----

----

| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|------------------------------------------------------------------------------------------|

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

| Class                         |   | Shares outstanding as of November 8, 2010 |
|-------------------------------|--------|-------------------------------------------|
| Common Stock, $0.01 Par Value |   | 22,026,401                                |

----

----

----

SeaBright Holdings, Inc.

|       |   |                                                                                                                   | Page   |
|------------|--------|------------------------------------------------------------------------------------------------------------------------|--------|
| Part I.    |   | Financial Information                                                                                                  |   |
|       |   |                                                                                                                   |   |
| Item 1.    |   | Financial Statements (unaudited)                                                                                       | 2      |
|       |   |                                                                                                                   |   |
|       |   | Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009                                   | 2      |
|       |   |                                                                                                                   |   |
|       |   | Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2010 and 2009 | 3      |
|       |   |                                                                                                                   |   |
|       |   | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009                  | 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                                                             | 21     |
|       |   |                                                                                                                   |   |
| 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                                                            | 22     |
|       |   |                                                                                                                   |   |
| Item 6.    |   | Exhibits                                                                                                               | 22     |
|       |   |                                                                                                                   |   |
| Signatures |   |                                                                                                                   | 23     |

----

Index

Item 1. Financial Statements

SEABRIGHT HOLDINGS, INC. AND SUBSIDIARIES

|                                                                                                                                                                           |   | September 30,2010                                  |      |   | December 31,2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|-----------|--------|------------------|--------|
|                                                                                                                                                                           |   | (Unaudited)                                        |      |   | (Audited)        |   |
|                                                                                                                                                                           |   | (in thousands, except share and per share amounts) |      |
| ASSETS                                                                                                                                                                         |   |                                               |      |   |             |   |
|                                                                                                                                                                           |   |                                               |      |   |             |   |
| Fixed income securities available for sale, at fair value (amortized cost $665,724 in 2010 and $608,222 in 2009)                                                               |   | $                                                  | 695,547   |   |             | $      | 626,608 |   |
| Cash and cash equivalents                                                                                                                                                      |   |                                               | 25,306    |   |             |   | 12,896 |   |
| Premiums receivable, net of allowance                                                                                                                                          |   |                                               | 16,547    |   |             |   | 14,477 |   |
| Deferred premiums                                                                                                                                                              |   |                                               | 163,047   |   |             |   | 182,239 |   |
| Reinsurance recoverables                                                                                                                                                       |   |                                               | 49,301    |   |             |   | 34,339 |   |
| Federal income tax recoverable                                                                                                                                                 |   |                                               | 10,113    |   |             |   | 4,774 |   |
| Deferred income taxes, net                                                                                                                                                     |   |                                               | 16,557    |   |             |   | 21,861 |   |
| Deferred policy acquisition costs, net                                                                                                                                         |   |                                               | 25,211    |   |             |   | 25,537 |   |
| Goodwill                                                                                                                                                                       |   |                                               | 2,794     |   |             |   | 4,321 |   |
| Other assets                                                                                                                                                                   |   |                                               | 43,976    |   |             |   | 37,809 |   |
| Total assets                                                                                                                                                                   |   | $                                                  | 1,048,399 |   |             | $      | 964,861 |   |
|                                                                                                                                                                           |   |                                               |      |   |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                     |   |                                               |      |   |             |   |   |   |
|                                                                                                                                                                           |   |                                               |      |   |             |   |   |   |
| Liabilities:                                                                                                                                                                   |   |                                               |      |   |             |   |   |   |
| Unpaid loss and loss adjustment expense                                                                                                                                        |   | $                                                  | 428,193   |   |             | $      | 351,496 |   |
| Unearned premiums                                                                                                                                                              |   |                                               | 157,557   |   |             |   | 175,766 |   |
| Reinsurance funds withheld and balances payable                                                                                                                                |   |                                               | 5,683     |   |             |   | 7,312 |   |
| Premiums payable                                                                                                                                                               |   |                                               | 9,491     |   |             |   | 4,786 |   |
| Accrued expenses and other liabilities                                                                                                                                         |   |                                               | 70,825    |   |             |   | 54,028 |   |
| Surplus notes                                                                                                                                                                  |   |                                               | 12,000    |   |             |   | 12,000 |   |
| Total liabilities                                                                                                                                                              |   |                                               | 683,749   |   |             |   | 605,388 |   |
|                                                                                                                                                                           |   |                                               |      |   |             |   |   |   |
| Commitments and contingencies                                                                                                                                                  |   |                                               |      |   |             |   |   |   |
|                                                                                                                                                                           |   |                                               |      |   |             |   |   |   |
| 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 – 22,009,901 shares at September 30, 2010 and 21,675,786 shares at December 31, 2009 |   |                                               | 220       |   |             |   | 217 |   |
| Paid-in capital                                                                                                                                                                |   |                                               | 208,635   |   |             |   | 205,079 |   |
| Accumulated other comprehensive income                                                                                                                                         |   |                                               | 20,361    |   |             |   | 12,927 |   |
| Retained earnings                                                                                                                                                              |   |                                               | 135,434   |   |             |   | 141,250 |   |
| Total stockholders’ equity                                                                                                                                               |   |                                               | 364,650   |   |             |   | 359,473 |   |
| Total liabilities and stockholders’ equity                                                                                                                               |   | $                                                  | 1,048,399 |   |             | $      | 964,861 |   |

