<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------

                                    FORM 10-Q
   (Mark One)
       [X]      Quarterly Report Pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002

       [ ]      Transition report pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934

   For the Period From _________ to __________.

                        Commission File Number: 001-14593
                                                ---------

                          THE MIIX GROUP, INCORPORATED
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                     22-3586492
(State or other jurisdiction of          (I.R.S. employer identification number)
incorporation or organization)


               TWO PRINCESS ROAD, LAWRENCEVILLE, NEW JERSEY 08648
               --------------------------------------------------
              (Address of principal executive offices and zip code)

                                 (609) 896-2404
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
                                         Common Stock, par value $0.01 per share
                                         ---------------------------------------

        Securities registered pursuant to Section 12(g) of the Act: None
                                                                    ----

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                    YES  X   NO
                                        ---     ---

     As of November 12, 2002, the number of outstanding shares of the
Registrant's Common Stock was 13,382,173.

================================================================================

<PAGE>

TABLE OF CONTENTS
-----------------


PART I      FINANCIAL INFORMATION..............................................4

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS..................................4

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS.............................................14

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........24

ITEM 4.     CONTROLS AND PROCEDURES...........................................26

PART II     OTHER INFORMATION.................................................26

ITEM 1.     LEGAL PROCEEDINGS.................................................26

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K..................................27

SIGNATURES....................................................................28










                                                                               2

<PAGE>

                           FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This Form 10-Q, the Company's Annual Report to
Stockholders, any Form 10-K or any Form 8-K of the Company or any other written
or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to uncertainties and other factors that could cause
actual results to differ materially from such statements. In particular, the
implementation of the Company's business plan is subject to completion of
financial analyses and other contingencies, regulatory approval and to the
Company's continuing ability to maintain sufficient risk-based capital to avoid
mandatory control. These uncertainties and other factors are detailed from time
to time in the Company's filings with the appropriate securities commissions,
and include, without limitation, the Company having sufficient liquidity and
working capital, the Company's ability to achieve consistent profitable growth,
the Company's ability to diversify its product lines, the continued adequacy of
the Company's loss and loss adjustment expense reserves, the Company's avoidance
of any material loss on collection of reinsurance recoverables, increased
competitive pressure, the loss of significant customers, continued or increased
loss severity in the insurance industry generally and among its insureds in
particular, general economic conditions, including changing interest rates,
rates of inflation and the performance of the financial markets, judicial
decisions and rulings, changes in domestic and foreign laws, regulations and
taxes, effects of acquisitions and divestitures, and various other factors. The
words "believe,'' "expect,'' "anticipate,'' "project,'' and similar expressions
identify forward-looking statements. The Company's expectations regarding future
values expected or believed to be realized through the implementation of its
current business plan, including through the management of the run-off of its
business and possible business arrangements with MIIX Advantage Insurance
Company of New Jersey, earnings, initiatives, underwriting, cost controls,
adequacy of loss and loss adjustment expense reserves, and realizing shareholder
value depend on a variety of factors, including economic, competitive, market
conditions, legal and regulatory which may be beyond the Company's control and
are thus difficult or impossible to predict. In light of the significant
uncertainties inherent in the forward-looking information herein, the inclusion
of such information should not be regarded as representation by the Company or
any other person that the Company's objectives or plans will be realized.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

                                                                               3

<PAGE>


PART I   FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                        REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
The MIIX Group, Incorporated

We have reviewed the accompanying consolidated balance sheet of The MIIX Group,
Incorporated and subsidiaries as of September 30, 2002, and the related
consolidated statements of income for the three and nine month periods ended
September 30, 2002 and 2001, and the consolidated statements of cash flows for
the nine month periods ended September 30, 2002 and 2001 and the consolidated
statement of stockholders' equity for the nine month period ended September 30,
2002. These financial statements are the responsibility of the Company's
management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with accounting principles generally accepted in
the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheets of The MIIX
Group, Incorporated and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2001, not presented
herein, and in our report dated April 1, 2002, we expressed an unqualified
opinion on those consolidated financial statements; however, we referred in our
report to disclosures in the Notes to the December 31, 2001 financial
statements, the potential consequences of which raised substantial doubt about
the Company's ability to continue as a going concern. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 2001, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.


                                                  ERNST & YOUNG LLP


New York, New York
November 8, 2002


                                                                               4

<PAGE>

                                        THE MIIX GROUP, INCORPORATED
                                         CONSOLIDATED BALANCE SHEETS
                                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                     SEPTEMBER 30,       DECEMBER 31,
                                                                                  -------------------------------------
                                                                                        2002                 2001
                                                                                  ----------------     ----------------
                                     ASSETS                                         (Unaudited)
<S>                                                                                    <C>                  <C>
Securities available-for-sale:
   Fixed-maturity investments, at fair value (amortized cost: 2002 - $823,060;
     2001 - $1,061,499)                                                                $  836,517           $1,054,934
   Equity investments, at fair value (cost: 2002 - $7,402; 2001 - $7,081)                   6,206                6,623
   Short-term investments, at cost which approximates fair value..............            243,822              166,501
                                                                                       ----------           ----------
         Total investments....................................................          1,086,545            1,228,058
                                                                                       ----------           ----------

Cash..........................................................................              1,448                2,029
Accrued investment income.....................................................              9,404               13,261
Premium receivable, net.......................................................             20,994               20,546
Reinsurance recoverable on unpaid losses......................................            445,739              463,275
Prepaid reinsurance premiums .................................................              5,978               16,067
Reinsurance recoverable on paid losses, net...................................             33,986               51,632
Deferred policy acquisition costs.............................................              1,875                4,416
Receivable for securities.....................................................             15,098                    0
Net investment in direct financing leases.....................................                  0               32,101
Other assets..................................................................             48,772               64,478
                                                                                       ----------           ----------
         Total assets.........................................................         $1,669,839           $1,895,863
                                                                                       ==========           ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses....................................         $1,129,819           $1,196,998
Unearned premiums.............................................................             48,836               88,598
Premium deposits..............................................................                  0               18,928
Funds held under reinsurance treaties.........................................            331,389              374,156
Payable for securities........................................................              3,660                    0
Notes payable and other borrowings............................................                  0               10,699
Other liabilities.............................................................             54,797               74,998
                                                                                       ----------           ----------
         Total liabilities....................................................          1,568,501            1,764,377
                                                                                       ----------           ----------

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares
   issued and outstanding.....................................................                  0                    0
Common stock, $0.01 par value, 100,000,000 shares authorized, 16,538,005
   shares issued (2002 - 13,382,173 shares outstanding; 2001 - 13,479,760
   shares outstanding)........................................................                166                  166
Additional paid-in capital....................................................             53,909               53,927
Retained earnings.............................................................             78,706              129,307
Treasury stock, at cost (2002 - 3,155,832 shares; 2001 - 3,058,245 shares)....            (40,199)             (39,631)
Stock purchase loans and unearned stock compensation..........................             (3,689)              (5,444)
Accumulated other comprehensive income (loss).................................             12,445               (6,839)
                                                                                       ----------           ----------
         Total stockholders' equity...........................................            101,338              131,486
                                                                                       ----------           ----------
         Total liabilities and stockholders' equity...........................         $1,669,839           $1,895,863
                                                                                       ==========           ==========
</TABLE>

SEE ACCOMPANYING NOTES

                                                                               5

<PAGE>

<TABLE>
<CAPTION>

                                                THE MIIX GROUP, INCORPORATED

                                             CONSOLIDATED STATEMENTS OF INCOME
                                          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                        (UNAUDITED)

                                                              THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                      SEPTEMBER 30,
                                                         ------------------------------    --------------------------------
                                                             2002             2001              2002              2001
                                                         -------------    -------------    ---------------    -------------
<S>                                                         <C>                <C>             <C>                <C>
REVENUES
Net premiums earned...................................      $23,727            $49,488         $109,963           $140,590
Net investment income.................................       13,710             19,862           48,117             62,078
Realized investment gains (losses)....................         (591)            (2,216)          (1,872)             5,355
Other revenue.........................................        1,368              1,849            5,651              6,862
                                                            -------            -------         --------           --------
     Total revenues...................................       38,214             68,983          161,859            214,885
                                                            -------            -------         --------           --------
EXPENSES
Losses and loss adjustment expenses...................       21,219             47,073          157,520            139,115
Underwriting expenses.................................        5,987             11,116           27,351             32,100
Funds held charges....................................        9,539              6,881           31,826             18,586
Other expenses........................................          584                762            2,254              2,568
Restructuring charge..................................            0                  0            2,552                  0
                                                            -------            -------         --------           --------
     Total expenses...................................       37,329             65,832          221,503            192,369
                                                            -------            -------         --------           --------

Income (loss) before income taxes.....................          885              3,151          (59,644)            22,516
Income tax provision (benefit)........................            0                687          (11,416)             6,441
                                                            -------            -------         --------           --------
     Net income (loss) before cumulative effect
        of an accounting change.......................          885              2,464          (48,228)            16,075
     Cumulative effect of an accounting change,
        net of tax....................................            0                  0           (2,373)            (5,283)
                                                            -------            -------         --------           --------
     Net income (loss) ...............................      $   885            $ 2,464         $(50,601)          $ 10,792
                                                            -------            -------         --------           --------

Basic earnings (loss) per share before
  cumulative effect of an accounting change...........        $0.07              $0.18          $ (3.60)             $1.19
Cumulative effect of an accounting change.............         0.00               0.00            (0.18)             (0.39)
                                                              -----              -----          -------              -----
Basic earnings (loss) per share.......................        $0.07              $0.18          $ (3.78)             $0.80
                                                              =====              =====          =======              =====

Diluted earnings (loss) per share before
  cumulative effect of an accounting change...........        $0.07              $0.18          $ (3.60)             $1.18
Cumulative effect of an accounting change.............         0.00               0.00            (0.18)             (0.39)
                                                              -----              -----           ------              -----
Diluted earnings (loss) per share.....................        $0.07              $0.18          $ (3.78)             $0.79
                                                              =====              =====           ======              =====

