Transcript Document

United America Indemnity, Ltd.
Investor Presentation
January 2005
Safe Harbor Statement
Safe Harbor statement:
United National has filed a registration statement on Form S-4 in connection with the transaction, and United National and PennAmerica have mailed a joint proxy statement/prospectus to their respective shareholders in connection with the transaction.
Investors and security holders of United National and Penn-America are urged to read the joint proxy statement/prospectus
because it contains important information about United National, Penn-America and the transaction. Investors and security holders
may obtain a free copy of the joint proxy statement/prospectus at the SEC's web site at http://www.sec.gov. A free copy of the joint
proxy statement/prospectus may also be obtained from United National or Penn- America.
United National and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the
shareholders of United National and Penn-America in favor of the transaction.
Information regarding the interests of United National's officers and directors in the transaction is included in the joint proxy
statement/prospectus. Penn-America and its executive officers and directors may also be deemed to be participants in the
solicitation of proxies from the shareholders of United National and Penn- America in favor of the transaction. Information regarding
the interests of Penn-America's officers and directors in the transaction is included in the joint proxy statement/prospectus.
In addition to the registration statement on Form S-4 filed by United National in connection with the transaction, and the joint proxy
statement/prospectus mailed to the shareholders of United National and
Penn- America in connection with the transaction, each of United National and Penn- America file annual, quarterly and special
reports, proxy and information statements, and other information with the SEC.
Investors may read and obtain a copy of any of these reports, statements and other information at the SEC's public reference
rooms located at 450 5th Street, N.W., Washington, D.C., 20549, or any of the SEC's other public reference rooms located in New
York and Chicago. Investors should call the SEC at 1-800-SEC-0330 for further information on these public reference rooms. The
reports, statements and other information filed by United National and Penn-America with the SEC are also available for free at the
SEC's web site at http://www.sec.gov. A free copy of these reports, statements and other information may also be obtained from
United National or Penn-America.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as amended.
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Executive Summary
 Overview of United America Indemnity, Ltd. Participants
 United National Group, Ltd.
 Penn-America Group, Inc.
 Penn Independent Corporation
 Highlights of UAI Business Combination
 Pro Forma Financial Implications and Merits
 Concluding Remarks
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Overview of United America
Indemnity, Ltd. Participants
Overview of United National Group, Ltd.

Headquartered outside Philadelphia, PA

44-year operating history of underwriting specialty general liability, professional liability, commercial property and multi-peril
insurance

Average combined ratio in last 20 years of 95%, placing UNGL in highest rank within P&C class

Products distributed through 85 wholesale general agents, who in turn access more than 34,000 retail insurance brokers

Niche insureds consist of:

Social service agencies

Equine mortality

Vacant property



Public officials, educators
Small businesses (bicycle shops, restaurants)
Attorneys, chiropractors and massage parlors
Net Premiums Written
Fox Paine
Transaction
($ in millions)
Fox Paine
Transaction
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
LTM
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
LTM
($ in millions)
Adjusted GAAP Equity
4
Overview of Penn-America Group, Inc.

Headquartered outside Philadelphia, PA

28-year operating history underwriting specialty general liability, commercial property and multi-peril insurance

Average combined ratio of 98% since going public in 1993

PNG distributes insurance products through 65 wholesale general agents, who in turn access more than 30,000 retail
insurance brokers

Niche insureds consist of:

Restaurants

Non-residential artisan contractors

Retail stores



Other multi-family dwellings
Daycare operations
Special event coverage
Net Premiums Written
GAAP Equity
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LTM
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
LTM
2003
2002
2001
2000
1999
1998
1997
1996
($ in millions)
1995
1994
1993
($ in millions)
Overview of Penn Independent Corporation

Headquartered outside Philadelphia, PA

57 years of operating history

Primary insurance agency operations include:

Delaware Valley Underwriting Authority – Wholesale agency primarily providing insurance policies on an E&S lines
basis for small to middle market businesses

Apex – Serves the specialty P&C insurance and reinsurance needs of governmental agencies

Summit – A subsidiary of Apex; provides claims administration services for policies written by Apex and other
professional liability providers

Stratus – Places insurance for association based programs and unique classes of business

PIFSI – Provides premium financing for those who are insured by P&C agents
Net Commission Revenues(1) ($mm)
Adjusted EBITDA(2) ($mm)
$25
$22
$15
$6
$16
$5
$3
$2
2000
2001
2002
2000
2003
2001
Source: Company reports.
(1) Gross commission received by wholesale general agent less commission paid to retail agents.
(2) Excludes non-recurring and extraordinary charges for PIC and subsidiaries historically, shown before realized investment gains/(losses).
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2002
2003
Highlights of UAI Business
Combination
Summary of UAI Business Combination Terms
Parent
Base Platform
Acquired / Merged

United America Indemnity, Ltd. (NASDAQ/”UNGL”)

United National Group, Ltd.