----

Index

SEABRIGHT HOLDINGS, INC. AND SUBSIDIARIES

|                                                                        |   | Three Months Ended September 30,                                |       |   | Nine Months Ended September 30, |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|---------------------------------|--------|
|                                                                        |   | 2010                                                            |       |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                        |   | (in thousands, except share and earnings per share information) |       |
| Revenue:                                                                    |   |                                                            |       |   |                            |   |   |   |   |   |   |   |
| Premiums earned                                                             |   | $                                                               | 65,108     |   |                            | $      | 64,427 |   |   | $ | 191,359 |   |   | $ | 182,460 |   |
| Claims service income                                                       |   |                                                            | 238        |   |                            |   | 293 |   |   |   | 675 |   |   |   | 782 |   |
| Other service income                                                        |   |                                                            | 37         |   |                            |   | 36 |   |   |   | 122 |   |   |   | 147 |   |
| Net investment income                                                       |   |                                                            | 5,806      |   |                            |   | 5,888 |   |   |   | 17,765 |   |   |   | 17,186 |   |
| Other-than-temporary impairment losses:                                     |   |                                                            |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Total other-than-temporary impairment losses                                |   |                                                            | –    |   |                            |   | – |   |   |   | – |   |   |   | (258 | ) |
| Less portion of losses recognized in accumulated other comprehensive income |   |                                                            | –    |   |                            |   | – |   |   |   | – |   |   |   | – |   |
| Net impairment losses recognized in earnings                                |   |                                                            | –    |   |                            |   | – |   |   |   | – |   |   |   | (258 | ) |
| Other net realized gains recognized in earnings                             |   |                                                            | 3,904      |   |                            |   | 292 |   |   |   | 14,287 |   |   |   | 217 |   |
| Other income                                                                |   |                                                            | 802        |   |                            |   | 1,145 |   |   |   | 2,528 |   |   |   | 3,353 |   |
|                                                                        |   |                                                            | 75,895     |   |                            |   | 72,081 |   |   |   | 226,736 |   |   |   | 203,887 |   |
| Losses and expenses:                                                        |   |                                                            |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Loss and loss adjustment expenses                                           |   |                                                            | 47,967     |   |                            |   | 42,216 |   |   |   | 170,412 |   |   |   | 121,992 |   |
| Underwriting, acquisition and insurance expenses                            |   |                                                            | 17,640     |   |                            |   | 18,155 |   |   |   | 53,456 |   |   |   | 54,039 |   |
| Interest expense                                                            |   |                                                            | 136        |   |                            |   | 140 |   |   |   | 396 |   |   |   | 466 |   |
| Goodwill impairment                                                         |   |                                                            | –    |   |                            |   | – |   |   |   | 1,527 |   |   |   | – |   |
| Other expenses                                                              |   |                                                            | 2,620      |   |                            |   | 2,688 |   |   |   | 7,512 |   |   |   | 7,402 |   |
|                                                                        |   |                                                            | 68,363     |   |                            |   | 63,199 |   |   |   | 233,303 |   |   |   | 183,899 |   |
| Income (loss) before taxes                                                  |   |                                                            | 7,532      |   |                            |   | 8,882 |   |   |   | (6,567 | ) |   |   | 19,988 |   |
| Income tax expense (benefit)                                                |   |                                                            | 2,104      |   |                            |   | 2,217 |   |   |   | (4,052 | ) |   |   | 5,033 |   |
| Net income (loss)                                                           |   | $                                                               | 5,428      |   |                            | $      | 6,665 |   |   | $ | (2,515 | ) |   | $ | 14,955 |   |
|                                                                        |   |                                                            |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share                                             |   | $                                                               | 0.26       |   |                            | $      | 0.32 |   |   | $ | (0.12 | ) |   | $ | 0.72 |   |
| Diluted earnings (loss) per share                                           |   | $                                                               | 0.25       |   |                            | $      | 0.31 |   |   | $ | (0.12 | ) |   | $ | 0.70 |   |
|                                                                        |   |                                                            |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average basic shares outstanding                                   |   |                                                            | 20,909,738 |   |                            |   | 20,732,801 |   |   |   | 20,850,428 |   |   |   | 20,691,250 |   |
| Weighted average diluted shares outstanding                                 |   |                                                            | 21,442,157 |   |                            |   | 21,502,272 |   |   |   | 20,850,428 |   |   |   | 21,451,959 |   |

