The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Note on Forward-Looking Statement

This Form 10-Q contains certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to future growth of the Company's business activities and availability of funds. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework, weather-related events and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation, regulations and regulatory investigations into industry practices, developments relating to existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected is contained in Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the period ended December 31, 2008, as updated by this Form 10-Q. The projections and statements in this report speak only as of the date of this report and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

The Company is a multinational specialty property and casualty insurer focused on generating consistent underwriting profits. We provide insurance coverage for small businesses and products with high volumes of insureds and loss profiles which we believe are predictable. We target lines of insurance that we believe generally are underserved by the market generally. The Company has grown by hiring teams of underwriters with expertise in our specialty lines, through acquisitions of companies and assets, including access to distribution networks and renewal rights to established books of specialty insurance business. We have operations in three business segments:

· Small commercial business insurance, which includes workers' compensation, commercial package and other commercial lines produced by retail agents and brokers in the United States;

· Specialty risk and extended warranty coverage for consumer and commercial goods and custom designed coverages, such as accidental damage plans and payment protection plans offered in connection with the sale of consumer and commercial goods, in the United States, United Kingdom and certain other European Union countries; and

· Specialty middle-market property and casualty insurance, through which we write commercial insurance for homogeneous, narrowly defined classes of insureds, requiring an in-depth knowledge of the insured's industry segment, through general and other wholesale agents.

In September 2009, the Company acquired from the subsidiaries of Swiss Re America Holding Corp. ("Swiss Re") access to the distribution network and renewal rights to CyberComp ("CyberComp"), its web-based platform providing workers' compensation insurance to the small to medium-sized employer market. CyberComp operates in 26 states and distributes though a network of 13 regional wholesale agencies and over 600 retail agents. The Company produced approximately $7 million of gross written premium in the third quarter of 2009 as a result of this transaction.

During the third quarter of 2008, the Company entered into a managing general agency agreement with Cardinal Comp, LLC ("Cardinal Comp") for the purpose of producing workers compensation premium. The agency writes premiums in the states of New York, Massachusetts and Texas. This relationship produced approximately $6 million and $32 million of gross written premium during the three and nine months ended September 30, 2009, respectively. The amount of premium produced from this relationship for the three months ended September 30, 2008 was less than $0.1 million.

During the second quarter of 2008, the Company completed a stock and asset purchase agreement with a subsidiary of Unitrin, Inc. ("Unitrin") whereby the Company acquired its commercial package business ("UBI") including its distribution networks, renewal rights and four insurance companies through which Unitrin wrote its UBI business. The acquired insurance companies are domiciled in Kansas, Texas and Wisconsin and are collectively licensed in 33 states. In connection with this acquisition, the Company assumed the existing unearned premium of UBI in the amount of $78.2 million and ceded one hundred percent of the unearned premium to Maiden Insurance during the second quarter of 2008. This acquisition produced approximately $15 million and $34 million of gross written premium during the three months ended September 30, 2009 and 2008, respectively, and $79 million and $45 million of gross written premium during the nine months ended September 30, 2009 and 2008, respectively.

The Company transacts business through eleven insurance company subsidiaries:

  Name                                                     Location of Domicile
· Technology Insurance Company, Inc. ("TIC")               New Hampshire
· Rochdale Insurance Company ("RIC")                       New York
· Wesco Insurance Company ("WIC")                          Delaware
· Associated Industries Insurance Company, Inc. ("AIIC")   Florida
· Milwaukee Casualty Insurance Co. ("MCIC")                Wisconsin
· Security National Insurance Company ("SNIC")             Texas
· AmTrust Insurance Company of Kansas, Inc. ("AICK")       Kansas
· Trinity Lloyd's Insurance Company ("TLIC")               Texas
· AmTrust International Insurance Ltd. ("AII")             Bermuda
· AmTrust International Underwriters Limited ("AIU")       Ireland
· IGI Insurance Company, Ltd. ("IGI")                      England

Insurance, particularly workers' compensation, is, generally, affected by seasonality. The first quarter generally produces greater premiums than subsequent quarters. Nevertheless, the impact of seasonality on our small commercial business and specialty middle market segments has not been significant. We believe that this is because we serve many small commercial businesses in different geographic locations. In addition, seasonality may have been muted by our acquisition activity.

