<PAGE>   1




                                  UNITED STATES
                       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 quarterly period ended June 30, 1999

                                       OR

   | |       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

    For the transition period from _____________ to _____________



                         Commission file number 0-21223


                            PROFESSIONALS GROUP, INC.
             (Exact name of registrant as specified in its charter)



         Michigan                                         38-3273911
(State or Other Jurisdiction                (I.R.S. Employer Identification No.)
of Incorporation or Organization)



2600 Professionals Drive, Okemos, Michigan                    48864
  (Address of principal executive offices)                  (Zip Code)


Registrant's telephone number, including area code:  (517) 349-6500



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 period that 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   [  ]

The number of shares outstanding of the registrant's common stock, no par value
per share, as of August 12, 1999 was 8,332,195.



                                   -1-

<PAGE>   2




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>


                                                                                                  PAGE NO.

PART I.  FINANCIAL INFORMATION



<S>                           <C>                                                                      <C>
                Item 1.    Financial Statements


                                Condensed   Consolidated   Balance   Sheets  at  June  30,  1999         3
                                (Unaudited) and December 31, 1998

                                Condensed  Consolidated  Statements of Operations  for the Three         4
                                Months and Six Months Ended June 30, 1999 and 1998 (Unaudited)

                                Condensed  Consolidated  Statements of Comprehensive  Income for         5
                                the Three  Months  and Six Months  Ended June 30,  1999 and 1998
                                (Unaudited)

                                Condensed  Consolidated  Statements  of Cash  Flows  for the Six         6
                                Months Ended June 30, 1999 and 1998 (Unaudited)

                                Notes to Condensed Consolidated Financial Statements (Unaudited)       7-10

                Item 2.    Management's  Discussion  and  Analysis of  Financial  Condition  and      11-19
                           Results of Operations

                Item 3.    Quantitative and Qualitative Disclosures About Market Risk                 19-22

PART II. OTHER INFORMATION

                Item 4.    Submission of Matters to a Vote of Security Holders                        22-23

                Item 6.    Exhibits and Reports on Form 8-K                                             23

                Signatures                                                                              24
</TABLE>

                                      -2-

<PAGE>   3


PART I.  FINANCIAL INFORMATION
Item 1.           Financial Statements


                           PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
                     Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                               June 30,             December 31,
                          Assets                                 1999                   1998
                                                            ---------------        ---------------
                                                              (Unaudited)
<S>                                                        <C>                  <C>
Investments:
   Fixed maturities available for sale, at fair value
      (amortized cost:  $622,330,000 and $646,864,000)        $618,152,000           $669,118,000
   Equity securities available for sale, at fair value
      (cost:  $4,100,000 and $4,035,000)                         4,496,000              3,901,000
   Short-term investments, at cost                              51,642,000             17,593,000
   Real estate, at cost, net of accumulated depreciation           410,000                421,000
                                                            ---------------        ---------------
               Total investments                               674,700,000            691,033,000
Cash                                                               744,000                379,000
Restricted cash                                                  2,070,000              2,070,000
Premiums due from policyholders                                 29,789,000             27,580,000

Reinsurance balances                                           134,725,000            106,692,000
Accrued investment income                                       10,922,000             10,743,000
Deferred federal income taxes                                   29,871,000             24,501,000
Property and equipment, at cost, net of
  accumulated depreciation                                       9,754,000              9,117,000
Prepaid reinsurance premiums                                     7,117,000              4,917,000
Deferred policy acquisition costs                                1,004,000              1,500,000
Other assets                                                    10,111,000             10,679,000
                                                            ---------------        ---------------
               Total assets                                   $910,807,000           $889,211,000
                                                            ===============        ===============

           Liabilities and Shareholders' Equity
Liabilities:
   Loss and loss adjustment expense reserves                  $563,684,000           $540,583,000
   Reserve for extended reporting period claims                 27,174,000             26,674,000
   Unearned premiums                                            58,713,000             48,201,000
   Long-term debt                                               17,500,000             20,000,000
   Surplus contributions                                        10,094,000             10,094,000
   Accrued expenses and other liabilities                       17,860,000             21,562,000
                                                            ---------------        ---------------
               Total liabilities                               695,025,000            667,114,000
                                                            ---------------        ---------------
Shareholders' equity:
   Preferred stock, no par value; 5,000,000 shares authorized;
      no shares issued and outstanding                            -                      -
   Common stock, no par value; 25,000,000 shares authorized;
      8,351,183 and 8,383,924 shares issued and
      outstanding in 1999 and 1998, respectively                 8,351,000              8,384,000
   Additional paid-in capital                                   33,062,000             33,982,000
   Retained earnings                                           176,865,000            165,132,000
   Accumulated other comprehensive income (loss),
      net of deferred federal income taxes                      (2,496,000)            14,599,000
                                                            ---------------        ---------------
               Total shareholders' equity                      215,782,000            222,097,000
                                                            ---------------        ---------------
               Total liabilities and shareholders' equity     $910,807,000           $889,211,000
                                                            ===============        ===============
</TABLE>

See accompanying notes to the unaudited condensed consolidated financial
statements.


                                      -3-


<PAGE>   4


                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                    Three Months Ended                Six Months Ended
                                                                         June 30,                         June 30,
                                                                 -------------------------      ------------------------------
                                                                 1999            1998               1999             1998
                                                                 ----            ----               ----             ----
                                                                             (As Restated)                       (As Restated)
<S>                                                             <C>            <C>              <C>             <C>
Revenues and other income:
   Net premiums written                                         $30,895,000    $22,024,000      $ 86,839,000     $  70,024,000
   Decrease (increase) in unearned premiums, net of
      prepaid reinsurance premiums                                8,950,000     13,268,000        (8,312,000)        3,047,000
                                                                -----------   ------------      ------------    --------------
   Premiums earned, net                                          39,845,000     35,292,000        78,527,000        73,071,000
   Net investment income                                          9,387,000      9,730,000        18,604,000        19,408,000
   Net realized investment gains                                    949,000         23,000         2,670,000         4,061,000
   Reinsurance experience refunds                                  -             2,695,000          -                3,095,000
   Other                                                          1,191,000        779,000         2,238,000         1,485,000
                                                                -----------   ------------      ------------    --------------
      Total revenues and other income                            51,372,000     48,519,000       102,039,000       101,120,000
                                                                -----------   ------------      ------------    --------------