----

Index

SEABRIGHT HOLDINGS, INC. AND SUBSIDIARIES

|                                                                                 |   | Nine Months Ended September 30, |     |
|--------------------------------------------------------------------------------------|--------|---------------------------------|----------|
|                                                                                 |   | 2010                            |     |   | 2009 |   |
|                                                                                 |   | (in thousands)                  |     |
|                                                                                 |   |                            |     |   |   |   |
| Cash flows from operating activities:                                                |   |                            |     |   |   |   |
| Net (loss) income                                                                    |   | $                               | (2,515   | ) |   | $ | 14,955 |   |
| Adjustments to reconcile net (loss) income to cash provided by operating activities: |   |                            |     |   |   |   |   |   |
| Amortization of deferred policy acquisition costs                                    |   |                            | 35,327   |   |   |   | 33,736 |   |
| Policy acquisition costs deferred                                                    |   |                            | (35,001  | ) |   |   | (34,889 | ) |
| Provision for depreciation and amortization                                          |   |                            | 4,941    |   |   |   | 3,856 |   |
| Compensation cost on restricted shares of common stock                               |   |                            | 3,402    |   |   |   | 3,229 |   |
| Compensation cost on stock options                                                   |   |                            | 706      |   |   |   | 548 |   |
| Net realized (gain) loss on investments                                              |   |                            | (14,287  | ) |   |   | 42 |   |
| Deferred income tax benefit (expense)                                                |   |                            | 1,313    |   |   |   | (1,896 | ) |
| Changes in certain assets and liabilities:                                           |   |                            |     |   |   |   |   |   |
| Unpaid loss and loss adjustment expense                                              |   |                            | 76,697   |   |   |   | 42,617 |   |
| Reinsurance recoverables, net of reinsurance withheld                                |   |                            | (13,676  | ) |   |   | (14,893 | ) |
| Unearned premiums, net of deferred premiums and premiums receivable                  |   |                            | 3,618    |   |   |   | 7,926 |   |
| Other assets and other liabilities                                                   |   |                            | (6,502   | ) |   |   | 5,296 |   |
| Net cash provided by operating activities                                            |   |                            | 54,023   |   |   |   | 60,527 |   |
|                                                                                 |   |                            |     |   |   |   |   |   |
| Cash flows from investing activities:                                                |   |                            |     |   |   |   |   |   |
| Purchases of investments                                                             |   |                            | (381,474 | ) |   |   | (126,978 | ) |
| Sales of investments                                                                 |   |                            | 304,137  |   |   |   | 30,225 |   |
| Maturities and redemption of investments                                             |   |                            | 40,335   |   |   |   | 39,837 |   |
| Purchases of property and equipment                                                  |   |                            | (1,862   | ) |   |   | (1,972 | ) |
| Net cash used in investing activities                                                |   |                            | (38,864  | ) |   |   | (58,888 | ) |
|                                                                                 |   |                            |     |   |   |   |   |   |
| Cash flows from financing activities:                                                |   |                            |     |   |   |   |   |   |
| Proceeds from exercise of stock options                                              |   |                            | 26       |   |   |   | 31 |   |
| Grant of restricted shares of common stock                                           |   |                            | 4        |   |   |   | 4 |   |
| Surrender of stock in connection with restricted stock vesting                       |   |                            | (579     | ) |   |   | (473 | ) |
| Stockholder dividends paid                                                           |   |                            | (2,200   | ) |   |   | – |   |
| Net cash used in financing activities                                                |   |                            | (2,749   | ) |   |   | (438 | ) |
|                                                                                 |   |                            |     |   |   |   |   |   |
| Net increase in cash and cash equivalents                                            |   |                            | 12,410   |   |   |   | 1,201 |   |
| Cash and cash equivalents at beginning of period                                     |   |                            | 12,896   |   |   |   | 22,872 |   |
| Cash and cash equivalents at end of period                                           |   | $                               | 25,306   |   |   | $ | 24,073 |   |
|                                                                                 |   |                            |     |   |   |   |   |   |
| Supplemental disclosures:                                                            |   |                            |     |   |   |   |   |   |
| Interest paid on surplus notes                                                       |   | $                               | 394      |   |   | $ | 488 |   |
| Federal income taxes paid                                                            |   |                            | –  |   |   |   | 7,500 |   |
| Payable for purchases of investments                                                 |   |                            | 15,166   |   |   |   | 8,832 |   |
| Receivable for sales of investments                                                  |   |                            | 5,466    |   |   |   | 2,039 |   |