Dividend per share of common stock....................        $0.00              $0.05          $  0.00              $0.15
                                                              =====              =====           ======              =====
</TABLE>

SEE ACCOMPANYING NOTES

                                                                               6
<PAGE>

<TABLE>
<CAPTION>

                                                       THE MIIX GROUP, INCORPORATED

                                                    CONSOLIDATED STATEMENT OF EQUITY
                                               FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
                                                  (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                                               (UNAUDITED)


                                                                                          STOCK
                                                                                        PURCHASE
                                                                                        LOANS AND     ACCUMULATED
                                  NUMBER OF    COMMON  ADDITIONAL                       UNEARNED         OTHER          TOTAL
                                    SHARES      STOCK   PAID-IN   RETAINED   TREASURY     STOCK       COMPREHENSIVE  STOCKHOLDERS'
                                 OUTSTANDING   ISSUED   CAPITAL   EARNINGS    STOCK    COMPENSATION   INCOME (LOSS)     EQUITY
                                 ----------- --------- --------- ---------- ---------- ------------- --------------- --------------

<S>                               <C>            <C>    <C>       <C>        <C>           <C>           <C>           <C>
Balance at January 1, 2002.....   13,479,760     $166   $53,927   $129,307   $(39,631)     $(5,444)      $(6,839)      $131,486
  Net loss.....................                                    (50,601)                                             (50,601)

  Other comprehensive
     income (loss), net of tax:

   Net unrealized appreciation
     on securities available-
     for-sale, net of deferred                                                                            19,284         19,284
     taxes.....................

   Stock purchase and loan
     agreement activities......     (110,061)                                    (729)       1,755                        1,026

   Stock compensation and
     treasury stock activity...       12,474                (18)                  161                                       143
                                  ----------     ----   -------   --------   --------      -------       -------       --------
 Balance at September 30, 2002.   13,382,173     $166   $53,909   $ 78,706   $(40,199)     $(3,689)      $12,445       $101,338
                                  ==========     ====   =======   ========   ========      =======       =======       ========
</TABLE>










SEE ACCOMPANYING NOTES

                                                                               7

<PAGE>

<TABLE>
<CAPTION>

                                           THE MIIX GROUP, INCORPORATED

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (In thousands)
                                                    (Unaudited)
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                     ----------------------------------
                                                                                          2002               2001
                                                                                     ---------------     --------------
<S>                                                                                      <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................................        $ (50,601)          $  10,792

Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of an accounting change, net of tax............................            2,373               5,283
Unpaid losses and loss adjustment expenses.......................................          (67,179)            (45,414)
Unearned premiums................................................................          (39,762)             36,508
Premium deposits.................................................................          (18,928)            (15,618)
Premium receivable, net..........................................................             (448)            (15,084)
Reinsurance balances, net........................................................            2,504               3,098
Deferred policy acquisition costs................................................            2,541              (2,811)
Realized (gains) losses..........................................................            1,872              (5,355)
Depreciation, accretion and amortization.........................................           (1,442)             (2,365)
Accrued investment income........................................................            3,857               1,227
Net investment in direct financing leases........................................           32,101              (4,079)
Other assets.....................................................................           13,333              (1,830)
Other liabilities................................................................          (19,032)                946
                                                                                         ---------           ---------
Net cash used in operating activities............................................         (138,811)            (34,702)
                                                                                         ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from fixed-maturity investment sales....................................          742,679             318,878
Proceeds from fixed-maturity investments matured, called or prepaid..............          109,880              94,928
Proceeds from equity investment sales............................................              387               2,098
Cost of investments acquired.....................................................         (615,258)           (304,475)
Change in short-term investments, net............................................          (77,321)            (71,910)
Net receivable for securities....................................................          (11,438)                  0
                                                                                         ---------           ---------
Net cash provided by investing activities........................................          148,929              39,519
                                                                                         ---------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and other borrowings.................................                0               2,826
Repayment of notes payable and other borrowings..................................          (10,699)             (5,835)
Purchase of treasury stock.......................................................                0                (101)
Cash dividends to stockholders...................................................                0              (2,030)
Subordinated loan certificates redeemed..........................................                0                (151)
                                                                                         ---------           ---------
Net cash used in financing activities............................................          (10,699)             (5,291)
                                                                                         ---------           ---------

Net change in cash...............................................................             (581)               (474)
Cash, beginning of period........................................................            2,029               2,191
                                                                                         ---------           ---------
Cash, end of period..............................................................        $   1,448           $   1,717
                                                                                         =========           =========
</TABLE>

SEE ACCOMPANYING NOTES

                                                                               8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS OF PRESENTATION
--------------------------

The accompanying consolidated financial statements include the accounts and
operations of The MIIX Group, Incorporated (the "MIIX Group") and its
wholly-owned subsidiaries, MIIX Insurance Company ("MIIX"), Lawrenceville
Holdings, Inc. ("LHI"), Lawrenceville Property and Casualty Company ("LP&C"),
MIIX Insurance Company of New York ("MIIX New York") and New Jersey State
Medical Underwriters, Inc. and its wholly-owned subsidiaries (the
"Underwriter"), collectively (the "Company"). The consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information, and in the
opinion of management, reflect all adjustments considered necessary for a fair
presentation. Such adjustments are of a normal recurring nature. Operating
results for the interim period are not necessarily indicative of the results to
be expected for the full year.

These consolidated financial statements and notes should be read in conjunction
with the audited consolidated financial statements and notes of the Company for
the year ended December 31, 2001 which were filed with the Securities and
Exchange Commission on Form 10-K.

2.  RECENT DEVELOPMENTS
-----------------------

The Company has been subjected to a number of adverse developments during fiscal
2002 as a result of unexpected and unprecedented increases in loss severity
during fiscal 2001. These increases required the Company to record an adjustment
to net loss and LAE reserves of approximately $25.0 million; in consequence, the
Company was also required to take a valuation allowance against a deferred tax
asset of approximately $2.0 million during 2002. As a result of these
adjustments since January 1, 2002 and adjustments made at December 31, 2001, the
Company has, among other things:

o    Received approval of its risk-based capital plan from the New Jersey
     Department of Banking and Insurance and the Virginia Bureau of Insurance;
o    Closed its operations in Dallas and Indianapolis;
o    Implemented a workforce reduction program;
o    Ceased writing insurance in all states, except where necessary to comply
     with individual state requirements;
o    Placed MIIX and LP&C insurance operations into voluntary solvent runoff;
o    Engaged investment bankers to seek offers for any or all of the Company's
     assets and properties;
o    Sold renewal rights to certain of its business to a newly formed New Jersey
     insurance company, MIIX Advantage Insurance Company of New Jersey ("MIIX
     Advantage");
o    Withdrew from the A.M. Best Rating System;
o    Licensed the "MIIX" name and certain marks to MIIX Advantage;
o    Begun the process to revise its business plan to become a consulting and
     management services provider to the insurance industry;
o    Received a "going concern qualification" from the Company's independent
     accountants in its report accompanying the Company's Annual Report on Form
     10-K for the fiscal year ended December 31, 2001.

The Company had also previously been advised by the New York Stock Exchange
("NYSE") that it had no longer satisfied two of the applicable listing criteria
and that its common stock was subject to delisting. In response, the Company
submitted a business plan to the NYSE and has since received the NYSE's approval
of the plan. However, the Company remains subject to oversight by the NYSE for
the next 18 months and could be delisted if its stock price deteriorates or it
is unable to complete its business plan successfully. Going forward, the
Company's business will consist principally of managing the runoff of existing
claims, and managing the operations of MIIX Advantage as it seeks to grow its
related consulting business by providing similar services to self-funded
entities and other healthcare provider owned insurers. Thus, the Company does
not anticipate near term significant revenues from continuing operations.
Because the subsidiary MIIX ceased writing insurance policies after August 31,
2002, except as necessary to comply with individual state requirements, the
Company's revenues and expenses will decline significantly, and the historical
financial statements cannot be relied upon as indicative of future performance.
The Company continues to explore all alternatives to realize value for its
shareholders, including seeking purchasers for all or portions of its remaining
assets.

                                                                               9

<PAGE>

3.   BORROWING ARRANGEMENTS
---------------------------

On May 24, 2000, the Company obtained a $20.0 million revolving credit facility
with Amboy National Bank to meet certain non-operating cash needs. The credit
facility, which terminated May 17, 2002, had a fixed interest rate of 8.0% per
annum. The Company had pledged 100% of the MIIX stock as collateral under the
credit facility. As of May 17, 2002, the Company had borrowed approximately $9.1
million against the credit facility, which is included in notes payable and
other borrowings on the consolidated balance sheet, and incurred interest
expense on the loan of approximately $286,000 during 2002. As of May 17, 2002,
the Company had fixed-maturity investments in Amboy National Bank of
approximately $9.1 million earning a fixed interest rate of 6% per annum. A
former CEO of the Company is a brother of the Senior Vice President and CFO of
Amboy National Bank. The Company believes that the terms of the credit facility
described above were as fair to the Company as could have been obtained from an
unaffiliated third party. The Company, on May 23, 2002, repaid the $9.1 million
loan balance largely with the proceeds from the sale of substantially all the
net assets of Hamilton National Leasing Corporation and the credit facility was
closed. The Company's $9.1 million fixed-maturity investments in Amboy National
Bank matured and the funds were reinvested in short-term securities.

4.   LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
-------------------------------------------------------------

During the nine months ended September 30, 2002, the Company recorded an
increase to the net loss and LAE reserves of approximately $25.0 million, which
is net of $36.1 million of ceded loss and LAE reserves under the Company's
aggregate reinsurance contracts. The adjustment resulted from an internal study
conducted by the Company at September 30, 2002.

