We are a specialty provider of multi-jurisdictional workers' compensation insurance. Traditional providers of workers' compensation insurance provide coverage to employers under one or more state workers' compensation laws, which prescribe benefits that employers are obligated to provide to their employees who are injured arising out of or in the course of employment. We focus on employers with complex workers' compensation exposures, and provide coverage under multiple state and federal acts, applicable common law or negotiated agreements. We also provide traditional state act coverage in markets we believe are underserved.

We are able to offer these products as a result of our highly specialized underwriting, loss control and claims management expertise. We consider all of our customers on an individual basis and we conduct financial evaluations, loss exposure analyses and review of management safety controls to respond to distinctive risk characteristics. Competition in our niche markets tends to focus less on price and more on availability, service and other value-based considerations.

We currently provide workers' compensation insurance to customers in the following three targeted markets:

• Maritime. We focus on employers with complex coverage needs over land, shore and navigable waters. This involves underwriting liability exposures subject to various state and federal statutes and applicable maritime common law. Our customers in this market are engaged primarily in ship building and repair, pier and marine construction and stevedoring. These customers generated $28.9 million, or 14.7%, of our direct premiums written during the nine months ended September 30, 2006. Our direct premiums written refers to all premiums billed by us during a specified policy period.
  
  
• Alternative Dispute Resolution. We provide customized solutions to employers who are party to collectively bargained workers' compensation agreements that provide for settlement of claims out of court in a negotiated process. This product currently is focused on the needs of the construction industry in California. These customers generated $50.8 million, or 25.8%, of our direct premiums written during the nine months ended September 30, 2006.
  
  
• State Act. We underwrite coverage for benefits that employers are obligated to pay specifically under state workers' compensation laws. We primarily target states that we believe are underserved, such as California, Hawaii and Alaska. These customers generated $117.1 million, or 59.5%, of our direct premiums written during the nine months ended September 30, 2006.

SeaBright was formed in 2003 by members of our current management and entities affiliated with Summit Partners, a leading private equity and venture capital firm, for the purpose of completing a management-led buyout that closed on September 30, 2003, which we refer to as the Acquisition. In the Acquisition, we acquired the renewal rights and substantially all of the operating assets and employees of Eagle Pacific Insurance Company and Pacific Eagle Insurance Company, which we collectively refer to as Eagle or the Eagle entities. Eagle Pacific began writing specialty workers' compensation insurance almost 20 years ago. The Acquisition gave us renewal rights to an existing portfolio of business, representing a valuable asset given the renewal nature of our business, and a fully-operational infrastructure that would have taken many years to develop. These renewal rights gave us access to Eagle's customer lists and the right to seek to renew Eagle's continuing in-force insurance contracts.

Upon completion of the Acquisition, our insurance company subsidiary received a rating of "A–'' (Excellent) from A.M. Best Company, which is the fourth highest of its 15 rating levels. A.M. Best ratings reflect A.M. Best's opinion of an insurance company's operating performance and ability to meet its obligations to policyholders, and are an important factor in establishing the competitive position of insurance companies.

Our chairman, chief executive officer and president joined Eagle in December 1998, and other senior members of our current management joined Eagle in 1999. The combined ratio on the Eagle book of business has improved from 176% in 1999, the first year in which our current management was responsible for the Eagle book of business, to 88% in pro forma 2003. By comparison, the industry average combined ratio was 115% in 1999 and 108% in 2003. We believe the improvement in the combined ratio has resulted primarily from our focus on the niche markets in which we currently operate and our emphasis on larger accounts and fewer customers. For the four-year period beginning with 2000 through pro forma 2003, the gross premiums written on our book of business increased at an average annual rate of 27%. For the nine months ended September 30, 2006, we had gross premiums written of $149.9 million, total revenues of $147.8 million and net income of $24.4 million. Our gross premiums written refers to our direct premiums written plus assumed premiums. Assumed premiums are premiums that we have received from another company under a reinsurance agreement or from an authorized state mandated pool.