Expenses:
   Losses and loss adjustment expenses, net                      31,706,000     69,600,000        64,323,000       104,392,000
   Increase (decrease) in reserve for extended reporting
      period claims                                                 250,000       (108,000)          500,000           245,000
   Policy acquisition and other underwriting expenses            11,934,000      9,036,000        20,313,000        17,603,000
   Interest expense                                                 264,000        334,000           554,000           694,000
   Other                                                            477,000       -                1,075,000          -
                                                                -----------   ------------      ------------    --------------
      Total expenses                                             44,631,000     78,862,000        86,765,000       122,934,000
                                                                -----------   ------------      ------------    --------------

      Income (loss) from operations before federal income
        taxes (benefit)                                           6,741,000    (30,343,000)       15,274,000      (21,814,000)

Federal income taxes (benefit)                                    1,637,000     (9,464,000)        3,515,000       (7,255,000)
                                                                -----------   ------------      ------------    -------------

      Net income (loss)                                         $ 5,104,000   ($20,879,000)     $ 11,759,000    ($ 14,559,000)
                                                                ===========   ============      ============    =============



Net income (loss) per common share - basic                      $      0.61   ($      2.50)     $       1.40    ($       1.74)
                                                                ===========   ============      ============    =============

Net income (loss) per common share - assuming dilution          $      0.60   ($      2.50)     $       1.38    ($       1.74)
                                                                ===========   ============      ============    =============

Weighted average shares outstanding - basic                       8,372,115      8,353,330         8,377,878        8,353,330
                                                                ===========   ============      ============    =============

Weighted average shares outstanding - assuming dilution           8,479,825      8,353,330         8,500,553        8,353,330
                                                                ===========   ============      ============    =============
</TABLE>


See accompanying notes to the unaudited condensed consolidated financial
statements.

                                      -4-
<PAGE>   5



                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
            Condensed Consolidated Statements of Comprehensive Income
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                        Three Months Ended                   Six Months Ended
                                                                            June 30,                            June 30,
                                                                ------------------------------   -------------------------------
                                                                    1999             1998           1999               1998
                                                                    ----             ----           ----               ----
                                                                                 (As Restated)                     (As Restated)
<S>                                                             <C>             <C>              <C>               <C>
Net income (loss)                                                $ 5,104,000    ($20,879,000)    $11,759,000       ($14,559,000)
                                                                ------------     -----------     -----------       ------------

Other comprehensive income (loss):
  Unrealized holding gains (losses) on securities arising
   during the period (net of income taxes of $5,405,000 and
   $1,309,000 for three months in 1999 and 1998, respectively
   and $7,899,000 and $1,865,000 for six months in 1999 and
   1998, respectively)                                           (10,492,000)      2,541,000     (15,333,000)         3,621,000
  Less reclassification adjustment for realized gains
   included in net income (loss) (net of income taxes of
   $323,000 and $8,000 for three months in 1999 and 1998,
   respectively and $908,000 and $1,381,000 for six months
   in 1999 and 1998, respectively)                                  (626,000)        (15,000)     (1,762,000)        (2,680,000)
                                                                ------------     -----------     -----------       ------------
          Other comprehensive income (loss)                      (11,118,000)      2,526,000     (17,095,000)           941,000
                                                                ------------     -----------     -----------       ------------

          Comprehensive income (loss)                           ($ 6,014,000)   ($18,353,000)    ($5,336,000)      ($13,618,000)
                                                                ============    ============     ===========       ============
</TABLE>

See accompanying notes to the unaudited condensed consolidated financial
statements.



                                      -5-
<PAGE>   6



                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                  Six Months Ended June 30,
                                                            --------------------------------------
                                                                 1999                   1998
                                                            ---------------        ---------------
                                                                                    (As Restated)
<S>                                                         <C>                    <C>
Net cash provided by (used in) operating activities         $   12,263,000         $   (2,932,000)
                                                            ---------------        ---------------

Cash flows from investing activities:
   Proceeds from sale or maturity of short-term investments    665,042,000            367,853,000
   Purchases of short-term investments                        (698,091,000)          (354,458,000)
   Proceeds from maturity of securities available for sale         500,000              2,941,000
   Proceeds from sale of securities available for sale         163,714,000            126,075,000
   Purchases of securities available for sale                 (138,112,000)          (142,805,000)
   Purchases of property and equipment                          (1,290,000)              (594,000)
   Payment on liability for purchased book of business            (637,000)              (600,000)
                                                            ---------------        ---------------
      Net cash used in investing activities                     (8,874,000)            (1,588,000)
                                                            ---------------        ---------------

Cash flows from financing activities:
   Repayment of long-term debt                                  (2,500,000)            (2,500,000)
   Book overdrafts                                                 996,000              6,375,000
   Common stock repurchased                                     (1,494,000)              -
   Cash paid for dissenter's rights                                (26,000)              -
                                                            ---------------        ---------------
      Net cash provided by (used in) financing activities       (3,024,000)             3,875,000
                                                            ---------------        ---------------

Net increase (decrease) in cash                                    365,000               (645,000)

Cash, beginning of period                                          379,000              2,636,000
                                                            --------------         ---------------

Cash, end of period                                         $      744,000         $    1,991,000
                                                            ===============        ===============

Supplemental schedule of noncash financing activities -
   Issuance of common stock as compensation                 $      541,000               -
                                                            ===============        ===============
</TABLE>


See accompanying notes to the unaudited condensed consolidated financial
statements.



                                      -6-


<PAGE>   7

                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)


(1)      Basis of Presentation

         Professionals Group, Inc. ("Professionals Group," and with its direct
         and indirect subsidiaries, the "Company") is a business corporation
         that was incorporated under the laws of the State of Michigan on
         January 31, 1996 and functions as an insurance holding company.
         Professionals Group has four direct wholly-owned subsidiaries; three
         indirect wholly-owned subsidiaries and one direct eighty percent owned
         subsidiary. The direct wholly-owned subsidiaries are ProNational
         Insurance Company ("ProNational"), ProNational Insurance Agency, Inc.
         ("PIA"), Professionals Group Services Corporation ("PGSC") and American
         Insurance Management Corporation ("AIMC"). The indirect wholly-owned
         entities, all of which are wholly-owned subsidiaries of ProNational,
         are PICOM Claims Services Corporation ("PCSC"), ProNational Casualty
         Company ("ProNational Casualty") and Physicians Protective Plan, Inc.
         ("PPP"). The direct eighty percent owned subsidiary is MedAdvantage,
         Inc. ("MedAdvantage").