5.   STOCK BASED COMPENSATION
-----------------------------

The Company accounts for its stock-based compensation in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations. The Company's policy regarding stock options is to issue
options with an exercise price equal to the market price on the date of grant.
Under APB 25, no compensation expense is recognized given the Company's policy.
During the first nine months of 2002, 10,000 restricted shares of The MIIX Group
common stock were granted, having a per share market value of $2.88, and 201,746
options to purchase shares of The MIIX Group common stock at exercise prices
ranging from $1.26 to $2.88 were granted, of which 74,246 shares were
immediately exercisable. During the nine months ended September 30, 2002,
303,510 options and 10,000 shares of non-vested restricted stock were cancelled,
and 12,474 options were exercised with exercise prices ranging from $7.45 to
$11.91. During the nine months ended September 30, 2002, certain current and
former officers tendered 110,061 shares of The MIIX Group common stock and
exercised 101,591 stock appreciation rights, which are designated as phantom
stock options in the respective agreement, and reduced the stock purchase and
loan balances by approximately $1.4 million. All transactions were recorded at
the fair market value of The MIIX Group common stock on the effective date of
the respective transactions.

6.   EARNINGS PER SHARE
-----------------------

Earnings (loss) per share are computed using the weighted-average number of
common shares outstanding for the three and nine month periods ended September
30, 2002 of 13,469,760 and 13,389,488, respectively, and for the three and nine
month periods ended September 30, 2001 of 13,520,327 and 13,543,566,
respectively.

                                                                              10
<PAGE>

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                    SEPTEMBER 30,
                                                         ------------------------------    ------------------------------
                                                             2002             2001             2002            2001
                                                         --------------   -------------   --------------  ---------------
                                                                  (in thousands)                  (in thousands)
<S>                                                          <C>              <C>             <C>              <C>
Numerator for basic and diluted earnings (loss) per
   share of common stock:
     Net income (loss) before cumulative effect of
        an accounting change...........................      $    885         $  2,464        $(48,228)        $16,075
     Cumulative effect of an accounting change,
        net of tax.....................................             0                0          (2,373)         (5,283)
                                                             --------         --------        --------         -------
     Net income (loss) ................................      $    885         $  2,464        $(50,601)        $10,792
                                                             ========         ========        ========         =======

Denominator:
     Denominator for basic earnings (loss) per share
        of common stock - weighted-average shares
        outstanding....................................        13,470           13,520          13,389          13,544
Effect of dilutive securities:
     Stock options and nonvested restricted stock......            10               86              89              42
                                                             --------         --------        --------         -------

     Denominator for diluted earnings (loss) per share
        of common stock - adjusted-weighted average
        shares outstanding.............................        13,480           13,606          13,478          13,586
                                                             ========         ========        ========         =======

Basic earnings (loss) per share of common stock
   before cumulative effect of an accounting change....         $0.07            $0.18          $(3.60)          $1.19
Cumulative effect of an accounting change..............          0.00             0.00           (0.18)          (0.39)
                                                                -----            -----          ------           -----
Basic earnings (loss) per share of common stock........         $0.07            $0.18          $(3.78)          $0.80
                                                                =====            =====          ======           =====

Diluted earnings (loss) per share of common stock
   before cumulative effect of an accounting change....         $0.07            $0.18          $(3.60)          $1.18
Cumulative effect of an accounting change..............          0.00             0.00           (0.18)          (0.39)
                                                                -----            -----          ------           -----
Diluted earnings (loss) per share of common stock......         $0.07            $0.18          $(3.78)          $0.79
                                                                =====            =====          ======           =====
</TABLE>

7.   COMPREHENSIVE INCOME
-------------------------

The Company has classified its entire investment portfolio as
available-for-sale. Unrealized gains (losses) at September 30, 2002 and December
31, 2001 are reflected as accumulated other comprehensive income in the
Consolidated Statement of Equity and Consolidated Balance Sheets.

                                                                              11
<PAGE>

The components of comprehensive income (loss), net of related tax, for the
periods ended September 30, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                            Three Months Ended               Nine Months Ended
                                                              September 30,                    September 30,
                                                       -----------------------------    ----------------------------
                                                           2002             2001            2002            2001
                                                       ------------     ------------    ------------    ------------
                                                             (in thousands)                  (in thousands)

<S>                                                       <C>              <C>            <C>              <C>
Net income (loss) ................................        $   885          $ 2,464        $(50,601)        $10,792

Other comprehensive income (loss):
  Unrealized holding appreciation arising during
     period (net of tax of $0, $7,030, $0 and
     $7,340, respectively)........................         15,079           13,024          17,412          13,631

  Reclassification adjustment for losses realized
     in net income (loss) (net of tax of $0, $776,
     $0 and $971, respectively)...................            591            1,440           1,872           1,802
                                                          -------          -------        --------         -------

Net unrealized appreciation arising during the
  period ended September 30 (net of tax of $0,
  $7,806, $0 and $8,311, respectively)............         15,670           14,464          19,284          15,433
                                                          -------          -------        --------         -------

Comprehensive income (loss).......................        $16,555          $16,928        $(31,317)        $26,225
                                                          =======          =======        ========         =======
</TABLE>

8.   DEFERRED POLICY ACQUISITION COSTS
--------------------------------------

The following represents the components of deferred policy acquisition costs and
the amounts that were charged to expense for the nine months ended September 30,
2002 and 2001.

<TABLE>
<CAPTION>
                                                                                       NINE MONTHS ENDED
                                                                                         SEPTEMBER 30,
                                                                              ----------------------------------
                                                                                   2002                2001
                                                                              ----------------    --------------
                                                                                        (in thousands)

<S>                                                                               <C>                 <C>
Balance at beginning of period............................................        $ 4,416             $ 3,026
Cost deferred during the period...........................................          4,862              11,204
Amortization expense......................................................         (7,403)             (8,393)
                                                                                  -------             -------
Balance, end of period....................................................        $ 1,875             $ 5,837
                                                                                  =======             =======
</TABLE>

9.   RESTRUCTURING CHARGE
-------------------------

The first quarter of 2002 includes a charge of approximately $2.6 million
composed primarily of severance and the write-off of remaining lease commitments
associated with the closure of the Company's offices in Dallas and Indianapolis,
and the decision to put MIIX and LP&C into runoff. The communication of these
initiatives was made during the first quarter of 2002. No similar event occurred
during the period ended September 30, 2002.

                                                                              12
<PAGE>
10.  INCOME TAXES
------------------

A reconciliation of income taxes computed based on the expected annual effective
federal statutory tax rate to total income tax expense (benefit) before the
cumulative effect of an accounting change for the periods ended September 30,
2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED SEPTEMBER 30,
                                       ----------------------------------------------------------------------------
                                                       2002                                   2001
                                       -------------------------------------  -------------------------------------
                                                             % OF INCOME                            % OF INCOME
                                                                BEFORE                                 BEFORE
                                          INCOME TAXES       INCOME TAXES        INCOME TAXES       INCOME TAXES
                                       ------------------- -----------------  ------------------  -----------------
                                         (in thousands)                        (in thousands)
<S>                                           <C>                <C>                 <C>                 <C>
Expected annual effective federal
    income tax expense (benefit)
    at 35%...........................         $(20,875)          (35.0)%             $  7,880            35.0 %
Increase (decrease) in taxes
    resulting from:
    Valuation allowance..............            8,757            14.7 %                    0            (0.0)%
    Tax-exempt interest..............             (444)           (0.7)%               (1,319)           (5.9)%
    Other............................            1,146             1.9 %                 (120)           (0.5)%
                                              --------           -----               --------            ----
Total income tax expense (benefit)...         $(11,416)          (19.1)%             $  6,441            28.6 %
                                              ========           =====               ========            ====
</TABLE>
The income tax benefit of $11.4 million resulted from the recognition of a net
operating loss carryback due to a tax law change enacted during the first
quarter of 2002.

11.   RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------------

On January 1, 2002, the Company adopted SFAS No. 141, "Business Combinations."
SFAS No. 141 requires that all business combinations be accounted for using the
purchase method. The purchase method of accounting requires that net assets
acquired that constitute a business be recorded at their fair value with any
excess cost over the net assets acquired be recorded as goodwill. SFAS No. 141
also requires that certain intangible assets acquired in a business combination
be recognized apart from goodwill. The provisions of SFAS No. 141 apply to all
business combinations initiated after June 30, 2001. Adoption of SFAS No. 141
did not have a material impact on the Company's financial condition or results
of operations.

On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." Under SFAS No. 142, goodwill is no longer amortized as an
expense, but instead is reviewed and tested for impairment under a fair value
approach. SFAS 142 requires that goodwill be tested for impairment at least
annually, or more frequently as a result of an event or change in circumstances
that would indicate impairment may be necessary. On January 1, 2002, the Company
recorded a $2.4 million impairment related to goodwill, net of $0 tax ($0.18 per
diluted share). If SFAS No. 142 were in effect beginning January 1, 2001, the
financial statement impact would have been approximately $111,000, net of tax
($0.01 per diluted share) for the quarter ended September 30, 2001 and
approximately $333,000, net of tax ($0.02 per diluted share) for the nine months
ended September 30, 2001.

In June 2001, The Financial Accounting Standards Board (FASB) issued SFAS 143,
"Accounting for Asset Retirement Obligations." SFAS 143 provides financial
accounting and reporting guidance for obligations associated with the retirement
of tangible long-lived assets and related asset retirement costs. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. Adoption of SFAS 143 is not expected to have a material impact on the
Company's financial condition or results of operations.

On January 1, 2002, the Company adopted SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This standard provides a unified model for
all assets to be disposed of, including disposal of segments of a business
currently accounted for under APB Opinion No. 30. SFAS 144 also addresses
implementation issues related to disposal of assets raised by SFAS 121, and
supersedes SFAS 121 while retaining the recognition and measurement provisions
of SFAS 121 of long-lived assets to be held and used and to be disposed of by
sale.
                                                                              13
<PAGE>

Adoption of SFAS 144 did not have a material impact on the Company's financial
condition or results of operations.

In April, 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
The primary impact of SFAS No. 145 was to rescind the requirement to report the
gain or loss from the extinguishment of debt as an extraordinary item on the
statement of income. The provisions of this Statement are generally effective
for fiscal years beginning after May 15, 2002. Adoption of SFAS 145 is not
expected to have a material impact on the Company's financial condition or
results of operations.

