 159 |   |   | $ | (34 | ) |   | $ | 266,470 |   |   | $ | (7,536 | ) |

| (1) | Government sponsored agency securities are not backed by the full faith and credit of the U.S. Government. |
|-----|------------------------------------------------------------------------------------------------------------|

| (2)  | Includes adjustable rate mortgage securities. |
|-----------|-----------------------------------------------|

|             |   |   | Insured Bonds  |   |   | UninsuredBonds          |   |   | Total Municipal PortfolioBased On |   |
|------------------|--------|--------|----------------|--------|--------|-------------------------|--------|--------|-----------------------------------|--------|
| Rating           |   |   | InsuredRatings |   |   | Underlying Ratings |   |   |  Ratings                     |   |   | OverallRatings (1) |   |   | UnderlyingRatings |   |
|             |   |   | (in thousands) |   |
| AAA              |   |   | $              | 4,625  |   |                    | $      | 4,625  |                              |   | $ | 31,568 |   |   | $ | 36,193 |   |   | $ | 36,193 |   |
| AA+              |   |   |           | 17,062 |   |                    |   | 15,426 |                              |   |   | 52,959 |   |   |   | 70,021 |   |   |   | 68,385 |   |
| AA               |   |   |           | 23,785 |   |                    |   | 21,576 |                              |   |   | 45,220 |   |   |   | 69,005 |   |   |   | 66,796 |   |
| AA-              |   |   |           | 28,389 |   |                    |   | 23,884 |                              |   |   | 40,590 |   |   |   | 68,979 |   |   |   | 64,474 |   |
| A+               |   |   |           | 10,737 |   |                    |   | 17,937 |                              |   |   | 9,655 |   |   |   | 20,392 |   |   |   | 27,592 |   |
| A                |   |   |           | 4,222  |   |                    |   | 4,222  |                              |   |   | 19,082 |   |   |   | 23,304 |   |   |   | 23,304 |   |
| A-               |   |   |           | 1,055  |   |                    |   | 1,055  |                              |   |   | 2,715 |   |   |   | 3,770 |   |   |   | 3,770 |   |
| BBB+             |   |   |           | -      |   |                    |   | 1,150  |                              |   |   | 3,313 |   |   |   | 3,313 |   |   |   | 4,463 |   |
| BBB              |   |   |           | -      |   |                    |   | -      |                              |   |   | 2,829 |   |   |   | 2,829 |   |   |   | 2,829 |   |
| Pre-refunded (2) |   |   |           | 6,130  |   |                    |   | 6,130  |                              |   |   | 8,080 |   |   |   | 14,210 |   |   |   | 14,210 |   |
| Total            |   |   | $              | 96,005 |   |                    | $      | 96,005 |                              |   | $ | 216,011 |   |   | $ | 312,016 |   |   | $ | 312,016 |   |

| (1) | Represents insured ratings on insured bonds and ratings on uninsured bonds. |
|-----|-----------------------------------------------------------------------------|

| (2)  | These bonds have been pre-refunded by the issuer depositing highly rated government-issued securities into irrevocable trust funds established for payment of principal and interest. |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|                                          |   |   |       |   |   Insurer Ratings                                              |   |   AverageUnderlying |
|-----------------------------------------------|--------|--------|------------|--------|---------------------------------------------------------------------|--------|--------------------------|
| Bond Insurer                                  |   |   | Fair Value |   | S&P           |   | Moody’s       |   | Bond Rating  |
|                                          |   |   | (Millions) |   |                                                                |
| National Public Finance Guarantee Corporation |   | $      | 47.4       |   | BBB                                                                 |   | Baa1                     |   | AA- |

|                                         |   |                | Cost or        |   |                | Estimated  |    |
|----------------------------------------------|--------|---------------------|----------------|--------|---------------------|------------|---------|
|                                         |   |                | Amortized Cost |   |                | Fair Value |    |
| Maturity                                     |   |                | (in thousands) |   |
| Due in one year or less                      |   | $                   | 24,136         |   |                | $          | 24,461  |   |
| Due after one year through five years        |   |                | 191,256        |   |                |       | 196,029 |   |
| Due after five years through ten years       |   |                | 247,475        |   |                |       | 246,791 |   |
| Due after ten years                          |   |                | 38,639         |   |                |       | 37,222  |   |
| Securities not due at a single maturity date |   | ­ 159,879 |           |   | ­ 162,473 |       |
|   Total fixed income securities    |   | $                   | 661,385        |   |                | $          | 666,976 |   |