We evaluate our operations by monitoring key measures of growth and profitability. We measure our growth by examining our net income, return on average equity, and our loss, expense and combined ratios. The following descriptions provide further explanation of the key measures that we use to evaluate our results:

Gross Written Premium. Gross written premium represents estimated premiums from each insurance policy that we write, including as part of an assigned risk pool, during a reporting period based on the effective date of the individual policy. Certain policies that are underwritten by the Company are subject to premium audit at that policy's cancellation or expiration. The final actual gross premiums written may vary from the original estimate based on changes to the final rating parameters or classifications of the policy.

Net Premium Written. Net premium written is gross written premium less that portion of premium that is ceded to third party reinsurers under reinsurance agreements. The amount ceded under these reinsurance agreements is based on a contractual formula contained in the individual reinsurance agreement.

Net Premium Earned. Net premium earned is the earned portion of our net premiums written. Insurance premiums are earned on a pro rata basis over the term of the policy. At the end of each reporting period, premiums written that are not earned are classified as unearned premiums and are earned in subsequent periods over the remaining term of the policy. Our small commercial business insurance policies typically have a term of one year. Thus, for a one-year policy written on July 1, 2009 for an employer with a constant payroll during the term of the policy, we would earn half of the premiums in 2009 and the other half in 2010. Our specialty risk and extended warranty coverages are earned over the estimated exposure time period. The terms vary depending on the risk and have an average duration of approximately 32 months, but range in duration from one month to 84 months.

Net Loss Ratio. The net loss ratio is a measure of the underwriting profitability of an insurance company's business. Expressed as a percentage, this is the ratio of net losses and loss adjustment expense incurred to net premiums earned.

Net Expense Ratio. The net expense ratio is a measure of an insurance company's operational efficiency in administering its business. Expressed as a percentage, this is the ratio of the sum of policy acquisition expenses, salaries and benefits, and other insurance general and administrative expenses (acquisition costs and other underwriting expenses) less ceding commission to net premiums earned.

Net Combined Ratio. The net combined ratio is a measure of an insurance company's overall underwriting profit. This is the sum of the net loss and net expense ratios. If the net combined ratio is at or above 100%, an insurance company cannot be profitable without investment income, and may not be profitable if investment income is insufficient.

Annualized Return on Equity. Return on equity is calculated by dividing net income (net income excludes results of discontinued operations as well as any currency gain or loss associated with discontinued operations on an after tax basis) by the average of shareholders' equity.

One of the key financial measures that we use to evaluate our operating performance is return on average equity. Our return on average equity was 19.1% and 9.3% for the three months ended September 30, 2009 and 2008, respectively and 21.6% and 21.3% for the nine months ended September 30, 2009 and 2008, respectively. In addition, we target a net combined ratio of 95.0% or lower over the long term, while seeking to maintain optimal operating leverage in our insurance subsidiaries commensurate with our A.M. Best rating objectives. Our net combined ratio was 78.0% and 58.0% for the three months ended September 30, 2009 and 2008, respectively and 79.1% and 73.1% for the nine months ended September 30, 2009 and 2008. The increase in the combined ratio quarter over quarter resulted primarily from an increase in loss and loss adjustment expenses in the Company's small commercial business segment and specialty risk and extended warranty segment resulting from the impact in 2008 of the reduction in prior year loss reserves in the approximate amount of $15 million.

Critical Accounting Policies

The Company's discussion and analysis of its results of operations, financial condition and liquidity are based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and judgments that affect the amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities as of the date of the financial statements. As more information becomes known, these estimates and assumptions could change, which would have an impact on actual results that may differ materially from these estimates and judgments under different assumptions. The Company has not made any changes in estimates or judgments that have had a significant effect on the reported amounts as previously disclosed in our Annual Report on Form 10-K for the fiscal period ended December 31, 2008.