         ProNational is a stock, property and casualty insurer that offers
         professional liability insurance to providers of health care services
         in Florida, Michigan, Illinois, Indiana, Kentucky, Ohio and
         Pennsylvania. PIA is an inactive Michigan insurance agency. PGSC is a
         Michigan business corporation that administers certain benefit plans
         for ProNational employees. AIMC is an Indiana corporation that serves
         as the attorney-in-fact for American Medical Insurance Exchange, an
         inactive Indiana interinsurance reciprocal exchange. PCSC provides
         claims management services on a fee for service basis. ProNational
         Casualty is a stock, property and casualty insurer that is currently
         not issuing policies. PPP is a Florida insurance agency. MedAdvantage
         provides credentialing verification services for medical service
         providers.

         As more fully described in Note 3 to the accompanying financial
         statements, on July 1, 1998, Professionals Group consummated its merger
         with Physicians Protective Trust Fund, a medical malpractice
         self-insurance trust fund located in Coral Gables, Florida ("PPTF").
         This transaction has been accounted for as a "pooling of interests"
         business combination under generally accepted accounting principles,
         whereby Professionals Group has carried forward to its accounts the
         assets and liabilities of PPTF at their respective amounts as reported
         by PPTF. As a result of this business combination, all prior period
         financial information has been restated to reflect the combined
         operations of Professionals Group and PPTF.

         The accompanying unaudited condensed consolidated financial statements
         of the Company have been prepared in conformity with generally accepted
         accounting principles and with the instructions for Form 10-Q and Rule
         10-01 of Regulation S-X as they apply to interim financial information.
         Accordingly, they do not include all of the information and footnotes
         required by generally accepted accounting principles for complete
         financial statements. All significant intercompany transactions have
         been eliminated in consolidation.



                                   -7-
<PAGE>   8



                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued


(1)      Basis of Presentation, continued

         In the opinion of management, all adjustments (consisting of normal
         recurring adjustments) considered necessary for a fair presentation of
         financial position and results of operations have been included. The
         operating results for the three month and six month periods ended June
         30, 1999 are not necessarily indicative of the results to be expected
         for the year ending December 31, 1999.

(2)      Net Income Per Share

         Net income per share is computed by dividing net income by the weighted
         average number of shares of common stock and common stock equivalents
         (stock options and stock awards) outstanding during each period after
         giving effect to stock dividends and treasury shares, calculated on a
         daily basis.

(3)      Business Combination

         On July 1, 1998, Professionals Group consummated its merger with PPTF.
         Pursuant to the merger agreement, Professionals Group issued 4,087,525
         shares of Professionals Group common stock to the eligible members of
         PPTF and paid cash of approximately $67,000 in lieu of fractional
         shares. Additionally, 30,594 shares (representing 20% of the 153,000
         total shares to be issued over a period of five years) of Professionals
         Group common stock were issued to directors and management of PPTF, as
         contemplated by the merger agreement. The transaction has been
         accounted for as a "pooling of interests" business combination under
         generally accepted accounting principles, whereby Professionals Group
         has carried forward to its accounts the assets and liabilities of PPTF
         at their respective amounts as reported by PPTF. As a result of this
         business combination, all prior period financial information has been
         restated to reflect the combined operations of Professionals Group and
         PPTF.

(4)      Segment Information

         The Company is organized and operates principally in the property and
         casualty insurance industry and has three reportable segments -
         professional liability lines property and casualty insurance, personal
         lines property and casualty insurance and investment operations. The
         accounting policies of the segments are the same as those described in
         the basis of presentation footnote of the Company's consolidated
         financial statements included in its Annual Report on Form 10-K for the
         year ended December 31, 1998. Revenue is primarily from unaffiliated
         customers. Identifiable assets by segment are those assets, including
         investment securities, used in the Company's operations. Corporate and
         other identifiable assets are principally cash and marketable
         securities. Segment information, for which results are regularly
         reviewed by Company management in making decisions about resources to
         be allocated to the segments and assess their performance, is
         summarized as follows:



                                   -8-

<PAGE>   9



                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued


(4)      Segment Information, continued
<TABLE>
<CAPTION>

                                                      Three months ended June 30,               Six months ended June 30,
                                                  -------------------------------------   --------------------------------------
                                                         1999                 1998              1999                 1998
                                                  ------------------------------------------------------------------------------

                                                                                 (in thousands)
<S>                                               <C>                  <C>                <C>                  <C>
REVENUES:
      Professional liability lines                $        28,493      $        27,544    $         56,014     $         55,280
      Personal lines                                       11,900               10,942              23,579               21,878
      Investment operations                                10,336                9,753              21,274               23,469
      Corporate and other                                     643                  280               1,172                  493
                                                  ----------------     ----------------   -----------------    -----------------


         Total revenues                           $        51,372      $        48,519    $        102,039     $        101,120
                                                  ================     ================   =================    =================

INCOME (LOSS) BEFORE INCOME TAXES:
      Professional liability lines                $        (6,485)     $       (40,505)   $         (9,972)    $        (45,914)
      Personal lines                                        2,988                  463               4,429                  832
      Investment operations                                10,336                9,753              21,274               23,469
      Corporate and other                                     (98)                 (54)               (457)                (201)
                                                  ----------------     ----------------   -----------------    -----------------

         Total income (loss) before income taxes
                                                  $         6,741      $       (30,343)   $         15,274     $        (21,814)
                                                  ================     ================   =================    =================

IDENTIFIABLE ASSETS:
      Property and casualty insurance             $       902,487      $       845,757
      Corporate and other                                   8,320               14,807
                                                  ----------------     ----------------

         Total identifiable assets                $       910,807      $       860,564
                                                  ================     ================
</TABLE>