In July, 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
the current practice of recognizing those costs at the date of a commitment to
exit or disposal plan. The provisions of SFAS No. 146 are to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
Adoption of SFAS 146 is not expected to have a material impact on the Company's
financial condition or results of operations.

12.   RECLASSIFICATION
----------------------

Certain amounts have been reclassified for the prior years to be comparable to
the 2002 presentation.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial
statements and the related notes thereto appearing elsewhere in this Form 10-Q.

CRITICAL ACCOUNTING POLICIES

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reporting amounts of
assets, liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities. On an on-going basis, management evaluates its
estimates, including those related to income taxes, loss and LAE reserves,
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

REINSURANCE. Reinsurance recoverables include the balances due from reinsurance
companies for paid and unpaid losses and LAE that will be recovered from
reinsurers, based on contracts in force. Amounts recoverable from reinsurers are
estimated in a manner consistent with the claim liability associated with the
reinsured policy. Reinsurance contracts do not relieve the Company from its
primary obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk
with respect to the individual reinsurers, which participate in its ceded
programs to minimize its exposure to significant losses from reinsurer
insolvencies. The Company holds collateral in the form of letters of credit or
trust accounts for amounts recoverable from reinsurers that are not designated
as authorized reinsurers by the domiciliary Departments of Insurance.

INCOME TAXES. The Company accounts for income taxes in accordance with Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which

                                                                              14
<PAGE>
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance
against deferred tax assets is recorded if it is more likely than not, that all
or some portion of the benefits related to the deferred tax assets will not be
realized. Valuation allowances are based on estimates of taxable income and the
period over which deferred tax assets will be recoverable. In the event that
actual results differ from these estimates or these estimates are adjusted in
future periods, the Company may need to establish a valuation allowance, which
would adversely impact our financial position and results of operations. A
valuation allowance has been established for approximately the full value of the
deferred tax assets at September 30, 2002.

PREMIUMS. Premiums are recorded as earned over the period the policies to which
they apply are in force. Premium deposits represent amounts received prior to
the effective date of the new or renewal policy period. The reserve for unearned
premiums is determined on a monthly pro-rata basis. Gross premiums include both
direct and assumed premiums earned.

LOSS AND LOSS ADJUSTMENT EXPENSES. The Company estimates its liability for loss
and LAE using actuarial projections of ultimate losses and LAE and other
quantitative and qualitative analyses of conditions expected to affect the
future development of claims and related expenses. The estimated liability for
losses is based upon paid and case reserve estimates for losses reported,
adjusted through judgmental formulaic calculations to develop ultimate loss
expectations; related estimates of incurred but not reported losses and expected
cash reserve developments based on past experience and projected future trends;
deduction of amounts for reinsurance placed with reinsurers; and estimates
received related to assumed reinsurance. Amounts attributable to ceded
reinsurance derived in estimating the liability for loss and LAE are
reclassified as assets in the consolidated balance sheets as required by SFAS
No. 113. The liability for LAE is provided by estimating future expenses to be
incurred in settlement of claims provided for in the liability for losses and is
estimated using similar techniques.

The liabilities for losses and LAE and the related estimation methods are
continually reviewed and revised to reflect current conditions and trends. The
resulting adjustments are reflected in the operating results of the current
year. While management believes the liabilities for losses and LAE are adequate
to cover the ultimate liability, the actual ultimate loss costs may vary from
the amounts presently provided and such differences may be material.

INVESTMENTS. The Company has designated its entire investment portfolio as
available-for-sale. As such, all investments are carried at their fair values.
The Company has no securities classified as "trading" or "held-to-maturity."
Investments are recorded at the trade date.

Temporary changes in fair values of available-for-sale securities, after
adjustment of deferred income taxes, are reported as unrealized appreciation or
depreciation directly in equity as a component of other comprehensive income.

The Company regularly evaluates the carrying value of its investments based on
current economic conditions, past credit loss experience and other
circumstances. A decline in fair value that is other-than-temporary is
recognized by an adjustment to carrying value treated as a realized investment
loss and a reduction in the cost basis of the investment in the period when such
a determination is made.

Premiums and discounts on investments (other than loan-backed and asset-backed
bonds) are amortized/accreted to investment income using the interest method
over the contractual lives of the investments. Realized investment gains and
losses are included as a component of revenues based on a specific
identification of the investment sold.

Short-term investments include investments maturing within one-year and other
cash and cash equivalent balances earning interest.

RECENT DEVELOPMENTS

The Company has been subjected to a number of adverse developments during fiscal
2002 as a result of unexpected and unprecedented increases in loss severity
during fiscal 2001. These increases required the Company to record an adjustment
to net loss and LAE reserves of approximately $25.0 million; in consequence, the
Company was also required to take a valuation allowance against a deferred tax
asset of approximately $2.0 million during 2002. As a result of these
adjustments since January 1, 2002 and adjustments made at December 31, 2001, the
Company has, among other things:
                                                                              15
<PAGE>

o    Received approval of its risk-based capital plan from the New Jersey
     Department of Banking and Insurance and the Virginia Bureau of Insurance;
o    Closed its operations in Dallas and Indianapolis;
o    Implemented a workforce reduction program;
o    Ceased writing insurance in all states, except where necessary to comply
     with individual state requirements;
o    Placed MIIX and LP&C insurance operations into voluntary solvent runoff;
o    Engaged investment bankers to seek offers for any or all of the Company's
     assets and properties;
o    Sold renewal rights to certain of its business to a newly formed New Jersey
     insurance company, MIIX Advantage Insurance Company of New Jersey ("MIIX
     Advantage");
o    Withdrew from the A.M. Best Rating System;
o    Licensed the "MIIX" name and certain marks to MIIX Advantage;
o    Begun the process to revise its business plan to become a consulting and
     management services provider to the insurance industry;
o    Received a "going concern qualification" from the Company's independent
     accountants in its report accompanying the Company's Annual Report on Form
     10-K for the fiscal year ended December 31, 2001.

The Company had also previously been advised by the NYSE that it had no longer
satisfied two of the applicable listing criteria and that its common stock was
subject to delisting. In response, the Company submitted a business plan to the
NYSE and has since received the NYSE's approval of the plan. However, the
Company remains subject to oversight by the NYSE for the next 18 months and
could be delisted if its stock price deteriorates or it is unable to complete
its business plan successfully. Going forward, the Company's business will
consist principally of managing the runoff of existing claims, and managing the
operations of MIIX Advantage as it seeks to grow its related consulting business
by providing similar services to self-funded entities and other healthcare
provider owned insurers. Thus, the Company does not anticipate near term
significant revenues from continuing operations. Because the subsidiary MIIX
ceased writing insurance policies after August 31, 2002, except as necessary to
comply with individual state requirements, the Company's revenues and expenses
will decline significantly, and the historical financial statements cannot be
relied upon as indicative of future performance. The Company continues to
explore all alternatives to realize value for its shareholders, including
seeking purchasers for all or portions of its remaining assets.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2001

NET PREMIUMS EARNED. Net premiums earned were $23.7 million for the three months
ended September 30, 2002, a decrease of approximately $25.8 million, or 52.1%,
from $49.5 million for the three months ended September 30, 2001. This net
decrease consists of a decrease in direct and assumed premiums earned of $24.4
million and an increase in ceded premiums earned of $1.4 million, in the three
months ended September 30, 2002. The decrease in gross premiums earned occurred
primarily as the result of ceased insurance operations and cancellation activity
in the second and third quarters of 2002. The net increase in ceded premiums
earned is primarily attributable to additional ceded premiums earned of $4.5
million related to the Company's aggregate reinsurance contracts associated with
loss and LAE reserve adjustments made during the three months ended September
30, 2002.

Total premiums written amounted to a negative $2.3 million for the three months
ended September 30, 2002, a decrease of $73.3 million, or 103.3%, from total
premiums written of $71.0 million for the three months ended September 30, 2001.
The negative total premiums written resulted from extensive cancellation
activity associated with the Company's decision to place MIIX and its subsidiary
insurance company, LP&C, into voluntary solvent run-off during the second
quarter of 2002. The negative total premiums written were composed of net
cancellations of $0.6 million in Texas, $0.6 million in New Jersey, $0.5 million
in Maryland, $0.3 million in Arizona and $0.3 million in all other states.
Because MIIX ceased writing insurance policies after August 31, 2002, the
Company will not receive premiums other than on insurance policies it has been
permitted to renew only where necessary to comply with individual state
requirements.

NET INVESTMENT INCOME. Net investment income decreased approximately $6.2
million, or 31.0%, to $13.7 million for the three months ended September 30,
2002 from $19.9 million for the same period in 2001. Average invested assets at
amortized cost decreased to approximately $1.14 billion for the three months
ended September 30, 2002

                                                                              16
<PAGE>
compared to approximately $1.25 billion for the same period last year. The
decrease resulted from the combined effects of lower market yields, a lower
invested asset base and an increase in average short-term investments held
during 2002. Because two of the Company's insurance subsidiaries, MIIX and LP&C,
are in voluntary solvent run-off, the Company is modifying its investment
portfolio to (1) manage an expected increase in accelerated claims and a lower
invested asset base and (2) improve overall average credit quality of the
portfolio. This modification involves selling the portfolio's longer duration
securities, opportunistically selling below investment grade holdings and using
the proceeds to acquire shorter duration, high quality securities. The Company
is attempting to modify the duration and credit quality of the portfolio,
however, at a time when the market is extremely volatile. Accordingly, the
Company has experienced and may potentially experience losses primarily in the
sale of its below investment-grade securities.

The average annualized pre-tax yield on the investment portfolio decreased to
4.83% for the three months ended September 30, 2002 from 6.36% for the same
period in 2001. The decrease is primarily due to lower market yields and a
higher proportion of investments held in short-term securities for the reasons
set forth above.