| 4. | Premiums |
|----|----------|

|                                             |   | March 31,2011     |    |   | December 31,2010 |   |
|--------------------------------------------------|--------|-------------------|---------|--------|------------------|--------|
| Current:                                         |   | (in thousands)    |    |
| Premiums receivable                              |   | $                 | 15,619  |   |             | $      | 15,673 |   |
| Allowance for doubtful accounts                  |   | ­ (804) | )  |   | ­ (650 | )      |
|     Premiums receivable, net |   | $                 | 14,815  |   |             | $      | 15,023 |   |

|                                             |   | March 31,2011     |    |   | December 31,2010 |    |
|--------------------------------------------------|--------|-------------------|---------|--------|------------------|---------|
| Deferred:                                        |   | (in thousands)    |    |
| Premiums receivable                              |   | $                 | 171,476 |   |             | $       | 169,128 |   |
| Allowance for doubtful accounts                  |   | ­ (273) | )  |   | ­ (286 | )  |
|     Premiums receivable, net |   | $                 | 171,203 |   |             | $       | 168,842 |   |

----

Index

|                                    |   | Three Months Ended March 31, |    |
|-----------------------------------------|--------|------------------------------|---------|
|                                    |   | 2011                         |    |   | 2010 |   |
|                                    |   | (in thousands)               |    |
| Beginning balance:                      |   |                         |    |   |   |   |
| Unpaid loss and loss adjustment expense |   | $                            | 440,919 |   |   | $ | 351,890 |   |
| Reinsurance recoverables                |   |                         | (56,350 | ) |   |   | (34,080 | ) |
| Net balance, beginning of period        |   |                         | 384,569 |   |   |   | 317,810 |   |
| Incurred related to:                    |   |                         |    |   |   |   |   |   |
| Current period                          |   |                         | 42,031  |   |   |   | 43,702 |   |
| Prior periods                           |   |                         | 1,235   |   |   |   | (125 | ) |
| Total incurred                          |   |                         | 43,266  |   |   |   | 43,577 |   |
| Paid related to:                        |   |                         |    |   |   |   |   |   |
| Current period                          |   |                         | (4,077  | ) |   |   | (5,823 | ) |
| Prior periods                           |   |                         | (40,345 | ) |   |   | (30,082 | ) |
| Total paid                              |   |                         | (44,422 | ) |   |   | (35,905 | ) |
| Net balance, end of period              |   |                         | 383,413 |   |   |   | 325,482 |   |
| Reinsurance recoverables                |   |                         | 63,564  |   |   |   | 36,853 |   |
| Unpaid loss and loss adjustment expense |   | $                            | 446,977 |   |   | $ | 362,335 |   |

----

Index

|                             |   |       |      |   |          |   |   | Weighted      |   |   |           |   |
|----------------------------------|--------|------------|-----------|--------|---------------|--------|--------|---------------|--------|--------|----------------|--------|
|                             |   |       |      |   | Weighted      |   |   | Average Re-   |   |   | Aggregate      |   |
|                             |   | Shares     |      |   | Average Exer- |   |   | maining Con-  |   |   | Intrinsic      |   |
|                             |   | Subject to |      |   | cise Price    |   |   | tractual Life |   |   | Value          |   |
|                             |   | Options    |      |   | per Share     |   |   | (years)       |   |   | (in thousands) |   |
| Outstanding at December 31, 2010 |   |       | 1,354,442 |   |          | $      | 11.09  |          |   |   | 5.7            |   |   | $ | 1,002 |   |
| Granted                          |   |       | 98,483    |   |          |   | 9.94   |          |   |   | -              |   |   |   | - |   |
| Forfeited                        |   |       | (850      | )      |          |   | 12.75  |          |   |   | -              |   |   |   | - |   |
| Exercised                        |   |       | -         |   |          |   | -      |          |   |   | -              |   |   |   | - |   |
| Cancelled                        |   |       | (2,100    | )      |          |   | 13.49  |          |   |   | -              |   |   |   | - |   |
| Outstanding at March 31, 2011    |   |       | 1,449,975 |   |          |   | 11.01  |          |   |   | 5.8            |   |   |   | 1,502 |   |
|                             |   |       |      |   |          |   |   |          |   |   |           |   |   |   |   |   |
| Exercisable at March 31, 2011    |   |       | 1,029,886 |   |          |   | 11.02  |          |   |   | 4.6            |   |   |   | 1,403 |   |