Penn-America Group, Inc. (NYSE/”PNG”)
Penn-Independent Corp., a privately-held insurance company which owns 31.4% of PNG
and three independent brokerage businesses


$15.375 per PNG share ($156 million)
— $13.875 of UNGL Class A common shares per PNG share (7.9 million UNGL shares)
— $1.50 cash per PNG share

$97 million cash transaction
— PNG shares - $13.39 per share for 4.8 million shares of PNG stock (Including options)
— Agency businesses - $32 million
Expected Closing

First Quarter 2005
Approvals Required

Customary regulatory and shareholder approvals for PNG and UNGL
PNG Public
Consideration
PIC
Consideration
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Financial Benefits to the Transaction
 Accretive on both an earnings and book value basis
UNGL
2003 Earnings Per Share
2004 YTD Earnings Per Share(1)
09/30/04 Book Value per Share
2005E Earnings Per Share
$1.08
$0.77
$14.73
(1)
UAI
$1.31
$0.93
$15.51
Accretion
21.8%
20.8%
5.3%
20.8%
Through 9/30/2004
Source: United National Form S-4 dated December 16, 2004. Refer to "Opinion of Financial Advisor to the
United National Group Board of Directors - Illustrative Pro Forma Earnings Analysis" and " - Other
Considerations" for assumptions and other considerations related to Merrill Lynch's analysis.
Note: 2005E earnings per share assumes $17.89 weighted average closing UNGL share price, extrapolated between
data points on page 66 of the merger proxy.
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Competitive Financial Landscape
 UAI’s pro forma book value and net operating income are comparable to
Philadelphia Consolidated and RLI
Book Value ($mm)
$1,976
$1,000~
$373
$1,506
$1,163
~
$80
~
$750
$606
~
~
Net Operating Income ($mm)
$149
~
$122
$70
$60
$588
$53
$559
$417
$500
$250
$49
$40
$28
$17
$20
$140
$0
$0
BER
MKL
HCC
PHLY
RLI
UAI
UNGL
PNG
BER
Source: Company reports.
Note: Financial information is for the last twelve months ended September 30, 2004.
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MKL
HCC
PHLY
RLI
UAI
UNGL
PNG
LTM Operating Metrics and Trading Statistics
($ in millions)
Gross Written Premiums
15%
$1,116
$690
UAI
’04E – ’05E EPS Growth
5YR EPS Growth Rate
14%
15%
62.3%
$759
RLI
36.1%
PHLY
UAI
RLI
PHLY
UAI
2.5x
PHLY
14.1x
12.0x
1.7x
1.1x
(1)
RLI
Price / 2005E EPS
Price / Book
UAI
53.1%
9.6x
RLI
(2)
PHLY
UAI
(1)
Based on pro forma UAI book value as of Sept. 30, 2004.
(2) Based on UNGL stock price of $17.72 (as of Jan. 21, 2005) and UNGL IBES estimate of $1.85 per share.
Source: Company reports, First Call.
Note: Financial information is at or for the twelve months ended September 30, 2004. Market statistics as of January 21, 2005.
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RLI
PHLY
UAI Management Organization Structure
United America Indemnity, Ltd.
Chairman- Saul A. Fox
CEO – David Bradley
President – Jon Saltzman
CFO – Kevin Tate
United National
Group
CEO – Bill Schmidt
Wind River
(Bermuda)
CEO – Seth
Freudberg
Penn-America
Group
Penn Independent
Corporation
CEO – Joe Morris
CEO – Bob Lear
 Businesses will remain separate and retain their identities in the marketplace
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Similar Businesses, Different Distribution Approaches And Clients
Penn-America
Business Lines
United National
Property
General Liability
Umbrella
Property
General Liability
Umbrella
Professional Liability
Specialized Programs & Products
Commercial Binding Authority
Umbrella
Specialized Programs & Products
Commercial Binding Authority
Umbrella
Professional Liability
Other Primary Liability
65
85
Retail Agents
30,000
34,000
Average Policy Size
$2,000
$3,000
Geographic Focus
Countrywide - Suburban
and Rural Communities
Countrywide – Urban,
Suburban and Rural Communities
Family-run General Agencies
General Agencies and Wholesale
Brokers
84%
67%
Client Focus
Wholesale Agents
Distribution
E & S Proportion
Source: Company reports.
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Historical Underwriting Performance