REALIZED INVESTMENT LOSSES. Net realized investment losses were $0.6 million for
the three months ended September 30, 2002, a decrease in investment losses of
approximately $1.6 million, or 73.3%, compared to net realized investment losses
of $2.2 million for the same period in 2001. During the quarter ended September
30, 2002, the Company recorded net realized gains of approximately $5.1 million
primarily due to sales of fixed maturity investments as a result of
modifications to the investment portfolio. During the same period, the Company
recognized approximately $5.7 million of losses related to other-than-temporary
declines in investment values of which $2.5 million was attributable to
collateralized bond obligations and $2.6 million was associated with United
Airlines corporate bonds. During the quarter ended September 30, 2001, the
Company recognized losses of $3.4 million related to other-than-temporary
declines in investment values, which were somewhat offset by net realized gains
of approximately $1.2 million recognized to reposition the fixed income
portfolio in response to the changing yield curve.

OTHER REVENUE. Other revenue decreased approximately $0.4 million, or 26.0%, to
$1.4 million for the three months ended September 30, 2002 from $1.8 million for
the same period last year. This net decrease is composed of a decrease of
approximately $1.0 million due to the sale of substantially all of the assets of
the Company's leasing subsidiary, Hamilton National Leasing Corporation,
effective April 30, 2002 and increases in finance charge income of approximately
$0.1 million resulting from the Company's premium financing program and $0.5
million associated with management services and related contracts with MIIX
Advantage, which commenced insurance operations on September 1, 2002.

LOSS AND LOSS ADJUSTMENT EXPENSE (LAE). The provision for losses and LAE
decreased $25.9 million, or 54.9%, to $21.2 million for the three months ended
September 30, 2002 from $47.1 million for the three months ended September 30,
2001. The provision for losses and LAE is net of ceded losses and LAE of $17.7
million and $8.9 million for the three months ended September 30, 2002 and 2001,
respectively. The decrease in net loss and LAE for the three months ended
September 30, 2002 was principally composed of decreases in direct and ceded
losses and LAE incurred of $17.6 million and $8.9 million, respectively, and an
increase in assumed losses and LAE incurred of $0.7 million.

During the three months ended September 30, 2002, reserve adjustments followed
from an internal study conducted by the Company. Loss and loss adjustment
expense reserves for the quarter ended September 30, 2002 included a net
increase to direct and assumed loss and allocated loss adjustment expense (ALAE)
reserves of $30.7 million and a net decrease to unallocated loss adjustment
expense (ULAE) reserves of $24.1 million. Ceded loss and ALAE reserves were
increased by $11.2 million.

Adjustments to direct and assumed loss and ALAE reserves included a net increase
in Pennsylvania hospital reserves of $23.5 million, a net decrease in
Pennsylvania physician reserves of $9.5 million, a net decrease in New Jersey
physician reserves of $0.8 million, and a net increase in reserves held on all
other business, written primarily in Texas and Ohio, of $17.5 million. The net
adjustment primarily reflects adverse severity trends, particularly with respect
to Pennsylvania hospital claims, somewhat offset by better than expected
activity in the 2002 accident year. The net adjustment to ULAE reserves
primarily reflects the greater level of claims activity associated with claims
made business written in recent years. Claims made business generally has a
shorter development tail than occurrence policies, so the duration of
anticipated future claim handling activity, and claim activity costs per dollar
of indemnity payment, has diminished. For the three months ended September 30,
2001, the Company increased
                                                                              17
<PAGE>

direct and assumed loss and LAE reserves held on prior accident years by $5.6
million while ceded loss and LAE reserves were increased by $11.0 million.

UNDERWRITING EXPENSES. Underwriting expenses decreased $5.1 million, or 46.1%,
to $6.0 million for the three months ended September 30, 2002, from $11.1
million for the three months ended September 30, 2001. The net decrease for the
quarter ended September 30, 2002 primarily results from the effects of
discontinued insurance operations, with reduced commissions, premium taxes and
reductions in compensation and benefit costs related to the restructuring and
downsizing actions which began in the first quarter of 2002. Underwriting
expenses for the third quarter ended September 30, 2001 included $0.4 million of
one-time severance charges associated with the departure of an executive
officer. The ratio of underwriting expenses to net premiums earned was 25.2% for
the three months ended September 30, 2002, as compared to 22.5% for the same
period in 2001 primarily due to lower net earned premiums and impacted by
additional ceded premiums of $4.5 million related to the loss reserve
adjustments made during the third quarter of 2002. The ratio of underwriting
expenses to net earned premiums excluding the impact of additional ceded
premiums was 21.2% for the three months ended September 30, 2002.

FUNDS HELD CHARGES. Funds held charges related to the Company's aggregate
reinsurance contracts increased $2.6 million, or 38.6%, to $9.5 million for the
three months ended September 30, 2002 from $6.9 million for the three months
ended September 30, 2001. This increase was primarily associated with a $3.9
million increase in funds held charges resulting from adjustments made to ceded
loss and LAE reserves held on prior years recorded during the third quarter of
2002. Funds held charges for the third quarter ended September 30, 2001 included
$1.4 million of additional charges relating to changes made to ceded loss and
LAE reserves held on prior years during the quarter.

Funds held charges are calculated based upon beginning of quarter funds held
balances and are adjusted based upon changes to ceded premiums associated with
changes in ceded losses.

OTHER EXPENSES. Other expenses decreased $0.2 million, or 23.4%, to $0.6 million
for the three months ended September 30, 2002, from $0.8 million for the three
months ended September 30, 2001. This net decrease is primarily due to the sale
of substantially all of the assets of the Company's leasing subsidiary, Hamilton
National Leasing Corporation, effective April 30, 2002, offset by increased
costs resulting from management services provided to MIIX Advantage, which
commenced insurance operations on September 1, 2002, and other non-insurance
business operations.

INCOME TAX PROVISION (BENEFIT). Income taxes decreased approximately $0.7
million to a tax expense of $0 for the three months ended September 30, 2002,
resulting in a 0% effective tax rate, compared to an income tax expense of $0.7
million and an effective tax rate of 21.8% for the same period in 2001. The
Company had no federal tax expense in the third quarter 2002 due to its
significant loss carry forward position.

NET INCOME (LOSS). Net income was $0.9 million for the three months ended
September 30, 2002, a decrease of $1.6 million, or 64.1%, from net income of
$2.5 million for the three months ended September 30, 2001 for the reasons
discussed above.


                                                                              18
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2001

NET PREMIUMS EARNED. Net premiums earned were $110.0 million for the nine months
ended September 30, 2002, a decrease of approximately $30.6 million, or 21.8%,
from $140.6 million for the nine months ended September 30, 2001. The net
decrease consists of decreased direct and assumed premiums earned of $19.0
million and $0.3 million, respectively, and an increase in ceded premiums of
$11.3 million. The decrease in gross premiums earned occurred primarily as the
result of ceased insurance operations and cancellation activity in the second
and third quarters of 2002. Ceded premiums earned increased primarily due to the
effect of additional ceded premiums of $17.6 million associated with adjustments
recorded to loss and LAE reserves during the nine months ended September 30,
2002 under the Company's aggregate reinsurance contracts. During the nine months
ended September 30, 2001, ceded earned premiums were increased by $3.8 million
due to adjustments made to loss and LAE reserves.

Total premiums written were $99.7 million for the nine months ended September
30, 2002, a decrease of $95.6 million, or 48.9%, from total premiums written of
$195.3 million for the nine months ended September 30, 2001. The net decrease in
total premiums written primarily reflects the Company's cessation of writing or
renewing policies in all states, in accordance with each state's specific
non-renewal requirements. Because MIIX ceased writing insurance policies after
August 31, 2002, the Company will not receive premiums other than on insurance
policies it has been permitted to renew only where necessary to comply with
individual state requirements.

NET INVESTMENT INCOME. Net investment income decreased approximately $14.0
million, or 22.5%, to $48.1 million for the nine months ended September 30, 2002
from $62.1 million for the same period in 2001. The decrease resulted from the
combined effects of lower market yields, a lower invested asset base and an
increase in average short-term investments held during the nine months ended
September 30, 2002. Because two of the Company's insurance subsidiaries, MIIX
and LP&C, are in voluntary solvent run-off, the Company is modifying its
investment portfolio to (1) manage an expected increase in accelerated claims
and a lower invested asset base and (2) improve overall average credit quality
of the portfolio. This modification involves selling the portfolio's longer
duration securities, opportunistically selling below investment grade holdings
and using the proceeds to acquire shorter duration, high quality securities. The
Company is attempting to modify the duration and credit quality of the
portfolio, however, at a time when the market is extremely volatile.
Accordingly, the Company has experienced and may potentially experience losses
primarily in the sale of its below investment-grade securities.

Average invested assets at amortized cost were approximately $1.17 billion
during the nine months ended September 30, 2002 compared to $1.26 billion for
the nine months ended September 30, 2001. The average annualized pre-tax yield
on the investment portfolio decreased to 5.47% for the nine months ended
September 30, 2002 from 6.56% for the same period in 2001 primarily as the
result of declining market yields and increase in short-term investments held
during 2002 for the reasons set forth above.

REALIZED INVESTMENT GAINS (LOSSES). Net realized investment gains decreased
approximately $7.3 million, or 135.0%, to a loss of $1.9 million for the nine
months ended September 30, 2002 compared to net realized investment gains of
$5.4 million for the same period in 2001. During the nine months ended September
30, 2002, realized net gains of approximately $10.0 million were recognized
primarily due to sales of fixed maturity investments as a result of the
investment portfolio modifications and recognized approximately $11.9 million of
losses related to other-than-temporary declines in investment values, of which
$8.6 million was attributable to collateralized bond obligations and $2.6
million was associated with United Airlines corporate bonds. In 2001, realized
gains of $13.3 million were taken to reposition the portfolio to the changing
yield curve, somewhat offset by $7.9 million of losses related to
other-than-temporary declines in investment values, of which $1.6 million is
attributable to activity following the adoption of EITF 99-20, "Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets," effective April 1, 2001. EITF 99-20 established
new guidelines for recognition of income and other-than-temporary declines for
interests in securitized assets.