                                      -9-
<PAGE>   10



                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued


(5)      Subsequent Event

         On July 1, 1999, Michigan Educational Employees Mutual Insurance
         Company ("MEEMIC"), a Michigan domiciled insurance company that
         provides personal automobile and homeowners coverages to teachers and
         other educational employees in the state of Michigan, completed its
         conversion to a stock insurance company. As a result of the conversion,
         MEEMIC became a wholly-owned subsidiary of MEEMIC Holdings, Inc.
         ("MEEMIC Holdings"), a publicly traded Michigan business corporation
         (Nasdaq: MEMH). As part of MEEMIC's conversion, the Company acquired
         5,065,517 shares, or 76.8%, of the outstanding common stock of MEEMIC
         Holdings, at a price of $10 per share. Of these shares, 2,302,209
         shares were acquired upon the conversion of a $21.5 million promissory
         note (plus accrued interest of $1,522,090) previously issued by MEEMIC
         to ProNational. The remaining 2,763,308 shares were purchased by
         ProNational for cash of $27.6 million. The registration statement of
         MEEMIC Holdings (registration statement no. 333-66671) should be
         consulted for additional information concerning the conversion and the
         role of Professionals Group. Pro forma financial information with
         respect to this acquisition is not available at the present time.
         Beginning with the third quarter of 1999, the financial results of
         MEEMIC Holdings will be consolidated into the financial results of the
         Company.

(6)      Effects of New Accounting Pronouncements

         The Financial Accounting Standards Board has issued Statement of
         Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting
         for Derivative Instruments and Hedging Activities", which is effective
         for fiscal quarters of all fiscal years beginning after June 15, 2000
         (as amended by SFAS No. 137). SFAS No. 133 requires that all derivative
         instruments be recorded on the balance sheet at fair value. Changes in
         the fair value of derivatives are recorded each period in current
         earnings or other comprehensive income, depending on whether a
         derivative is designated as part of a hedge transaction, and if it is,
         the type of hedge transaction. As the Company currently does not use
         derivative instruments, we anticipate that the adoption of SFAS No. 133
         will not affect the results of operations or financial position of the
         Company.


                                      -10-
<PAGE>   11


Item 2. Management's Discussion and Analysis of Financial Condition and
              Results of Operations

      The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements and the notes thereto included
elsewhere in this report and the Company's Annual Report on Form 10-K for the
year ended December 31, 1998. The following discussion of the financial
condition and results of operations of the Company contains certain
forward-looking statements relating to anticipated future financial conditions
and operating results of the Company and its current business plans. In the
future, the financial condition and operating results of the Company could
differ materially from those discussed herein and its current business plans
could be altered in response to market conditions and other factors beyond the
Company's control. Important factors that could cause or contribute to such
differences or changes include those discussed in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998. (See the disclosures under "Item
1. Business - Forward Looking Statements" and under "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.")

Financial Condition -- June 30, 1999 Compared to December 31, 1998:

      On July 1, 1998, Professionals Group consummated its merger with
Physicians Protective Trust Fund, a medical malpractice self-insurance trust
fund located in Coral Gables, Florida ("PPTF"). The transaction has been
accounted for as a "pooling of interests" business combination under generally
accepted accounting principles, whereby Professionals Group has carried forward
to its accounts the assets and liabilities of PPTF at their respective amounts
as reported by PPTF. As a result of this business combination, all prior period
financial information has been restated to reflect the combined operations of
Professionals Group and PPTF (see also Note 3 to the Company's condensed
consolidated financial statements contained herein).

      Total assets increased by $21.6 million, or 2.4%, to $910.8 million at
June 30, 1999, compared to $889.2 million at December 31, 1998, primarily due to
increases in reinsurance balances and prepaid reinsurance premiums. Invested
assets decreased 2.4% to $674.7 million, or approximately 74% of the Company's
total assets at June 30, 1999. This compares to invested assets of $691.0
million, or approximately 78% of the Company's total assets at December 31,
1998. The decrease in invested assets was primarily due to a reduction in the
fair value of the fixed maturity portfolio, as further discussed below.
Reinsurance balances have increased due to increased business in states that
have higher limits, resulting in higher reinsurance coverage, therefore the
reinsurance recoverables have continued to increase. The increase in prepaid
reinsurance premiums reflect the timing of renewals for the Company's Illinois
professional liability book of business, which have a common renewal date of
January 1.

      The Company's investment portfolio continues to be dominated by fixed
maturity securities at June 30, 1999, and primarily consists of U.S. government
and agency bonds, high-quality corporate bonds, mortgage-backed securities,
redeemable preferred stocks and tax-exempt U.S. municipal bonds. The entire
fixed maturity portfolio, which is classified as available-for-sale, and is
carried at fair value, is sensitive to interest rate changes. At June 30, 1999,
the fixed maturity portfolio had a fair value that was $4.2 million less than
the $622.3 million amortized cost of such portfolio. At December 31, 1998, the
fixed maturity portfolio had a fair value that was $22.3 million higher than the
$646.9 million amortized cost of such portfolio. The reduction of fair value
resulted from higher interest rates, particularly in the U.S. Treasury sector.

                                      -11-
<PAGE>   12


      Loss and loss adjustment expense reserves represented approximately 81% of
the Company's consolidated liabilities at both June 30, 1999 and December 31,
1998. These reserves are determined on the basis of individual claims and
actuarially determined estimates of future losses based on the Company's past
loss experience and projections as to future claims frequency, severity,
inflationary trends and settlement patterns. Estimating professional liability
reserves is a complex process that is heavily dependent on judgment and involves
many uncertainties. As a result, reserve estimates may vary significantly from
the eventual outcome. It has been the practice of the Company to establish its
loss and loss adjustment expense reserves conservatively, as it relates to
immaturely developed accident years, to minimize potential uncertainties. The
Company's carried reserves have been established within the range of acceptable
values periodically estimated by the Company's consulting actuary and are
recorded based on such actuarial estimates. The assumptions used in establishing
the Company's reserves are regularly reviewed by management and revised as new
data becomes available. Any adjustments necessary are generally reflected in
current operations.

      Loss and loss adjustment expense reserves increased by $23.1 million, or
4.3%, to $563.7 million at June 30, 1999, from $540.6 million at December 31,
1998. This increase was primarily attributable to increased professional
liability business in states that have higher limits, therefore loss and loss
adjustment expense reserves have continued to increase.

      The unearned premium reserve increased by $10.5 million, or 21.8%, to
$58.7 million at June 30, 1999, from $48.2 million at December 31, 1998. The
increase was due mainly to the timing of renewals for the Company's Illinois
professional liability book of business, which have a common renewal date of
January 1.