----

Index

SEABRIGHT HOLDINGS, INC. AND SUBSIDIARIES

| 1. | Basis of Presentation |
|----|-----------------------|

|          |   | Three Months Ended September 30, 2009 |   |   | Nine Months Ended September 30, 2009 |   |
|---------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|          |   | As Reported                           |   |   | Adjustment                           |   |   | As Revised |   |   | As Reported |   |   | Adjustment |   |   | As Revised |   |
|          |   | (in thousands)                        |   |
| Other income  |   | $                                     | 1,986  |   |                                 | $      | (841 | ) |   | $ | 1,145 |   |   | $ | 6,308 |   |   | $ | (2,955 | ) |   | $ | 3,353 |   |
| Other expense |   |                                  | 3,529  |   |                                 |   | (841 | ) |   |   | 2,688 |   |   |   | 10,357 |   |   |   | (2,955 | ) |   |   | 7,402 |   |

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

|   | a. | Use of Estimates |
|--------|----|------------------|

----

Index

|   | b. | Earnings Per Share |
|--------|----|--------------------|

|                                                                                                                           |   | Three Months Ended September 30, |   |   | Nine Months Ended September 30, |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                                           |   | 2010                             |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                           |   | (in thousands)                   |   |
| Basic weighted average shares outstanding                                                                                      |   |                             | 20,910 |   |                            |   | 20,733 |   |   |   | 20,850 |   |   |   | 20,691 |   |
| Weighted average dilutive shares issuable upon exercise of outstanding stock options and vesting of nonvested restricted stock |   |                             | 532    |   |                            |   | 769 |   |   |   | – |   |   |   | 761 |   |
| Diluted weighted average shares outstanding                                                                                    |   |                             | 21,442 |   |                            |   | 21,502 |   |   |   | 20,850 |   |   |   | 21,452 |   |

|   | c. | Stockholder Dividends |
|--------|----|-----------------------|

|   | d. | Comprehensive Income |
|--------|----|----------------------|

|                                                                                            |   | Three Months Ended September 30, |    |   | Nine Months Ended September 30, |   |
|-------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|---------------------------------|--------|
|                                                                                            |   | 2010                             |    |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                                            |   | (in thousands)                   |    |
| Net income (loss)                                                                               |   | $                                | 5,428   |   |                            | $      | 6,665 |   |   | $ | (2,515 | ) |   | $ | 14,955 |   |
| Reclassification adjustment for net realized (gains) losses recorded into income                |   |                             | (3,904  | )      |                            |   | (292 | ) |   |   | (14,287 | ) |   |   | 41 |   |
| Tax expense (benefit) related to reclassification adjustment gains (losses)                     |   |                             | 1,366   |   |                            |   | 102 |   |   |   | 5,000 |   |   |   | (14 | ) |
| Increase in net unrealized gains on investment securities available for sale                    |   |                             | 11,944  |   |                            |   | 20,709 |   |   |   | 25,725 |   |   |   | 29,702 |   |
| Tax expense related to unrealized gains                                                         |   |                             | (4,180  | )      |                            |   | (7,242 | ) |   |   | (9,004 | ) |   |   | (10,391 | ) |
| Tax effect of change in deferred tax asset valuation allowance recorded in comprehensive income |   |                             | – |   |                            |   | 1,204 |   |   |   | – |   |   |   | 2,015 |   |
| Total comprehensive income                                                                      |   | $                                | 10,654  |   |                            | $      | 21,146 |   |   | $ | 4,919 |   |   | $ | 36,308 |   |

|   | e. | Other Significant Accounting Policies |
|--------|----|---------------------------------------|

----

Index

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

|                                           |   | Cost orAmortizedCost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |   | Carrying Value |    |
|------------------------------------------------|--------|----------------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|---------------------|--------|--------|----------------|---------|
|                                           |   | (in thousands)       |    |
| U.S. Treasury securities                       |   | $                    | 24,551  |   |                 | $      | 1,236  |                  |   | $      | (1                  | )      |   | $              | 25,786  |   |   | $ | 25,786 |   |
| Government sponsored agency securities         |   |                 | 23,622  |   |                 |   | 1,444  |                  |   |   | –             |   |   |           | 25,066  |   |   |   | 25,066 |   |
| Corporate securities                           |   |                 | 153,564 |   |                 |   | 8,314  |                  |   |   | (47                 | )      |   |           | 161,831 |   |   |   | 161,831 |   |
| Tax-exempt municipal securities                |   |                 | 320,308 |   |                 |   | 13,706 |                  |   |   | (238                | )      |   |           | 333,776 |   |   |   | 333,776 |   |
| Mortgage pass-through securities               |   |                 | 61,178  |   |                 |   | 2,810  |                  |   |   | (31                 | )      |   |           | 63,957  |   |   |   | 63,957 |   |
| Collateralized mortgage obligations            |   |                 | 22,240  |   |                 |   | 399    |                  |   |   | (41                 | )      |   |           | 22,598  |   |   |   | 22,598 |   |
| Asset-backed securities                        |   |                 | 60,261  |   |                 |   | 2,273  |                  |   |   | (1                  | )      |   |           | 62,533  |   |   |   | 62,533 |   |
| Total investment securities available for sale |   | $                    | 665,724 |   |                 | $      | 30,182 |                  |   | $      | (359                | )      |   | $              | 695,547 |   |   | $ | 695,547 |   |