|                             |   |      |      |   | Weighted   |   |
|----------------------------------|--------|-----------|-----------|--------|------------|--------|
|                             |   |      |      |   | Average    |   |
|                             |   | Number of |      |   | Grant Date |   |
|                             |   | Shares    |      |   | Fair Value |   |
| Outstanding at December 31, 2010 |   |      | 1,105,125 |   |       | $      | 11.84 |   |
| Granted                          |   |      | 345,650   |   |       |   | 9.94 |   |
| Vested                           |   |      | (304,074  | )      |       |   | 13.97 |   |
| Forfeited                        |   |      | -         |   |       |   | - |   |
| Outstanding at March 31, 2011    |   |      | 1,146,701 |   |       |   | 10.70 |   |

----

Index

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Three Months Ended March 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2011                         |   |   | 2010 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (in thousands)               |   |
| Stock-based compensation expense related to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |   |   |   |   |
|   Nonvested restricted stock                                                                                             |   | $                            | 1,368  |   |   | $ | 1,109 |   |
|   Stock options                                                                                                          |   |                         | 183    |   |   |   | 196 |   |
| Total                                                                                                                              |   | $                            | 1,551  |   |   | $ | 1,305 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                         |   |   |   |   |   |   |
| Total related tax benefit                                                                                                          |   | $                            | 499    |   |   | $ | 406 |   |

|   | • | Cash and cash equivalents, premiums receivable, accruedexpenses, other liabilities and surplus notes: The carrying amounts for these financial instruments as reported in the accompanying condensed consolidated balance sheets approximate their fair values. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Investment securities:   The Company measures and reports its financial assets and liabilities, including investment securities, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures”.  The estimated fair values for available-for-sale securities are generally based on quoted market prices for securities traded in the public marketplace. The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity. Additional information with respect to fair values of the Company’s investment securities is disclosed in Note 3. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 consists of U.S. Treasury securities that are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 2 — Valuations for assets and liabilities traded in less active dealer or broker markets. Level 2 valuations are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 includes government sponsored agency securities, corporate fixed-income securities, municipal bonds, mortgage pass-through securities, collateralized mortgage obligations and asset-backed securities. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | • | Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.  As of March 31, 2011, the Company had no Level 3 financial assets or liabilities. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | Total          |    |   | Level 1 |   |    | Level 2 |   |   | Level 3 |   |
|----------------------------------------|--------|----------------|---------|--------|---------|--------|---------|---------|--------|--------|---------|--------|
|                                   |   | (In thousands) |    |
| U.S. Treasury securities               |   | $              | 26,271  |   |    | $      | 26,271  |    |   | $      | — |   |   | $ | — |   |
| Government sponsored agency securities |   |           | 21,476  |   |    |   | — |    |   |   | 21,476  |   |   |   | — |   |
| Corporate securities                   |   |           | 163,359 |   |    |   | — |    |   |   | 163,359 |   |   |   | — |   |
| Tax-exempt municipal securities        |   |           | 293,397 |   |    |   | — |    |   |   | 293,397 |   |   |   | — |   |
| Mortgage pass-through securities       |   |           | 72,455  |   |    |   | — |    |   |   | 72,455  |   |   |   | — |   |
| Collateralized mortgage obligations    |   |           | 16,005  |   |    |   | — |    |   |   | 16,005  |   |   |   | — |   |
| Asset-backed securities                |   |           | 74,013  |   |    |   | — |    |   |   | 74,013  |   |   |   | — |   |
| Total                                  |   | $              | 666,976 |   |    | $      | 26,271  |    |   | $      | 640,705 |   |   | $ | — |   |