OTHER REVENUE. Other revenue decreased approximately $1.2 million, or 17.6%, to
$5.7 million for the nine months ended September 30, 2002 from $6.9 million for
the same period last year. This net decrease is composed of (1) a decrease of
approximately $1.5 million due to the sale of substantially all of the assets of
the Company's leasing subsidiary, Hamilton National Leasing Corporation,
effective April 30, 2002, (2) an increase of $0.5 million associated with
management services and related contracts with MIIX Advantage, which commenced
insurance

                                                                              19
<PAGE>
operations on September 1, 2002 and (3) a net decrease of approximately $0.2
million attributable to other non-insurance business activity. The Company sold
substantially all of the assets of its leasing operations at an approximate net
book value of $5.5 million.

LOSSES AND LOSS ADJUSTMENT EXPENSES (LAE). The provision for losses and LAE
increased $18.4 million, or 13.2%, to $157.5 million for the nine months ended
September 30, 2002 from $139.1 million for the nine months ended September 30,
2001. The provision for losses and LAE is net of ceded losses and LAE of $50.5
million and $30.3 million for the nine months ended September 30, 2002 and 2001,
respectively.

Through the nine months ended September 30, 2002, reserve adjustments have been
made to maintain the loss and LAE reserve at management's best estimate levels.
The reserve adjustments recorded for the three months ending September 30, 2002,
follow from an internal study conducted by the Company. Loss and loss adjustment
expense reserves for the quarter ended September 30, 2002 included a net
increase to direct and assumed loss and allocated loss adjustment expense (ALAE)
reserves of $30.7 million and a net decrease to unallocated loss adjustment
expense (ULAE) reserves of $24.1 million. Ceded loss and ALAE reserves were
increased by $11.2 million. Adjustments to direct and assumed loss and ALAE
reserves included a net increase in Pennsylvania hospital reserves of $23.5
million, a net decrease in Pennsylvania physician reserves of $9.5 million, a
net decrease in New Jersey physician reserves of $0.8 million, and a net
increase in reserves held on all other business, written primarily in Texas and
Ohio, of $17.5 million. The net adjustment primarily reflects adverse severity
trends, particularly with respect to Pennsylvania hospital claims, somewhat
offset by better than expected activity in the 2002 accident year. The net
adjustment to ULAE reserves primarily reflects the greater level of claims
activity associated with claims made business written in recent years. Claims
made business generally has a shorter development tail than occurrence policies,
so the duration of anticipated future claim handling activity, and claim
activity costs per dollar of indemnity payment, has diminished.

For the three months ending March 31, 2002, the Company strengthened loss
reserves based on updated actuarial information, which became available as of
March 31, 2002. The Company recorded a $29.5 million net adjustment to loss and
LAE expenses as of March 31, 2002. Prior year gross and ceded loss and LAE
reserves were increased by $54.5 million and $25.0 million, respectively. The
strengthening in prior year gross loss and LAE reserves consists of $31.3
million attributable to physician business written by LP&C for the coverage
years of 1998-2001, $31.3 million related to New Jersey physicians primarily for
business earned during 1994-1996, and other increases of $8.0 million relating
primarily to Pennsylvania institutional business for the 1999-2001 coverage
years. These increases were partly offset by reductions in prior year gross loss
and LAE reserves of $9.5 million related to Pennsylvania physician business
earned primarily during 1998 and 1999 and $6.6 million related to New Jersey
physician business earned during 2001, reflecting the Company's recent
improvements in underwriting, risk selection and pricing disciplines.

During the nine months ended September 30, 2001, reserve adjustments were made
to maintain loss and LAE expense reserves at Company best estimate levels. These
adjustments resulted in recognition of additional losses on prior accident
years, primarily resulting from further increases in loss severity observed
during the third quarter of 2001, as well as a reduction in loss frequency and
projected overall losses primarily associated with business written since 1999.
Direct and assumed loss and LAE reserves held on prior accident years were
increased by approximately $10.8 million and ceded loss and LAE reserves were
increased $14.2 million.

UNDERWRITING EXPENSES. Underwriting expenses decreased $4.7 million, or 14.8%,
to $27.4 million for the nine months ended September 30, 2002, from $32.1
million for the nine months ended September 30, 2001. This decrease is primarily
due to the effects of discontinued insurance operations, with reduced
commissions, premium taxes and a reduction in compensation and benefits
resulting from downsizing actions taken during the nine months ended September
30, 2002. In addition, underwriting expenses in the third quarter of 2001
included $0.4 million in one-time severance charges. The ratio of underwriting
expense to net premiums earned increased to 24.9% for the nine months ended
September 30, 2002 from 22.8% for the same period in 2001. This increase
primarily resulted from lower net earned premiums and was impacted by additional
ceded premiums of $17.6 million associated with the loss reserve adjustments
during the first and third quarters of 2002. The ratio of underwriting expenses
to net premiums earned excluding the impact of the additional ceded premiums was
21.4% for the nine months ended September 30, 2002.

FUNDS HELD CHARGES. Funds held charges increased $13.2 million, or 71.2%, to
$31.8 million for the nine months ended September 30, 2002, from $18.6 million
for the nine months ended September 30, 2001. This increase is
                                                                              20
<PAGE>

primarily attributable to an increase of $12.2 million resulting from changes
made to ceded loss and LAE reserves recorded during the first and third quarters
of 2002. During the nine months ended September 30, 2001, funds held charges
increased $1.3 million associated with prior year loss and LAE reserve
adjustments. Funds held charges are calculated based upon the beginning of
quarter funds held balances and are adjusted based upon changes to ceded
premiums associated with changes in ceded losses.

RESTRUCTURING CHARGE. The Company announced, in March, 2002, its intention to
place all operations of LP&C into run-off and recorded a restructuring charge of
$2.6 million during the first quarter of 2002 relating to the reduction of
regional and home office staff and the closing of regional offices in Dallas and
Indianapolis. No such event occurred during the nine months ended September 30,
2001.

OTHER EXPENSES. Other expenses decreased $0.3 million, or 12.2%, to $2.3 million
for the nine months ended September 30, 2002, from $2.6 million for the same
period last year. This net decrease is primarily due to the sale of
substantially all of the assets of the Company's leasing subsidiary, Hamilton
National Leasing Corporation, effective April 30, 2002, offset by increased
costs resulting from management services provided to MIIX Advantage, which
commenced insurance operations on September 1, 2002.

INCOME TAX PROVISION (BENEFIT). Income taxes decreased approximately $17.8
million to a tax benefit of $11.4 million for the nine months ended September
30, 2002, resulting in an effective tax rate of (19.1)%, compared to a tax
expense of $6.4 million and an effective tax rate of 28.6% for the same period
in 2001. The tax benefit resulted from the recognition of a net operating loss
carryback due to a tax law change enacted during 2002. The Company had
previously recognized a valuation allowance on its net deferred tax asset at
December 31, 2001.

CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX. On January 1, 2002, the
Company adopted SFAS 142, "Goodwill and Other Intangible Assets," which requires
that goodwill no longer be amortized as an expense, but instead reviewed and
tested for impairment under a fair value approach. The cumulative effect of
adopting SFAS 142 was a charge of $2.4 million on January 1, 2002. On April 1,
2001, the Company adopted EITF 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets," which establishes new guidelines for recognition of income
and other-than-temporary declines for interests in securitized assets. The
cumulative effect of adopting EITF 99-20 was a $5.3 million loss, net of $2.8
million tax, on April 1, 2001.

NET INCOME (LOSS). Net loss was $50.6 million for the nine months ended
September 30, 2002, a decrease of $61.4 million, or 568.9%, from a net income of
$10.8 million for the nine months ended September 30, 2001 attributable to the
reasons discussed above. Excluding the cumulative effect of the accounting
change associated with adoption of SFAS 142, net loss was $48.2 million for the
nine months ended September 30, 2002.

FINANCIAL CONDITION

CASH AND INVESTED ASSETS. Aggregate invested assets at fair value, including
cash and short-term investments, were $1,088.0 million at September 30, 2002 and
$1,230.1 million at December 31, 2001. The net decrease of $142.1 million
largely resulted from disposals of fixed-maturity investments to meet
accelerating claims activity partly offset by a net increase in investment
market values.

Fixed-maturity investments available for sale at fair value, including
short-term investments, were $1,080.3 million, or 99.4% of the investment
portfolio of the Company, as of September 30, 2002. At that date, the average
credit quality of the fixed income portfolio was "AA," as defined by an
independent rating agency, while the total portfolio effective duration
(excluding short-term investments) was 4.47 years.

UNPAID LOSSES AND LAE, REINSURANCE RECOVERABLE ON UNPAID LOSSES AND LAE AND
FUNDS HELD UNDER REINSURANCE TREATIES. Gross unpaid losses and LAE were $1,129.8
million at September 30, 2002 and $1,197.0 million at December 31, 2001. The net
decrease in unpaid losses and LAE reserves is primarily attributable to claims
paid activity, partly offset by adjustments to maintain loss and LAE reserves at
management's best estimate levels. Reinsurance recoverable on unpaid losses and
LAE was $445.7 million at September 30, 2002 and $463.3 million at December 31,
2001. The net decrease in reinsurance recoverable is primarily attributable to
increases in ceded loss and LAE collection from reinsurers offset by increases
in ceded loss and LAE reserves resulting from increases to gross loss and LAE
reserves. Substantially all of the reinsurance recoverables at September 30,
2002 are collateralized by the funds held under reinsurance treaties and letters
of credit.

                                                                              21
<PAGE>
EQUITY. Total equity was $101.3 million at September 30, 2002 and $131.5 million
at December 31, 2001. The net decrease of $30.2 million consisted of a net loss
of $50.6 million, change in unrealized net appreciation of investments of $19.3
million and $1.1 million resulting in treasury stock activity associated with
net stock purchase and loan, of which $143,000 related to exercising of stock
options and $1.0 million resulted from the tendering of shares of The MIIX Group
common stock and a reduction in the stock purchase and loan balance.