|                                |   | Less Than 12 Months  |   |   | 12 Months or More       |   |   | Total               |   |
|-------------------------------------|--------|----------------------|--------|--------|-------------------------|--------|--------|---------------------|--------|
| Investment Category                 |   | Aggregate Fair Value |   |   | AggregateUnrealizedLoss |   |   | AggregateFair Value |   |   | AggregateUnrealizedLoss |   |   | Aggregate Fair Value |   |   | AggregateUnrealizedLoss |   |
|                                |   |                 |   |   | (in thousands)          |   |   |                |   |
| Fixed Income Securities:            |   |                 |   |   |                    |   |   |                |   |   |   |   |   |   |   |   |   |   |
| US Treasury securities              |   | $                    | 1,009  |   |                    | $      | (1     | )                   |   | $ | – |   |   | $ | – |   |   | $ | 1,009 |   |   | $ | (1 | ) |
| Corporate securities                |   |                 | 7,752  |   |                    |   | (47    | )                   |   |   | – |   |   |   | – |   |   |   | 7,752 |   |   |   | (47 | ) |
| Tax-exempt municipal securities     |   |                 | 36,503 |   |                    |   | (238   | )                   |   |   | – |   |   |   | – |   |   |   | 36,503 |   |   |   | (238 | ) |
| Mortgage pass-through securities    |   |                 | 8,458  |   |                    |   | (31    | )                   |   |   | – |   |   |   | – |   |   |   | 8,458 |   |   |   | (31 | ) |
| Collateralized mortgage obligations |   |                 | 464    |   |                    |   | (2     | )                   |   |   | 165 |   |   |   | (39 | ) |   |   | 629 |   |   |   | (41 | ) |
| Asset backed securities             |   |                 | 1,194  |   |                    |   | (1     | )                   |   |   | – |   |   |   | – |   |   |   | 1,194 |   |   |   | (1 | ) |
| Total                               |   | $                    | 55,380 |   |                    | $      | (320   | )                   |   | $ | 165 |   |   | $ | (39 | ) |   | $ | 55,545 |   |   | $ | (359 | ) |

----

Index

|             |   |   | Insured Bonds  |    |   | UninsuredBonds    |   |    | Total Municipal PortfolioBased On |   |
|------------------|--------|--------|----------------|---------|--------|-------------------|--------|---------|-----------------------------------|--------|
| Rating           |   |   | InsuredRatings |    |   | UnderlyingRatings |   |    | Ratings                           |   |   | OverallRatings (1) |   |   | Underlying Ratings |   |
|             |   |   | (in thousands) |    |
| AAA              |   |   | $              | 7,872   |   |              | $      | 7,872   |                              |   | $ | 36,896 |   |   | $ | 44,768 |   |   | $ | 44,768 |   |
| AA+              |   |   |           | 25,564  |   |              |   | 20,058  |                              |   |   | 59,917 |   |   |   | 85,481 |   |   |   | 79,975 |   |
| AA               |   |   |           | 28,879  |   |              |   | 27,646  |                              |   |   | 41,028 |   |   |   | 69,907 |   |   |   | 68,674 |   |
| AA-              |   |   |           | 40,610  |   |              |   | 37,688  |                              |   |   | 33,393 |   |   |   | 74,003 |   |   |   | 71,081 |   |
| A+               |   |   |           | 15,199  |   |              |   | 23,694  |                              |   |   | 12,154 |   |   |   | 27,353 |   |   |   | 35,848 |   |
| A                |   |   |           | 8,063   |   |              |   | 8,063   |                              |   |   | 14,146 |   |   |   | 22,209 |   |   |   | 22,209 |   |
| A-               |   |   |           | 3,188   |   |              |   | 3,188   |                              |   |   | 2,791 |   |   |   | 5,979 |   |   |   | 5,979 |   |
| BBB+             |   |   |           | – |   |              |   | 1,166   |                              |   |   | 3,404 |   |   |   | 3,404 |   |   |   | 4,570 |   |
| BBB              |   |   |           | – |   |              |   | – |                              |   |   | 2,864 |   |   |   | 2,864 |   |   |   | 2,864 |   |
| Pre refunded (2) |   |   |           | 7,607   |   |              |   | 7,607   |                              |   |   | 10,580 |   |   |   | 18,187 |   |   |   | 18,187 |   |
| Total            |   |   | $              | 136,982 |   |              | $      | 136,982 |                              |   | $ | 217,173 |   |   | $ | 354,155 |   |   | $ | 354,155 |   |