Strong Underwriting Performance:
► UNGL has a 95% combined ratio for the last 20 years
► PNG has a 98% combined ratio since public (1993)
► P&C industry average is 108%
Statutory Combined Ratios
170%
P&C
Industry
Average:
108%
110%
100%
90%
80%
70%
60%
1991
1992
1993
1994
1995
1996
United National
1997
1998
Penn-America
1999
2000
2001
2002
Industry Average
2003
2004
YTD
Source: Company reports, A.M. Best.
Note: Statutory combined ratio. In 2002, UNGL increased net loss reserves relative to accident years 2001 and prior by $47.8 million primarily due to higher than
anticipated losses in the multi-peril and other liability lines of business and by $23.6 million due to the conclusion of an arbitration proceeding. The net losses
and loss adjustment expenses ratio increased by 43.9 percentage points in 2002 due to this $71.4 million increase in net loss reserves. 2003 is adjusted for
certain expenses related to the acquisition as well as other one-time costs. “UNG 2004 results reported on a GAAP basis to reflect the combined business of
its domestic and international operations.”
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Differentiated Business Model
 Focus on Excess and Surplus Lines – Highest percentage of non-admitted writings of any
competitor
 PNG – 84%, UNGL 67%, Average of Top 20 Comparables – approximately 13%
 Focus on general agents, Focus on franchise value
 UAI is the only dedicated general agent business model
 80% - 90% relationships are exclusive or #1 with general agents in non-admitted
markets
 Average relationship approximates 8 years for UNGL, 10 years for PNG
 Opportunistic market approach
 Small markets (UNGL average premium $3,000, PNG average premium $2,000)
 Specialty markets (horses, vacant buildings, chiropractors, bike shops)
 Less competition and greater defensible platforms have led to outperformance
 UNGL 20-year compounded book value growth of 17%
 PNG compounded book value growth of 13% since public offering in 1993
A focused approach creates an ability to develop new products, defend
markets and grow premium and book value even in the most challenging cycles
Note: Financial information at or for the twelve months ended September 30, 2004.
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Pro Forma Financial Implications
and Merits
Financial Profile of the Combined Business
($ in millions)
Pro Forma
UNGL
PNG
PIC
Consolidated
Income Statement (1)
Gross premiums written
Net premiums written
Premiums earned & net commissions
Net income
$439
257
207
28
$251
216
194
17
NA
NA
25
4
$690
473
426
49(1)
Balance Sheet (1)
Cash & investments
Shareholders’ equity
Assets
$901
417
2,743
$403
140
526
$70
7
60
$1,201 (1)
559 (1)
3,297 (1)
AM Best and Market Data
Rating
Market capitalization
“A” (Excellent)
$512
“A-” (Excellent)
$221
NA
NA
Source: Company reports, A.M. Best.
Note: Financial information at or for the twelve months ended September 30, 2004. Market statistics as of January 21, 2005.
(1) On a consolidated basis pro forma for the transaction. Cash is adjusted to reflect cash uses for transaction consideration. Book value
is UNGL book value plus $141mm equity issued for the transaction minus fair-value equity adjustments. PIC is pro forma to adjust for
investment in PNG. Pro forma net income is historical for last twelve months and does not reflect transaction adjustments or cost
synergies. Market capitalization includes UNGL equity issued to PNG public shareholders.
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653(1)
Reinsurance Recoverables to GAAP Equity
 Net reinsurance recoverable $925.1 million as of September 30, 2004, a decrease of
$119.1 million vs. December 31, 2003
 This represents approximately a $900 million (50%) reduction in uncollateralized
recoverables since the Fox Paine investment in 2003
6.5x
7.0x
6.0x
5.0x
2.7x
4.0x
2.4x
2.2x
1.6x
3.0x
1.0x
1.0x
2.0x
1.0x
0.0x
December
2002
December
2003
United National
June
2004
September
2004
December
2004
Pro forma(1)
UAI Pro Forma Projected
(1)
December
2005
Projected(1)
Competing Group Median
Derived using 9/30/2004 balances per Proxy statement, less previously stated improvements expected from UNGL (per
earnings release investor call transcripts)
Note: Net of collateral.
Source: Company reports, SNL Financial and management estimates.
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Competing
Group
Median
Underleveraged Capital Base
 UAI’s underleveraged capital base shows an ability to grow without accessing
equity markets
NPW/GAAP
Book Value
2.1x
2.50x
1.5x
2.00x
1.4x
0.9x
1.50x
0.9x
0.9x
1.00x
0.50x
0.00x
BER
A.M. Best Rating
A
PHLY
MKL
HCC
RLI
UAI
A+
A
A+
A+
A (1)
5.7%
36.2%
(Debt + Preferred)/Total Capital
34.0%
21.7%
Source: Company reports, A. M. Best.
Note: Financial information is at or for the nine months ended September 30, 2004 annualized.
(1) UNGL Barbados and US operations rated A (Excellent), PNG and UN Bermuda rated A- (Excellent)
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20.0%
20.0%
Concluding Remarks
United America Indemnity, Ltd.
Growth Strategy
United National & Penn-America

United National & Penn Independent

Avoid price competition by emphasizing
specialty programs, small average premiums,
focus on franchise value, and access to
Bermuda or US
Opportunity to Partner in Business
Situations

New UNGL products in need of
distribution

Consider leveraging capital base

New PIC product ideas in need of
insurance market (“ear to the ground”)

Combine Functions

Brokerage business


Investment management

Public company responsibilities

Reinsurance purchasing
PIC Closer to Newly Arising Surplus Lines
Market Needs

Marketing



Enable PNG agents access to UNGL products
Evaluate Other Synergies
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Bring more value to investments in
UNGL product development
capabilities
United America Indemnity, Ltd.
Transaction Highlights
 Fox Paine sponsorship, diligence and execution
 Partnership of three leaders in excess and surplus lines specialty property &
casualty industry
 Outstanding historical operational performance and prospects for growth
 Longstanding relationships with 150 market-leading general agents
 Increased market size, asset base, agency networks and public float
 Immediate value creation for shareholders
 Increase in financial stability, diversity and strength
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