LIQUIDITY AND CAPITAL RESOURCES

The MIIX Group is a holding company whose assets primarily consist of all of the
capital stock of its subsidiaries. Its principal sources of funds are dividends
and other permissible payments from its subsidiaries and the issuance of debt
and equity securities. The insurance company subsidiaries are restricted by
state regulation in the amount of dividends they can pay in relation to surplus
and net income without the consent of the applicable state regulatory authority,
principally the New Jersey Department of Banking and Insurance. New Jersey
regulations permit the payment of any dividend or distribution only out of
statutory earned (unassigned) surplus. The Department may limit or disallow the
payment of any dividend or distribution if an insurer's statutory surplus
following the payment of any dividend or other distribution is not deemed
adequate in relation to its outstanding liabilities and adequate to meet its
financial needs, or the insurer is determined to be in a hazardous financial
condition. The Company's other insurance subsidiaries are organized and subject
to similar provisions and restrictions. No significant amounts are currently
available for payment of dividends by the Company's other insurance subsidiaries
without prior approval of the applicable insurance department. During the first
quarter of 2002, the New Jersey Department of Banking and Insurance approved a
$2.1 million dividend payment from MIIX to the MIIX Group. However, the MIIX
Group does not expect that MIIX will have the ability to declare and pay
dividends to the MIIX Group to meet its operating needs, except to the extent
that the New Jersey Department of Banking and Insurance specifically approves
dividend payments in the future.

On May 3, 2002 and on May 10, 2002, the Company's business plan, which provides
for MIIX and LP&C to be placed in voluntary solvent run-off, was approved by the
New Jersey Department of Banking and Insurance and the Virginia Bureau of
Insurance, respectively. MIIX and LP&C ceased writing business in all states in
accordance with each state's specific withdrawal requirements. As a result, the
Company expects that cash flow from operations in the future will continue to be
negative, as payments of outstanding claims and expenses exceed its revenues,
primarily that are attributable to investment income. The Company also withdrew
MIIX and LP&C from the interactive rating process with A.M. Best. At the time of
the withdrawal, the companies were rated C+. The Company received approval from
the New Jersey Department of Banking and Insurance for the formation and
capitalization of a physician-supported insurance company, MIIX Advantage, that
focuses on insuring New Jersey physicians. MIIX Advantage began writing
insurance policies on September 1, 2002. The Company entered into a management
contract and other financial arrangements with the new company. The revenues
from these agreements and investment income will be the Company's only source of
revenues in the foreseeable future as it seeks to grow its related consulting
business by providing similar services to self-funded entities and other health
care provider owned insurers.

On May 23, 2002, the Company repaid the $9.1 million loan balance under a credit
facility with Amboy National Bank largely with the proceeds from the sale of
substantially all the net assets of Hamilton National Leasing Corporation.
Thereafter, the credit facility closed. The Company's $9.1 million
fixed-maturity investments in Amboy National Bank matured and the funds were
reinvested in short-term securities. The Company currently does not have any
bank financing.

The primary sources of the Company's liquidity are net investment income,
proceeds from the maturity or sale of invested assets, recoveries from
reinsurance and revenues from non-insurance operations. Funds are used to pay
losses and LAE, operating expenses, reinsurance premiums and taxes. The
Company's net cash flow used by operating activities were approximately $138.8
million and $34.7 million for the nine months ended September 30, 2002 and 2001,
respectively, and $23.6 million for the year ended 2001. The decrease in cash
flow during this period was primarily the result of increased loss payments,
reflecting both the maturation of the Company's expansion book of business and
the settlement of a few higher severity cases, lower investment income and a
decrease in premium collection reflecting the decrease in written premium
offset, in part, by a federal income tax refund and proceeds from the sale of
substantially all of the assets of Hamilton National Leasing Corporation.
Because of the inherent unpredictability related to the timing of the payment of
claims, it is not unusual for cash flow from operations for a medical
malpractice insurance company to vary, perhaps substantially, from year to year.
                                                                              22
<PAGE>

Because the Company ceased writing insurance policies, cash flow is expected to
decrease substantially. The Company's cash flow could be further impacted
adversely if it becomes subject to mandatory control. See "Risks and
Uncertainties."

The Company investments consist primarily of fixed-maturity securities. The
Company's current investment strategy seeks to maximize after-tax income through
a high quality, diversified, duration-sensitive, taxable bond portfolio, while
maintaining an adequate level of liquidity. The Company currently plans to
continue this strategy. At September 30, 2002, the portfolio has an average
credit quality of "AA+," an average duration of 3.5 years, and an annualized
yield of 5.5%.

At September 30, 2002, the Company held collateral of $331.4 million and $374.2
million at December 31, 2001, in the form of funds held and $166.5 million at
September 30, 2002 and December 31, 2001 in the form of letters of credit, for
recoverable amounts on ceded unpaid losses and LAE under certain reinsurance
contracts. Under the contracts, and as a result of the downgrade of the
Company's A.M. Best rating to below B+ during the first quarter of 2002,
reinsurers requested that assets supporting the funds withheld account be placed
in trust. The Company has established the required trust accounts in accordance
with contract provisions. Under the terms of the reinsurance contracts, the
funds held are credited with interest at contractual rates ranging from 6.0% to
8.6%, which is recorded as an expense in the period incurred.

During 2002, The MIIX Group Board of Directors suspended the payments of
dividends to shareholders. Future payments and amounts of cash dividends will
depend upon, among other factors, the Company's operating results, overall
financial condition, capital requirements, ability to receive dividends from our
insurance company subsidiaries, which are subject to regulatory approval, and
general business conditions. Payment of dividends is also subject to approval by
the Board of Directors. The Company does not expect to pay dividends for the
foreseeable future.

During August 1999, the Company approved a stock repurchase program authorizing
the purchase of up to 1,000,000 shares of its common stock in the open market.
During November 1999, the program was amended, authorizing the purchase of up to
an additional 2,000,000 shares. Through December 31, 2000, 3,000,000 shares had
been repurchased at a total cost of $39.3 million and 25,933 shares have been
issued from treasury at a value of $0.4 million. No stock was repurchased under
the stock repurchase program during 2001 or during the nine months ended
September 30, 2002. We do not expect to repurchase any additional common stock
under this program.

During 2001, The MIIX Group repurchased 84,178 shares at a value of
approximately $0.7 million related to the resignation of a former executive
officer of the Company. During the nine-month period ended September 30, 2002,
certain current and former officers tendered 110,061 shares in the aggregate of
The MIIX Group common stock and exercised 101,591 stock appreciation rights,
which are designated as phantom stock options in the respective agreements.
These tenders reduced the stock purchase and loan balances of the officers by
approximately $1.4 million in the aggregate. All transactions were recorded at
the fair market value of the MIIX Group common stock on the effective date of
the respective transactions.

RISKS AND UNCERTAINTIES

As a result of the events described above under the caption "Recent
Developments," the Company is subject to a number of risks and uncertainties.
Some of the most obvious are the following:

RISK OF MANDATORY CONTROL. If the Company's capital or surplus amounts fall
below the thresholds established under New Jersey insurance laws, MIIX may be
unable to avoid mandatory control. We have previously announced that the
risk-based capital level of MIIX is below the authorized control level but above
the mandatory control level. Many events could result in MIIX being placed under
mandatory control, including net losses and LAE reserve adjustment, a
deterioration in the Company's investment portfolio and an adverse outcome of
the Death Benefit Plan Litigation referenced in Item 1 of Part II of this
Form 10-Q.

Should MIIX be subjected to mandatory control, the New Jersey Department of
Banking and Insurance would have the authority to, among other things: replace
the Company's management with Department appointees; liquidate MIIX; sell MIIX;
and/or restructure the Company's internal operations. The impact of any such
decisions by the Department of Banking and Insurance cannot be predicted. If
MIIX's assets are sold or liquidated by the Department, shareholders would
likely receive little if any value from the sale or liquidation.

                                                                              23
<PAGE>
RISKS IN CLAIMS EXPERIENCE. The Company currently anticipates that its assets
will be sufficient to discharge its liabilities. While this anticipation is
based upon actuarial projections, loss and LAE reserves are estimates of future
events whose outcomes are unknown at the current time. The inherent uncertainty
associated with estimating loss and LAE reserves may lead to actual results that
differ, perhaps materially, from our projections. Should the Company experience
worse than anticipated losses, it is highly likely that MIIX and LP&C would
become subject to mandatory control. It is possible that the Company will see
some acceleration of claims in connection with the run-off of MIIX. Should this
acceleration become substantial, even favorable settlements could result in
short-term adjustments to the Company's loss and LAE reserves, which would cause
it to fall under mandatory control.

LIMITED INCOME FROM OPERATIONS. MIIX ceased writing insurance on September 1,
2002, except where required by law. Because of the resultant decrease in premium
income, the Company's revenues will be limited. While the Company intends to
seek management contracts with other insurance entities and/or to establish
itself as a third-party administrator of professional liability contracts, no
assurances can be given that it will be able to do so. In consequence, the
Company's revenues will be largely limited to investment income and income from
various contractual arrangements with MIIX Advantage. No assurances can be given
that these revenues will be adequate to support the Company's operations or to
permit it to avoid mandatory control.

INVESTMENT RISK. A significant portion of the Company's assets are invested in
fixed-maturity investments. The Company manages its portfolio through three
separate investment advisers and an investment consultant who supervises the
advisers on a day-to-day basis. Thus, the Company is exposed to all of the risks
of the capital markets, which have been substantial in recent periods because of
the general deterioration of those markets as well as increasing volatility in
particular sectors. In response to these developments, the Company is seeking to
modify its investment portfolio so as to reduce the level of risk to which it is
exposed. In the process of this modification, the Company may liquidate
securities, sometimes at a loss. Furthermore, the movement of the Company's
investments from instruments believed to be more risky to those believed to be
less risky may result in a reduction of the Company's return on investments.
Even if the Company is able to manage its claims portfolio successfully,
deterioration in the Company's investment portfolio or losses incurred in
liquidating the portfolio not offset by gains, could result in the Company being
subjected to mandatory control.