|   | (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. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   |       |   | Insurer Ratings |   | AverageUnderlying |
|-----------------------------------------------|--------|------------|--------|-----------------|--------|-------------------|
| Bond Insurer                                  |   | Fair Value |   | S&P         |   | Moody’s     |   | Bond Rating |
|                                          |   | (Millions) |   |            |   |              |   |   |
| National Public Finance Guarantee Corporation |   | $          | 66.3   |            |   | A                 |   | Baa1 |   | AA- |

| Maturity                                     |   | Cost or AmortizedCost |    |   | EstimatedFair Value |   |
|----------------------------------------------|--------|-----------------------|---------|--------|---------------------|--------|
|                                         |   | (in thousands)        |    |
| Due in one year or less                      |   | $                     | 22,587  |   |                | $      | 22,888 |   |
| Due after one year through five years        |   |                  | 179,526 |   |                |   | 188,568 |   |
| Due after five years through ten years       |   |                  | 282,989 |   |                |   | 296,864 |   |
| Due after ten years                          |   |                  | 36,943  |   |                |   | 38,140 |   |
| Securities not due at a single maturity date |   |                  | 143,679 |   |                |   | 149,087 |   |
| Total fixed income securities                |   | $                     | 665,724 |   |                | $      | 695,547 |   |

----

Index

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

|                                  |   | September 30,2010 |   |   | December 31,2009 |   |
|---------------------------------------|--------|-------------------|--------|--------|------------------|--------|
|                                  |   | (in thousands)    |   |
| Premiums receivable                   |   | $                 | 17,241 |   |             | $      | 15,057 |   |
| Allowance for doubtful accounts       |   |              | (694   | )      |             |   | (580 | ) |
| Premiums receivable, net of allowance |   | $                 | 16,547 |   |             | $      | 14,477 |   |

| 5. | Reinsurance |
|----|-------------|

| 6. | Unpaid Loss and Loss Adjustment Expenses |
|----|------------------------------------------|

|                                            |   | Three Months Ended September 30, |    |   | Nine Months Ended September 30, |   |
|-------------------------------------------------|--------|----------------------------------|---------|--------|---------------------------------|--------|
|                                            |   | 2010                             |    |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                            |   | (in thousands)                   |    |
| Beginning balance:                              |   |                             |    |   |                            |   |   |   |   |   |   |   |
| Unpaid loss and loss adjustment expense         |   | $                                | 411,865 |   |                            | $      | 322,728 |   |   | $ | 351,496 |   |   | $ | 292,027 |   |
| Reinsurance recoverables                        |   |                             | (44,052 | )      |                            |   | (28,032 | ) |   |   | (34,080 | ) |   |   | (18,231 | ) |
| Net balance, beginning of period                |   |                             | 367,813 |   |                            |   | 294,696 |   |   |   | 317,416 |   |   |   | 273,796 |   |
| Incurred related to:                            |   |                             |    |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Current period                                  |   |                             | 47,967  |   |                            |   | 40,783 |   |   |   | 139,954 |   |   |   | 116,729 |   |
| Prior periods                                   |   |                             | − |   |                            |   | 1,433 |   |   |   | 30,458 |   |   |   | 4,689 |   |
| Receivable under adverse development cover      |   |                             | − |   |                            |   | − |   |   |   | − |   |   |   | 574 |   |
| Total incurred                                  |   |                             | 47,967  |   |                            |   | 42,216 |   |   |   | 170,412 |   |   |   | 121,992 |   |
| Paid related to:                                |   |                             |    |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Current period                                  |   |                             | (15,286 | )      |                            |   | (15,588 | ) |   |   | (26,822 | ) |   |   | (31,558 | ) |
| Prior periods                                   |   |                             | (21,412 | )      |                            |   | (17,242 | ) |   |   | (81,924 | ) |   |   | (59,574 | ) |
| Total paid                                      |   |                             | (36,698 | )      |                            |   | (32,830 | ) |   |   | (108,746 | ) |   |   | (91,132 | ) |
| Receivable under adverse development cover |   |                             | − |   |                            |   | − |   |   |   | − |   |   |   | (574 | ) |
| Net balance, end of period                      |   |                             | 379,082 |   |                            |   | 304,082 |   |   |   | 379,082 |   |   |   | 304,082 |   |
| Reinsurance recoverable                         |   |                             | 49,111  |   |                            |   | 30,562 |   |   |   | 49,111 |   |   |   | 30,562 |   |
| Unpaid loss and loss adjustment expense         |   | $                                | 428,193 |   |                            | $      | 334,644 |   |   | $ | 428,193 |   |   | $ | 334,644 |   |