      Shareholders' equity decreased by 2.8% to $215.8 million at June 30, 1999,
compared to $222.1 million at December 31, 1998. The decrease in shareholders'
equity was due to a decrease in accumulated other comprehensive income,
consisting of unrealized losses on the investment portfolio of $17.1 million and
other decreases in shareholders' equity of $1.0 million, which was offset by net
income of $11.8 million during the six month period ended June 30, 1999. The
Company expects to use retained earnings to increase its capital base and
finance future growth and, therefore, there can be no assurance as to any future
cash dividends by the Company.

Results of Operations -- Three Months Ended June 30, 1999 Compared to Three
Months Ended June 30, 1998:

      Total net premiums written were $30.9 million for the three months ended
June 30, 1999, an increase of $8.9 million, or 40.3%, compared to net premiums
written of $22.0 million for the three months ended June 30, 1998. Professional
liability related net premiums written were $19.5 million for the three months
ended June 30, 1999, an increase of $7.9 million, or 68.8%, compared to net
premiums written of $11.6 million for the three months ended June 30, 1998. The
increase in professional liability net premiums written was mainly due to
Florida policies issued in the last half of 1997 that had a one-time coverage
term of eighteen months to convert policy renewal dates from a common renewal
date of January 1. The issuance of these eighteen month policies in 1997
resulted in a decrease in premiums written in 1998 because these policies were
not renewed until 1999. The increase in professional liability net premiums
written was offset somewhat by continued price-based competition. The
reinsurance premiums assumed from MEEMIC were $11.3 million



                                      -12-
<PAGE>   13


for the three months ended June 30, 1999, an increase of $0.9 million, or 8.7%,
compared to net premiums written of $10.4 million for the three months ended
June 30, 1998.

      Total net premiums earned were $39.8 million for the three months ended
June 30, 1999, an increase of $4.5 million, or 12.9%, compared to net premiums
earned of $35.3 million for the three months ended June 30, 1998. Professional
liability net earned premiums were $28.5 million for the three months ended June
30, 1999, an increase of $3.6 million, or 14.7%, compared to $24.9 million for
the three months ended June 30, 1998. Net earned reinsurance premiums assumed
from MEEMIC were $11.3 million for the three months ended June 30, 1999, an
increase of $0.9 million, or 8.7%, compared to $10.4 million for the three
months ended June 30, 1998.

      The Company continued to balance its need for rate adjustments with a goal
of maintaining market share in a very competitive professional liability
environment. Although the Company is endeavoring to offset lower premiums
charged through more selective underwriting practices, there can be no assurance
that these practices will be successful in the long run.

      Net investment income, excluding realized investment gains, was $9.4
million for the three months ended June 30, 1999, a decrease of $0.3 million, or
3.5%, compared to net investment income of $9.7 million for the three months
ended June 30, 1998. The decrease in net investment income resulted as average
fixed maturity invested assets were lower during the three months ended June 30,
1999 compared to the three months ended June 30, 1998 and due to lower
prevailing interest rates, particularly in the spread-products sector. The
weighted average tax equivalent book yield of the fixed maturity portfolio was
6.8% and 7.0% as of June 30, 1999 and 1998, respectively. Net realized
investment gains were $1.0 million during the three months ended June 30, 1999
and were negligible during the three months ended June 30, 1998.

      Reinsurance experience refunds were $2.7 million for the three months
ended June 30, 1998. Through 1995, reinsurance agreements on the Florida
business included profit sharing provisions whereby premiums were refunded to
the Company after an established period of time if they exceeded actual losses
incurred plus an allowance for expenses. Interest income also accrued on excess
premiums paid. In prior years, the amount of profit recognized in income was
based on ultimate loss projections established by the Company's independent
actuary. Reinsurance profits were paid to the Company when losses developed
favorably. During 1998, reinsurance contracts covering claims prior to 1991 were
commuted. Therefore, any deferred reinsurance profits from these contracts were
recognized in 1998. Reinsurance experience refunds subsequent to 1998 are not
expected to be material.

      Total incurred losses and loss adjustment expenses (including the increase
in reserve for extended reporting period claims) totaled $32.0 million for the
three months ended June 30, 1999, a decrease of $37.5 million, or 54.0%,
compared to $69.5 million for the same period of 1998. The decrease was
primarily due to a $25.6 million increase to loss reserves to reflect actuarial
estimates and the application of the Company's reserving practices to the
Florida book of business as well as a $9.5 million excess limits verdict on one
Florida claim, both of which occurred during the three months ended June 30,
1998. As a percentage of premiums earned, the total incurred loss and loss
adjustment expense ratio (including the increase in reserve for extended
reporting period claims) decreased to 80.2% for the three months ended June 30,
1999, compared to 92.2% (excluding the reserve charges) for the same period of
1998. This decrease arose from both the professional liability and MEEMIC books
of business, as further discussed below.




                                      -13-

<PAGE>   14

      Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $26.3 million for the three months ended June 30, 1999, a
decrease of $0.8 million, or 3.0%, compared to $27.1 million (excluding the
reserve charges) for the three months ended June 30, 1998. As a percentage of
premiums earned, the professional liability insurance incurred loss and loss
adjustment expense ratio (including the increase in reserve for extended
reporting period claims) decreased to 92.4% for the three months ended June 30,
1999, compared to 101.1% for the same period of 1998 (excluding the reserve
charges). The professional liability insurance incurred loss and loss adjustment
expense ratio has decreased due mainly to reinsurance benefits derived from a
stop loss reinsurance contract entered into for the 1999 accident year and
favorable development of prior years' loss reserves related to the Company's
book of business in the Midwest. The stop loss reinsurance contract has reduced
the loss and loss adjustment expense ratio by approximately 7.0 percentage
points.

      Incurred losses and loss adjustment expenses related to the personal
automobile and homeowners insurance assumed from MEEMIC (the "personal liability
insurance") totaled $5.6 million for the three months ended June 30, 1999, a
decrease of $1.6 million, or 22.4%, compared to $7.2 million for the same period
of 1998. As a percentage of premiums earned, the personal liability insurance
generated an incurred loss and loss adjustment expense ratio of 49.5% for the
three months ended June 30, 1999, compared to 69.3% for the same period of 1998.
The decrease in the personal liability insurance loss and loss adjustment
expense ratio was attributable to a reduction in IBNR reserves recorded by
Professionals Group and mild weather during the second quarter of 1999.