DELISTING OF COMMON STOCK. The NYSE may delist the Company's common stock. On
July 19, 2002, the NYSE notified the Company that its stock price and market
capitalization were below NYSE listing standards, and asked the Company to
respond within 45 days with a business plan that demonstrates compliance with
continued listing standards within 18 months. The Company submitted a plan which
the NYSE reviewed and accepted as demonstrating compliance with continued
listing shareholders. The Company will continue to be listed but remains subject
to NYSE oversight for approximately 18 months. Any future adverse development
affecting the Company's plan or a deterioration in the Company's stock price may
result in delisting. If the Company's stock is delisted, it will become more
difficult for shareholders to sell their stock.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the potential for loss due to adverse changes in the fair
value of financial instruments. The market risk associated with the financial
instruments of the Company relates to the investment portfolio, which exposes
the Company to risks related to unforeseen changes in interest rates, credit
quality, prepayments and valuations. Analytical tools and monitoring systems are
in place to continually assess and react to each of these elements of market
risk.

Interest rate risk is considered by management to be the most significant market
risk element currently facing the Company. Interest rate risk is the price
sensitivity of a fixed-maturity security to changes in interest rates. The
Company views these potential changes in price within the overall context of
assets and liability management. To reduce the Company's interest rate risk,
duration targets are set for the fixed income portfolio after consideration of
the duration of associated liabilities, primarily losses and LAE reserves, and
other factors.

The Company's investment portfolio at September 30, 2002 is primarily composed
of fixed-maturity securities, consisting of 77.0% of total investments at market
value. U.S. government and tax-exempt bonds represent 10.7%, corporate bonds
represent 30.2% and mortgage backed and asset backed securities represent 36.1%
of fixed-maturity investments. Short-term investments represent 22.4% of total
investments at market value and equity investments, primarily common stock,
accounts for the remaining 0.6%.
                                                                              24
<PAGE>

At September 30, 2002, the Company had net after-tax unrealized gains on its
fixed-maturity investment portfolio of $13.6 million. The deferred tax asset on
this amount of $4.8 million is fully offset by a deferred tax valuation
allowance. The net after-tax unrealized gains of $13.6 million on the
fixed-maturity portfolio represented 15.3% of total stockholders' equity gross
of net after-tax unrealized losses on investments. At December 31, 2001, the
Company had net after-tax unrealized losses on its fixed-maturity investment
portfolio of $6.6 million, which included a deferred tax valuation allowance of
$2.3 million.

Management does not expect that significant unrealized losses will be realized
on the fixed-maturity portfolio given the credit quality of the portfolio at
September 30, 2002 and the Company's policy of matching asset and liability
maturities. Asset and liability matching is an important part of the Company's
portfolio management process. The Company utilizes financial modeling and
scenario analysis to closely monitor the effective modified duration of both
assets and liabilities in order to minimize any mismatching. The goal of
effective asset liability management is to allow payment of claims and operating
expenses from operating funds without disrupting the Company's long-term
investment strategy.

In addition to interest rate risk, fixed-maturity securities like those
comprising the Company's investment portfolio involve other risks such as
default or credit risk. The Company manages this risk by limiting the amount of
higher risk corporate obligations (determined by credit rating assigned by
private rating agencies) in which it invests.

Mortgage-backed and asset-backed securities involve similar risks associated
with fixed-maturity investments: interest rate risk, reinvestment rate risk, and
default or credit risk. In addition, mortgage-backed and asset-backed securities
also possess prepayment risk, which is the risk that a security's originally
scheduled interest and principal payments will differ considerably due to
changes in the level of interest rates. The Company purchases mortgage-backed
and asset-backed securities structured to enhance credit quality and/or provide
prepayment stability.

Short-term investments are composed of highly rated money market instruments,
which are subject to an element of interest rate risk, although to a lesser
extent than those instruments discussed above due to a shorter maturity.

The Company also holds a portfolio of equity investments. The value of the
common stock investments is dependent upon general conditions in the securities
markets and the business and financial performance of the individual companies
in the equity portfolio. At September 30, 2002, the cost and fair value of
equity investments was $7.4 million and $6.2 million, respectively, compared to
$7.1 million and $6.6 million at December 31, 2001, respectively. The net
after-tax unrealized loss of $1.2 million on the equity portfolio represented
1.4% of total stockholders' equity gross of net after-tax unrealized losses on
investments.

There have been no material changes to the Company's financial market risks
since December 31, 2001.



                                                                              25
<PAGE>

ITEM 4.   CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, and with the participation of
management, The MIIX Group's Chief Executive Officer and Chief Financial Officer
carried out an evaluation of the effectiveness of the design and operation of
The MIIX Group's disclosure controls and procedures (as defined in Securities
Exchange Act Rule 15d-14). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that The MIIX Group's
disclosure controls and procedures are effective in providing them with timely
material information that is required to be disclosed in reports The MIIX Group
files under Section 15(d) of the Securities Exchange Act.

There were no significant changes in The MIIX Group's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation.

PART II   OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

DEATH BENEFIT PLAN

In October 1999, a former Underwriter Board member filed an action in the
Superior Court of New Jersey against the Medical Inter-Insurance Exchange of New
Jersey, the Underwriter, The MIIX Group and Daniel Goldberg, seeking damages
arising out of the unanimous decision of the Exchange and Underwriter Boards in
July 1998 to terminate a Death Benefit Plan that was adopted in December 1991 to
provide members of the Boards and their committees with a $1 million death
benefit. In October 2001, the court determined that judgment should be entered
in favor of plaintiff in the amount of $490,585, representing the cash balance
of the life insurance policy insuring plaintiff's life, which was held by the
Exchange to secure the payment of benefits under the Death Benefit Plan. The
judgment provides that this sum is payable in ten equal annual installments
following plaintiff's death, in accordance with the Plan's terms. The Company is
appealing this decision. Two subsequent actions by other Plan participants, one
styled as a class action on behalf of all Plan participants, were filed in the
Superior Court of New Jersey against the Company on November 7, 2000 and
December 11, 2001. These actions have been stayed pending the outcome of the
appeal in the first action. The Company and external counsel believe that the
Company will be successful on appeal.

The Company may be a party to litigation from time to time in the ordinary
course of business. Management believes that the Company is not currently a
party to any litigation which may have a material adverse effect on the Company.

Reference is made to Item 3: Legal Proceedings, described in The MIIX Group's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001.






                                                                              26
<PAGE>

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           a.   Exhibits


                Exhibit                           Exhibit
                Number                          Description

                  3.1      Restated Certificate of Incorporation (incorporated
                           by reference to Exhibit 3.1 filed with the Company's
                           registration statement on Form S-1 filed on October
                           28, 1998.)

                  3.2      Bylaws of The MIIX Group as amended and restated
                           (incorporated by reference to Exhibit 3.2 filed with
                           the Company's Annual Report on Form 10-K for the
                           year ended December 31, 2001, filed on April 1,
                           2001.)

                10.71+     Severance Agreement between The MIIX Group,
                           Incorporated,  New Jersey State Medical Underwriters,
                           Inc. and Stewart J. Gerson dated  July 3,  2002
                           (incorporated by reference to Exhibit 10.71 filed
                           with the registrant's Form 10-Q for the period ended
                           June 30, 2002 and filed with the Securities and
                           Exchange Commission on August 14, 2002).

                10.72*     Combined Quota Share and Aggregate Excess of Loss
                           Reinsurance Agreement made and entered into by and
                           between MIIX Insurance Company and Hannover
                           Reinsurance (Ireland) Limited/ E + S Reinsurance
                           (Ireland) Limited.

                10.73*     Commutation and Release Agreement by and between
                           Health Care Indemnity, Inc. and Lawrenceville
                           Property & Casualty Company and MIIX Insurance
                           Company.

                10.74*+    Employment Agreement between and among The MIIX
                           Group, Incorporated, New Jersey State Medical
                           Underwriters, Inc. and Allen G. Sugerman dated
                           October 16, 2002.

                  15*      Acknowledgement of Independent Accountant.


                  *  Filed herewith.
                  +  Represents a management contract or compensatory plan or
                     arrangement.

           b.     Reports on Form 8-K

                  A current report on Form 8-K, dated August 28, 2002, was
                  filed by the Company reporting that the Company and certain
                  of its affiliates entered into a series of contracts with
                  MIIX Advantage Holdings, Inc. ("MAHI") and MIIX Advantage
                  Insurance Company of New Jersey ("MANJ"), relating to, among
                  other things, the transfer of policy renewal rights to MANJ
                  and the use of the "MIIX" name and associated marks by MAHI
                  and MANJ.

                  A current report on Form 8-K, dated November 14, 2002, was
                  filed by the Company to provide Financial Supplements and
                  certifications of the Chief Executive Officer and the Chief
                  Financial Officer pursuant to Section 906 of Sarbanes-Oxley
                  Act of 2002.

                                                                              27
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                     THE MIIX GROUP, INCORPORATED


                                By:      /s/ Patricia A. Costante
                                   ---------------------------------------
                                   Chairman and Chief Executive Officer
                                   (principal executive officer)


                                By:      /s/ Allen G. Sugerman
                                   ----------------------------------------
                                   Interim Chief Financial Officer
                                   (principal financial and accounting officer)


                                Dated:   November 14, 2002











                                                                              28
<PAGE>

                              CERTIFICATION OF THE
                             CHIEF EXECUTIVE OFFICER


I, Patricia A. Costante, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of The MIIX Group,
     Incorporated;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   Presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date.

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

     a)   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: November 14, 2002

                                            /s/ Patricia A. Costante
                                            ------------------------------------
                                            Chairman and Chief Executive Officer

                                                                              29
<PAGE>

                              CERTIFICATION OF THE
                             CHIEF FINANCIAL OFFICER


I, Allen G. Sugerman, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of The MIIX Group,
     Incorporated;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   Presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date.

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

     a)   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: November 14, 2002

                                                /s/ Allen G. Sugerman
                                                --------------------------------
                                                Interim Chief Financial Officer

                                                                              30