----

Index

| 7. | Contingencies |
|----|---------------|

| 8. | Share-Based Payment Arrangements |
|----|----------------------------------|

|                                         |   | Shares Subject to Options |      |   | Weighted Average Exercise Price per Share |   |   | Weighted Average Remaining Contractual Life (years) |   |   | Aggregate Intrinsic Value (in thousands) |   |
|----------------------------------------------|--------|---------------------------|-----------|--------|-------------------------------------------|--------|--------|-----------------------------------------------------|--------|--------|------------------------------------------|--------|
| Outstanding at December 31, 2009             |   |                      | 1,225,660 |   |                                      | $      | 11.19  |                                                |   |   | 6.2                                      |   |   | $ | 368 |   |
| Granted                                      |   |                      | 169,613   |   |                                      |   | 10.97  |                                                |   |   | –                                  |   |   |   | – |   |
| Forfeited                                    |   |                      | (20,047   | )      |                                      |   | 13.05  |                                                |   |   | –                                  |   |   |   | – |   |
| Exercised                                    |   |                      | (4,000    | )      |                                      |   | 6.54   |                                                |   |   | –                                  |   |   |   | – |   |
| Cancelled                                    |   |                      | (22,159   | )      |                                      |   | 13.67  |                                                |   |   | –                                  |   |   |   | – |   |
| Outstanding at September 30, 2010            |   |                      | 1,349,067 |   |                                      |   | 11.11  |                                                |   |   | 5.9                                      |   |   |   | – |   |
|                                         |   |                      |      |   |                                      |   |   |                                                |   |   |                                     |   |   |   |   |   |
| Exercisable at September  30, 2010 |   |                      | 938,860   |   |                                      |   | 10.81  |                                                |   |   | 4.8                                      |   |   |   | – |   |

----

Index

|                              |   |      |      |   | Weighted   |   |
|-----------------------------------|--------|-----------|-----------|--------|------------|--------|
|                              |   |      |      |   | Average    |   |
|                              |   | Number of |      |   | Grant Date |   |
|                              |   | Shares    |      |   | Fair Value |   |
| Outstanding at December 31, 2009  |   |      | 936,020   |   |       | $      | 13.78 |   |
| Granted                           |   |      | 412,270   |   |       |   | 11.02 |   |
| Vested                            |   |      | (228,165  | )      |       |   | 17.94 |   |
| Forfeited                         |   |      | (28,500   | )      |       |   | 12.44 |   |
| Outstanding at September 30, 2010 |   |      | 1,091,625 |   |       |   | 11.90 |   |

|                                         |   | Three Months Ended September 30, |   |   | Nine Months Ended September 30, |   |
|----------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                         |   | 2010                             |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                         |   | (in thousands)                   |   |
| Stock-based compensation expense related to: |   |                             |   |   |                            |   |   |   |   |   |   |   |
| Nonvested restricted stock                   |   | $                                | 1,134  |   |                            | $      | 1,085 |   |   | $ | 3,402 |   |   | $ | 3,229 |   |
| Stock options                                |   |                             | 268    |   |                            |   | 197 |   |   |   | 706 |   |   |   | 548 |   |
| Total                                        |   | $                                | 1,402  |   |                            | $      | 1,282 |   |   | $ | 4,108 |   |   | $ | 3,777 |   |
|                                         |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Total related tax benefit                    |   | $                                | 423    |   |                            | $      | 398 |   |   | $ | 1,268 |   |   | $ | 1,151 |   |

| 9. | Fair Values of Assets and Liabilities |
|----|---------------------------------------|

|   | • | 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 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 value 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. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | • | Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 includes 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. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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 September 30, 2010, the Company had no Level 3 financial assets or liabilities. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |   | Total          |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|-------------------------------|--------|----------------|---------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                          |   | (in thousands) |    |
| Securities available for sale |   | $              | 695,547 |   |    | $      | 25,786 |    |   | $      | 669,761 |   |   | $ | – |   |

| (1) | Consists of the Company’s investments in U.S. Treasury securities. |
|-----|--------------------------------------------------------------------------|

----

Index

| 10. | Goodwill |
|-----|----------|

|                                 |   | SBIC           |    |   | PMCS   |   |    | BWNV   |   |   | Total   |   |
|--------------------------------------|--------|----------------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
|                                 |   | (in thousands) |    |
| Balance as of July 1, 2010:          |   |           |    |   |   |   |    |   |   |   |    |   |
| Goodwill                             |   | $              | 1,527   |   |   | $      | 1,355   |   |   | $      | 1,439   |   |   | $ | 4,321 |   |
| Accumulated impairment losses        |   |           | (1,527  | )      |   |   | – |   |   |   | – |   |   |   | (1,527 | ) |
|                                 |   |           | – |   |   |   | 1,355   |   |   |   | 1,439   |   |   |   | 2,794 |   |
| Goodwill acquired during the quarter |   |           | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Impairment losses                    |   |           | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Balance as of September 30, 2010:    |   |           |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Goodwill                             |   |           | 1,527   |   |   |   | 1,355   |   |   |   | 1,439   |   |   |   | 4,321 |   |
| Accumulated impairment losses        |   |           | (1,527  | )      |   |   | – |   |   |   | – |   |   |   | (1,527 | ) |
|                                 |   | $              | – |   |   | $      | 1,355   |   |   | $      | 1,439   |   |   | $ | 2,794 |   |

