United National, Penn-America, Penn Independent Join Forces to Become United America Indemnity

October 15, 2004

United National Group Ltd., Penn-America Group Inc. and Penn Independent Corporation (PIC), a privately-held company, have announced their agreements to combine operations in transactions aggregating over $800 million in enterprise value. As a result of the transactions, the new United America Indemnity Ltd. (UAI) will become one of the leading specialty property and casualty insurers in the industry as well as a significant originator of and placement agent for specialty property and casualty insurance coverage.

Under UAI’s ownership, each company will retain its existing corporate identity and the businesses of UNGL, PNG, and PIC will continue to be operated by the existing management teams. UAI will boast more than $700 million in direct written premiums and net commission revenues, more than $1.1 billion in invested assets and approximately $550 million of shareholders’ equity. Based on today’s market values, United America Indemnity, Ltd. would be owned approximately 75 percent by the current shareholders of UNGL and 25 percent by the current public shareholders of PNG, with the shareholders of PIC receiving cash consideration. The final ownership proportions between UNGL and PNG will be determined based on market trading values of UNGL prior to closing.

To effectuate the transaction, UNGL, the publicly traded holding company for the United National Insurance businesses, which based on recent market prices has an enterprise value of approximately $528 million, will be renamed United America Indemnity Ltd.; Class A common shares and Class B common shares of UNGL will continue as shares of UAI; each publicly held share of PNG will be exchanged for $15.375 of value, consisting of $13.875 in UAI Class A common shares and $1.50 in cash, for aggregate consideration of $156 million for all publicly held PNG shares; and all PIC shares will be acquired by a subsidiary of UAI for $97 million in cash. The $132 million of existing trust preferred securities and notes issued by UNGL and PNG will remain in place. The transaction, expected to close during the first quarter 2005, is subject to several conditions and contingencies, including insurance regulatory approvals and the affirmative vote of the shareholders of each of UNGL and PNG.

Saul Fox, UNGL’s chairman and who will continue as chairman of UAI, said: “By combining the breadth and depth of the UNGL, PNG, and PIC property and casualty insurance operations under United America Indemnity’s umbrella, each company will significantly enhance its ability to provide specialized products and services to its clients.” Fox is also Chief Executive Officer of San Francisco based Fox Paine & Company LLC, whose affiliated private equity funds acquired a controlling interest in United National in September 2003 and will be the largest shareholder in United America Indemnity.

David Bradley, chief executive officer of United National Group Ltd. (who will remain CEO of the holding company), emphasized the market opportunities and intellectual synergies accelerated by the deal, “We now have four critical platforms in which United America Indemnity has clear market leadership, beginning with United National’s and Penn-America’s growing excess and surplus lines specialty P&C businesses that include self-generated proprietary products, niche programs, brokered lines and franchise relationships with general agents who serve the small business marketplace.”

Jon S. Saltzman, currently president and chief executive officer of Penn-America Group Inc., will become president of UAI. Saltzman will oversee all United States insurance company operations of both United National and Penn-America. Joseph F. Morris, currently senior vice president, chief financial officer and treasurer of Penn-America Group Inc., will be promoted to president and chief executive officer of Penn-America Group Inc.

Commenting on the business combination, Saltzman noted, “We are excited about bringing together two great businesses that have long-term histories of producing superior operating results in the excess and surplus lines market. United National is a leader in developing unique specialty products while Penn-America is one of the leading small commercial limited binding authority companies.”

UAI will conduct a conference call regarding the transaction on Monday, Oct. 18, 2004, at 8:00 am EDT. The conference call will not be webcast, but UAI will make slides pertaining to the transaction available on the company’s Web site at www.ungl.ky. Interested parties may access the call on the following dial-in numbers:

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