|                                   |   | Total          |    |   | Level 1 |   |    | Level 2 |   |   | Level 3 |   |
|----------------------------------------|--------|----------------|---------|--------|---------|--------|---------|---------|--------|--------|---------|--------|
|                                   |   | (In thousands) |    |
| U.S. Treasury securities               |   | $              | 26,977  |   |    | $      | 26,977  |    |   | $      | — |   |   | $ | — |   |
| Government sponsored agency securities |   |           | 24,071  |   |    |   | — |    |   |   | 24,071  |   |   |   | — |   |
| Corporate securities                   |   |           | 156,269 |   |    |   | — |    |   |   | 156,269 |   |   |   | — |   |
| Tax-exempt municipal securities        |   |           | 310,712 |   |    |   | — |    |   |   | 310,712 |   |   |   | — |   |
| Mortgage pass-through securities       |   |           | 75,304  |   |    |   | — |    |   |   | 75,304  |   |   |   | — |   |
| Collateralized mortgage obligations    |   |           | 17,465  |   |    |   | — |    |   |   | 17,465  |   |   |   | — |   |
| Asset-backed securities                |   |           | 62,170  |   |    |   | — |    |   |   | 62,170  |   |   |   | — |   |
| Total                                  |   | $              | 672,968 |   |    | $      | 26,977  |    |   | $      | 645,991 |   |   | $ | — |   |

----

Index

----

Index

Item 2. 

|   | • | greater frequency or severity of claims and loss activity, including as a result of catastrophic events, than our underwriting, reserving or investment practices anticipate based on historical experience or industry data; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | changes in the U.S. economy and workforce levels, including the length of the economic recovery; |
|--------|---------|--------------------------------------------------------------------------------------------------|

|   | • | our dependency on a concentrated geographic market; |
|--------|---------|-----------------------------------------------------|

|   | • | changes in the availability, cost or quality of reinsurance and failure of our reinsurers to pay claims timely or at all; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------|

|   | • | changes in regulations or laws applicable to us, our subsidiaries, brokers or customers; |
|--------|---------|------------------------------------------------------------------------------------------|

|   | • | uncertainty about the effect of rules and regulations to be promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act on us and the economy and the financial services sector in particular; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | potential downgrades in our rating or changes in rating agency policies or practices; |
|--------|---------|---------------------------------------------------------------------------------------|

|   | • | ineffectiveness or obsolescence of our business strategy due to changes in current or future market conditions; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------|

|   | • | unexpected issues relating to claims or coverage and changes in legal theories of liability under our insurance policies; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------|

|   | • | increased competition on the basis of pricing, capacity, coverage terms or other factors; |
|--------|---------|-------------------------------------------------------------------------------------------|

|   | • | developments in financial and capital markets that adversely affect the performance of our investments; |
|--------|---------|---------------------------------------------------------------------------------------------------------|

|   | • | loss of the services of any of our executive officers or other key personnel; |
|--------|---------|-------------------------------------------------------------------------------|

|   | • | our inability to raise capital in the future; |
|--------|---------|-----------------------------------------------|

----

Index

|   | • | our status as an insurance holding company with no direct operations; |
|--------|---------|-----------------------------------------------------------------------|

|   | • | our reliance on independent insurance brokers; |
|--------|---------|------------------------------------------------|

|   | • | increased assessments or other surcharges by states in which we write policies; |
|--------|---------|---------------------------------------------------------------------------------|

|   | • | our potential exposure to losses if LMC were to be placed into receivership; |
|--------|---------|------------------------------------------------------------------------------|

|   | • | the effects of mergers, acquisitions and divestitures that we may undertake; |
|--------|---------|------------------------------------------------------------------------------|

|   | • | failure of our customers to pay additional premium under our retrospectively rated policies; |
|--------|---------|----------------------------------------------------------------------------------------------|

|   | • | the effects of acts of terrorism or war; |
|--------|---------|------------------------------------------|

|   | • | cyclical changes in the insurance industry; |
|--------|---------|---------------------------------------------|

|   | • | changes in accounting policies or practices; and |
|--------|---------|-------------------------------------------------------|

|   | • | changes in general economic conditions, including inflation and other factors. |
|--------|---------|--------------------------------------------------------------------------------|