----

Index

| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|---------|---------------------------------------------------------------------------------------------|

|   | • | 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; |
|--------|---------|---------------------------------------------------|

|   | • | 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; |
|--------|---------|------------------------------------------------------------------------------------------|

|   | • | 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; |
|--------|---------|-----------------------------------------------|

|   | • | our status as an insurance holding company with no direct operations, which could adversely affect our ability to pay dividends in the future; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | • | 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 acquisitions 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

|       |   | Nine Months Ended September 30, |    |
|------------|--------|---------------------------------|---------|
|       |   | 2010                            |    |   | 2009 |   |
|       |   | Direct Premiums Earned          |    |   | % |   |   | Direct Premiums Earned |   |   | % |   |
|       |   | ($ in thousands)                |    |
| California |   | $                               | 95,666  |   |   |   | 46.8 | % |   | $ | 77,192 |   |   |   | 40.0 | % |
| Louisiana  |   |                            | 19,726  |   |   |   | 9.6 |   |   |   | 19,495 |   |   |   | 10.1 |   |
| Alaska     |   |                            | 11,186  |   |   |   | 5.5 |   |   |   | 11,898 |   |   |   | 6.2 |   |
| Texas      |   |                            | 10,778  |   |   |   | 5.3 |   |   |   | 11,314 |   |   |   | 5.9 |   |
| Illinois   |   |                            | 10,315  |   |   |   | 5.0 |   |   |   | 16,357 |   |   |   | 8.5 |   |
| Total      |   | $                               | 147,671 |   |   |   | 72.2 | % |   | $ | 136,256 |   |   |   | 70.7 | % |

----

Index

----

Index

----

Index

----

Index

| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
|---------|------------------------------------------------------------|

| Item 4. | Controls and Procedures |
|---------|-------------------------|

Item 1A.  Risk Factors

----

Index

| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
|---------|-------------------------------------------------------------|

|                                                     |   | (a)Total Number of Shares (or Units) Purchased |    |   | (b)Average Price Paid per Share (or Unit) |   |    | (c)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |   |   | (d)Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |   |
|----------------------------------------------------------|--------|------------------------------------------------|---------|--------|-------------------------------------------|--------|---------|------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------|--------|
| Month # 1 (July 1, 2010 through July 31, 2010)           |   |                                           | 792     |   |                                      | $      | 9.63    |                                                                                           |   |   | –                                                                                                                    |   |   |   | – |   |
| Month # 2 (August 1, 2010 through August 31, 2010)       |   |                                           | – |   |                                      |   | – |                                                                                           |   |   | –                                                                                                                    |   |   |   | – |   |
| Month # 3 (September 1, 2010 through September 30, 2010) |   |                                           | 2,378   |   |                                      | $      | 7.92    |                                                                                           |   |   | –                                                                                                                    |   |   |   | – |   |

| Item 6. | Exhibits |
|---------|----------|

----

Index

SIGNATURES

|                   |   | SEABRIGHT HOLDINGS, INC. |
|------------------------|--------|--------------------------|
| Date: November 9, 2010 |   |                     |   |
|                   |   |                     |   |
|                   |   | By:                      | /s/ John G. Pasqualetto |
|                   |   |                     | John G. Pasqualetto Chairman, President and Chief Executive Officer |
|                   |   |                     | (Principal Executive Officer) |
|                   |   |                     |   |
|                   |   | By:                      | /s/ Scott H. Maw |
|                   |   |                     | Scott H. Maw |
|                   |   |                     | Senior Vice President – Chief Financial Officer and Assistant Secretary |
|                   |   |                     | (Principal Financial Officer) |

----

Index

| Exhibit Number |   | Description                                                                                                                                                                                                   |
|----------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1            |   | Amended and Restated Certificate of Incorporation of the Company (incorporated by refence to the Company’s Registration Statement on Form S-8 (file No. 333-123319), filed on March 15, 2005).          |
| 3.2            |   | Amendment to the Company’s Amended and Restated Certificate of Incorporation (incorporated by reference to the Company’s Current Report on Form 8-K (file No. 001-34204), filed on May 24, 2010). |
| 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)                                                                                                                                                          |

----