      Policy acquisition and underwriting expenses were $11.9 million for the
three months ended June 30, 1999, an increase of $2.9 million, or 32.1%,
compared to policy acquisition and underwriting expenses of $9.0 million for the
same period of 1998. As a percentage of premiums earned, the underwriting
expense ratio increased to 30.0% for the three months ended June 30, 1999, from
25.6% for the same period of 1998. The increase was mainly attributable to $2.0
million in severance expenses incurred during the three months ended June 30,
1999 due to the resignation of three executives that joined Professionals Group
from PPTF. Excluding these severance expenses, the expense ratio was 25.0% for
the three months ended June 30, 1999. Interest expense was $0.3 million during
both three month periods ended June 30, 1999 and 1998. See "Liquidity and
Capital Resources."

      The Company recorded $1.6 million in federal income tax expense for the
three months ended June 30, 1999, compared to a $9.5 million tax benefit during
the same period in 1998 (due to the pretax loss generated). The effective tax
rate was 24.3% for the three months ended June 30, 1999, compared to a tax
benefit rate of (31.2%) for the three months ended June 30, 1998. The Company's
relatively low effective tax rate for the three months ended June 30, 1999 was
due primarily to an increase in the percentage of tax-exempt municipal bonds
held in 1999.

      Net income for the three months ended June 30, 1999 was $5.1 million, or
$0.60 per share (assuming dilution) on revenues of $51.4 million. This compares
to a net loss of $20.9 million, or a loss of $2.50 per share (assuming dilution)
on revenues of $48.5 million, for the three months ended June 30, 1998 (caused
by the loss reserve charge and excess limits verdict mentioned previously). The
improvement in earnings was primarily attributable to the improvement in the
loss and loss adjustment expense ratio, as described previously.


                                      -14-

<PAGE>   15

Results of Operations -- Six Months Ended June 30, 1999 Compared to Six Months
Ended June 30, 1998:

      Total net premiums written were $86.8 million for the six months ended
June 30, 1999, an increase of $16.8 million, or 24.0%, compared to net premiums
written of $70.0 million for the six months ended June 30, 1998. Professional
liability related net premiums written were $64.3 million for the six months
ended June 30, 1999, an increase of $15.2 million, or 30.9%, compared to net
premiums written of $49.1 million for the six months ended June 30, 1998. The
increase in professional liability net premiums written was mainly due to
Florida policies issued in the last half of 1997 that had a one-time coverage
term of eighteen months to convert policy renewal dates from a common renewal
date of January 1. The issuance of these eighteen month policies in 1997
resulted in a decrease in premiums written in 1998 because these policies were
not renewed until 1999. The increase in professional liability net premiums
written was offset somewhat by continued price-based competition. The
reinsurance premiums assumed from MEEMIC were $22.5 million for the six months
ended June 30, 1999, an increase of $1.6 million, or 7.8%, compared to net
premiums written of $20.9 million for the six months ended June 30, 1998.

      Total net premiums earned were $78.5 million for the six months ended June
30, 1999, an increase of $5.4 million, or 7.5%, compared to net premiums earned
of $73.1 million for the six months ended June 30, 1998. Professional liability
net earned premiums were $56.0 million for the six months ended June 30, 1999,
an increase of $3.8 million, or 7.3%, compared to $52.2 million for the six
months ended June 30, 1998. Net earned reinsurance premiums assumed from MEEMIC
were $22.5 million for the six months ended June 30, 1999, an increase of $1.6
million, or 7.8%, compared to $20.9 million for the six months ended June 30,
1998.

      The Company continued to balance its need for rate adjustments with a goal
of maintaining market share in a very competitive professional liability
environment. Although the Company is endeavoring to offset lower premiums
charged through more selective underwriting practices, there can be no assurance
that these practices will be successful in the long run.

      Net investment income, excluding realized investment gains, was $18.6
million for the six months ended June 30, 1999, a decrease of $0.8 million, or
4.1%, compared to net investment income of $19.4 million for the six months
ended June 30, 1998. The decrease in net investment income resulted as average
fixed maturity invested assets were lower during the six months ended June 30,
1999 compared to the six months ended June 30, 1998 and due to lower prevailing
interest rates, particularly in the spread-products sector. The weighted average
tax equivalent book yield of the fixed maturity portfolio was 6.8% and 7.0% as
of June 30, 1999 and 1998, respectively. Net realized investment gains were $2.7
million and $4.1 million during the six months ended June 30, 1999 and 1998,
respectively. The significant amount of investment gains recorded in the first
six months of 1998 was attributable to the sale of a majority of the Company's
common stock portfolio due to the Company's desire to maximize after-tax
investment yield in 1998 and future years.

      Reinsurance experience refunds were $3.1 million for the six months ended
June 30, 1998. Through 1995, reinsurance agreements on the Florida business
included profit sharing provisions whereby premiums were refunded to the Company
after an established period of time if they exceeded actual losses incurred plus
an allowance for expenses. Interest income also accrued on excess premiums paid.
In prior years, the amount of profit recognized in income was based on ultimate
loss projections established by the Company's independent actuary. Reinsurance
profits were paid to the Company when losses developed favorably. During 1998,
reinsurance contracts covering claims prior to 1991 were commuted. Therefore,
any deferred

                                      -15-

<PAGE>   16

reinsurance profits from these contracts were recognized in 1998. Reinsurance
experience refunds subsequent to 1998 are not expected to be material.

      Total incurred losses and loss adjustment expenses (including the increase
in reserve for extended reporting period claims) totaled $64.8 million for the
six months ended June 30, 1999, a decrease of $39.8 million, or 38.1%, compared
to $104.6 million for the same period of 1998. The decrease was primarily due to
a $25.6 million increase to loss reserves to reflect actuarial estimates and the
application of the Company's reserving practices to the Florida book of business
as well as a $9.5 million excess limits verdict on one Florida claim, both of
which occurred during the six months ended June 30, 1998. As a percentage of
premiums earned, the total incurred loss and loss adjustment expense ratio
(including the increase in reserve for extended reporting period claims)
decreased to 82.6% for the six months ended June 30, 1999, compared to 92.6%
(excluding the reserve charges) for the same period of 1998. This decrease arose
from both the professional liability and MEEMIC books of business, as further
discussed below.

      Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $52.4 million for the six months ended June 30, 1999, a decrease
of $2.5 million, or 4.6%, compared to $55.0 million (excluding the reserve
charges) for the six months ended June 30, 1998. As a percentage of premiums
earned, the professional liability insurance incurred loss and loss adjustment
expense ratio (including the increase in reserve for extended reporting period
claims) decreased to 93.6% for the six months ended June 30, 1999, compared to
101.4% for the same period of 1998 (excluding the reserve charges). The
professional liability insurance incurred loss and loss adjustment expense ratio
has decreased due mainly to reinsurance benefits derived from a stop loss
reinsurance contract entered into for the 1999 accident year and favorable
development of prior years' loss reserves related to the Company's book of
business in the Midwest. The stop loss reinsurance contract has reduced the loss
and loss adjustment expense ratio by approximately 7.0 percentage points.

      Incurred losses and loss adjustment expenses related to the personal
automobile and homeowners insurance assumed from MEEMIC (the "personal liability
insurance") totaled $12.4 million for the six months ended June 30, 1999, a
decrease of $2.2 million, or 14.9%, compared to $14.6 million for the same
period of 1998. As a percentage of premiums earned, the personal liability
insurance generated an incurred loss and loss adjustment expense ratio of 55.1%
for the six months ended June 30, 1999, compared to 69.8% for the same period of
1998. The decrease in the personal liability insurance loss and loss adjustment
expense ratio was attributable to a reduction in IBNR reserves recorded by
Professionals Group and mild weather during 1999.

      Policy acquisition and underwriting expenses were $20.3 million for the
six months ended June 30, 1999, an increase of $2.7 million, or 15.4%, compared
to policy acquisition and underwriting expenses of $17.6 million for the same
period of 1998. As a percentage of premiums earned, the underwriting expense
ratio increased to 25.9% for the six months ended June 30, 1999, from 24.1% for
the same period of 1998. The increase was mainly attributable to $2.0 million in
severance expenses incurred during the six months ended June 30, 1999 due to the
resignation of three executives that joined Professionals Group from PPTF.
Excluding these severance expenses, the expense ratio was 23.4% for the six
months ended June 30, 1999. Interest expense was $0.6 million and $0.7 million
during the six month periods ended June 30, 1999 and 1998, respectively. See
"Liquidity and Capital Resources."

                                      -16-
<PAGE>   17


      The Company recorded $3.5 million in federal income tax expense for the
six months ended June 30, 1999, compared to a $7.3 million tax benefit during
the same period in 1998 (due to the pretax loss generated). The effective tax
rate was 23.0% for the six months ended June 30, 1999, compared to a tax benefit
rate of (33.3%) for the six months ended June 30, 1998. The Company's relatively
low effective tax rate for the six months ended June 30, 1999 was due primarily
to an increase in the percentage of tax-exempt municipal bonds held in 1999.

      Net income for the six months ended June 30, 1999 was $11.8 million, or
$1.38 per share (assuming dilution) on revenues of $102.0 million. This compares
to a net loss of $14.6 million, or a loss of $1.74 per share (assuming dilution)
on revenues of $101.1 million, for the six months ended June 30, 1998 (caused by
the loss reserve charge and excess limits verdict mentioned previously). The
improvement in earnings was primarily attributable to the improvement in the
loss and loss adjustment expense ratio, as described previously.

Liquidity and Capital Resources:

      Liquidity describes the ability to generate sufficient cash flows to meet
the cash requirements of continuing operations. Liquidity, in the context of
insurance operations, is typically determined by two distinct operations:
underwriting and investing. Net cash flows from underwriting operations are used
to build an investment portfolio, which in turn produces future cash from
investment income. The Company continuously monitors available cash and
short-term investment balances in relation to projected cash needs to maintain
adequate balances for current payments while maximizing cash available for
longer term investment opportunities.

      The payment of losses, loss adjustment expenses and operating expenses in
the ordinary course of business represents the Company's principal need for
liquid funds. Payments for losses and loss adjustment expenses are distributed
fairly evenly throughout the year. Payments for reinsurance are made within
thirty days subsequent to the end of each quarter, with adjustments made after
each reinsurance year. Historically, cash used to pay for these items has been
provided by operations. The Company did not borrow any funds in the six month
periods ended June 30, 1999 or 1998. As of June 30, 1999, no material
commitments for capital expenditures existed, and management believes the
Company's present liquidity, together with its expected cash flow from
operations, will be sufficient to fund any future potential commitments for
capital expenditures.

      On April 4, 1997, Professionals Group borrowed $22.5 million under a
seven-year unsecured bank term loan, bearing interest at an adjustable rate of
LIBOR plus 62.5 basis points (5.69% at June 30, 1999), and payable quarterly
(the "Credit Agreement"). As of June 30, 1999, the outstanding principal balance
was $17.5 million. The remaining principal payments are due on April 30, as
follows: 2000 - $3,000,000; 2001 - $3,000,000; 2002 - $3,500,000; 2003 -
$3,500,000; and 2004 - $4,500,000. The Company paid the $2,500,000 principal
amount due on April 30, 1999.

      The Credit Agreement contains a covenant that prohibits the payment of
cash dividends on Professionals Group's common stock (except for cash paid in
lieu of fractional shares related to stock dividends declared). Additional
covenants also require the Company to, among other things, maintain total
consolidated shareholders' equity of at least $80.0 million plus 50% of the
preceding fiscal year's consolidated net income, maintain a ratio of debt to
equity of not more than 0.5:1 and maintain a fixed charges coverage ratio and an

                                      -17-

<PAGE>   18

interest coverage ratio (as defined by the Credit Agreement) of not less than
1.5:1 and 2.5:1, respectively. The Company was in compliance with, or had
received waivers of, all required covenants at June 30, 1999.

      On April 14, 1999, Professionals Group's Board of Directors authorized
management to repurchase up to 400,000 shares of the Company's common stock in
open market transactions over the next twelve months. This repurchase plan
represents approximately 5% of the issued and outstanding common stock of the
Company. The Company repurchased 50,792 shares under this plan at an average
cost of $29.42 per share during the second quarter of 1999.