----

Index

----

Index

|                    |   | Quarter Ended March 31, |   |
|-------------------------|--------|-------------------------|--------|
|                    |   | 2011                    |   |   | 2010 |   |
|                    |   | DirectPremiumsEarned    |   |   | % |   |   | DirectPremiumsEarned |   |   | % |   |
|                    |   | ($ in thousands)        |   |
| California              |   | $                       | 32,735 |   |   |   | 50.4 | % |   | $ | 28,655 |   |   |   | 44.1 | % |
| Louisiana               |   |                    | 5,937  |   |   |   | 9.1 |   |   |   | 5,907 |   |   |   | 9.1 |   |
| Texas                   |   |                    | 3,777  |   |   |   | 5.8 |   |   |   | 3,749 |   |   |   | 5.8 |   |
| Alaska                  |   |                    | 3,339  |   |   |   | 5.1 |   |   |   | 3,146 |   |   |   | 4.8 |   |
| Washington              |   |                    | 3,108  |   |   |   |  4.8 |   |   |   | 2,923 |   |   |   | 4.5 |   |
|    Total |   | $                       | 48,896 |   |   |   | 75.2 | % |   | $ | 44,380 |   |   |   | 68.3 | % |

----

Index

----

Index

----

Index

Item 3.

----

Index

Item 4

Item  1A

Item 2.

|                                                                               |   | (a)TotalNumberof Shares(or Units)Purchased |    |   | (b)AveragePrice Paidper Share(or Unit) |   |    | (c)Total Numberof Shares(or Units)Purchased as Part ofPublicly AnnouncedPlans or Programs |   |   | (d)MaximumNumber (or ApproximateDollar Value) of Shares (or Units)that May Yet BePurchased Under the Plans or Programs |   |
|------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|--------|----------------------------------------|--------|---------|-------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------|--------|
| Month #1 (January 1, 2011 through     January 31, 2011)   |   |                                       | – |   |                                   |   | – |                                                                                      |   |   | –                                                                                                                |   |   |   | – |   |
| Month #2 (February 1, 2011 through     February 28, 2011) |   |                                       | 15,345  |   |                                   | $      | 10.04   |                                                                                      |   |   | –                                                                                                                |   |   |   | – |   |
| Month # 3 (March 1, 2011 through     March 31, 2011)      |   |                                       | 66,411  |   |                                   | $      | 10.19   |                                                                                      |   |   | –                                                                                                                |   |   |   | – |   |

Item 6

----

Index

SIGNATURES

|              | SEABRIGHT HOLDINGS, INC. |                                                                                                                  |
|-------------------|--------------------------|-----------------------------------------------------------------------------------------------------------------------|
|              |                     |                                                                                                                  |   |
| Date: May 6, 2011 | By:                      | /s/ John G. Pasqualetto                                                                                          |   |
|              |                     | John G. PasqualettoChairman, President and Chief Executive Officer(Principal Executive Officer)                       |   |
|              |                     |                                                                                                                  |   |
|              | By:                      | /s/ Scott H. Maw                                                                                                      |   |
|              |                     | Scott H. MawSenior Vice President – Chief Financial Officer andAssistant Secretary(Principal Financial Officer) |   |

----

Index

| ExhibitNumber                                                                                                    | Description                                                                                                                                                                                                   |
|------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1                                                                                                             | Amended Employment Agreement with Scott H. Maw dated February 3, 2011 (incorporated by reference to the Company’s current report on Form 8-K (file no. 001-34204) filed on February 9, 2011)            |
| 10.2                                                                                                             | SeaBright Holdings, Inc. 2011 Bonus Plan for Section 16 Officers and Key Employees (incorporated by reference to the Company’s current report on Form 8-K (file no. 001-34204) filed on March 23, 2011) |
| 31.1                   | Rule 13a-14(a) Certification (Chief Executive Officer)                                                                                                                                                        |
| 31.2                   | Rule 13a-14(a) Certification (Chief Financial Officer)                                                                                                                                                        |
| 32.1                                                                                                             | Section 1350 Certification (Chief Executive Officer)                                                                                                                                                          |
| 32.2                   | Section 1350 Certification (Chief Financial Officer)                                                                                                                                                          |