      On July 1, 1999, MEEMIC, a Michigan domiciled insurance company that
provides personal automobile and homeowners coverages to teachers and other
educational employees in the state of Michigan, completed its conversion to a
stock insurance company. As a result of the conversion, MEEMIC became a
wholly-owned subsidiary of MEEMIC Holdings, Inc. ("MEEMIC Holdings"), a publicly
traded Michigan business corporation (Nasdaq: MEMH). As part of MEEMIC's
conversion, the Company acquired 5,065,517 shares, or 76.8%, of the outstanding
common stock of MEEMIC Holdings, at a price of $10 per share. Of these shares,
2,302,209 shares were acquired upon the conversion of a $21.5 million promissory
note (plus accrued interest of $1,522,090) previously issued by MEEMIC to
ProNational. The remaining 2,763,308 shares were purchased by ProNational for
cash of $27.6 million. The registration statement of MEEMIC Holdings
(registration statement no. 333-66671) should be consulted for additional
information concerning the conversion and the role of Professionals Group. Pro
forma financial information with respect to this acquisition is not available at
the present time. Beginning with the third quarter of 1999, the financial
results of MEEMIC Holdings will be consolidated into the financial results of
the Company.

Effects of New Accounting Pronouncements:

      The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative
Instruments and Hedging Activities", which is effective for fiscal quarters of
all fiscal years beginning after June 15, 2000 (as amended by SFAS No. 137).
SFAS No. 133 requires that all derivative instruments be recorded on the balance
sheet at fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction, and if it is, the type
of hedge transaction. As the Company currently does not use derivative
instruments, we anticipate that the adoption of SFAS No. 133 will not affect the
results of operations or financial position of the Company.

Year 2000 Compliance:

      The Company utilizes computerized information systems across its entire
operation. The inability of any of the Company's systems to recognize a date
using "00" as the year 2000 could result in information system errors or
failures. Accordingly, the Company has been working to resolve the potential
impact of the year 2000 on the ability of those systems to accurately process
information that may be date-sensitive. Subject to the discussion that follows,
and based on the information thus far available to the Company, the Company
currently believes that the costs expected to be incurred by it in connection
with its efforts to become Year 2000-compliant will not have a material adverse
impact on the Company's operating results or financial position.


                                      -18-

<PAGE>   19

      The Company has developed and followed a plan to ensure all modifications
and conversions to its primary computerized information systems are implemented
and thoroughly tested on a timely basis. The Company estimates that 95% of such
modifications and conversions have been made to date. Management anticipates
that the remaining modifications and conversions will be completed by September
30, 1999 and that the Company's primary computerized information systems will be
Year 2000-compliant by that date.

      Although the Company has established a contingency plan for critical
computerized information systems to mitigate potential delays or other problems
associated with such modifications or conversions deemed necessary by
management, the Company continues to bear some risk related to the Year 2000
issue due to its voluntary interaction with other persons and entities not
affiliated with the Company (e.g., vendors and customers) who must address their
own Year 2000 issues. For this reason, the Company has been monitoring the Year
2000 issues of certain third parties with which it interacts. The Company has
asked such third parties to demonstrate, or give some indication as to their
ability to become Year 2000-compliant by June 30, 1999. With respect to any
third party who appears unlikely to remedy its Year 2000 issues, the Company
intends to take appropriate steps to mitigate the exposure to the risk posed by
such third party's failure to timely address its Year 2000 issues. However, due
to the uncertainty inherent in both the Year 2000 problem and the efforts of
third parties to timely resolve their own Year 2000 issues, there can be no
assurances that the Company's mitigation efforts will be successful or that the
failure of any third party to timely resolve its Year 2000 issues will not have
a material adverse impact on the Company's operations, operating results or
financial position.

      Both internal and external resources will be utilized in the Company's
efforts to become Year 2000-compliant. During 1998 and 1997, approximately
$160,000 and $150,000, respectively, of costs were incurred by the Company in
connection with its efforts to become Year 2000-compliant. During the six months
ended June 30, 1999, approximately $90,000 of costs were incurred by the Company
in connection with its efforts to become Year 2000-compliant. The total costs of
the Company's efforts to become Year 2000-compliant are not expected to exceed
$500,000. All such costs have been, and will continue to be, expensed as
incurred.

      The costs expected to be incurred in connection with the Company's efforts
to become Year 2000-compliant, as well as the date by which the Company is
expected to be Year 2000-compliant, are based on management's best estimates.
Because such estimates were derived utilizing numerous assumptions of future
events (including the availability of certain resources, third party
modifications and other factors), there can be no assurance that these estimates
will be achieved and actual results could differ materially from those plans.
Specific factors that might cause material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

General:

      The Company invests in fixed maturity, equity and short-term securities.
The Company's investment strategy recognizes the need to maintain capital
adequate to support its insurance operations. The Company evaluates the
risk/reward trade-off of investment opportunities, measuring their effects on
yield, stability, diversity, overall quality and liquidity of the investment
portfolio.

                                      -19-
<PAGE>   20

      As of June 30, 1999, the majority of the Company's investment portfolio
was invested in fixed maturity securities and short-term investments. The fixed
maturity securities primarily consisted of U.S. government and agency bonds,
high-quality corporate bonds, mortgage-backed securities, redeemable preferred
stocks and tax-exempt U.S. municipal bonds.

Qualitative Information About Market Risk:

      Investments in the Company's portfolio have varying degrees of risk. The
primary market risk exposure to the fixed maturity portfolio is interest rate
risk, which is limited somewhat by managing duration to a defined range of 3.5
to 5.5 years. The distribution of maturities and sector concentrations is
monitored on a regular basis. Equity securities (common stocks), which generally
have greater risk and volatility of market value, are not significant to the
Company's overall investment portfolio; therefore, exposure to equity price risk
is not significant. However, market values of equity securities are monitored
regularly.

      The Company regularly examines the quality distribution of its investment
portfolio for evidence of impairment. In such cases, changes in market value are
evaluated to determine the extent to which such changes are attributable to: (i)
interest rates, (ii) market-related factors other than interest rates and (iii)
financial conditions, business prospects and other fundamental factors specific
to the issuer. Declines attributable to issuer fundamentals are reviewed in
further detail. Available evidence is considered to estimate the realizable
value of the investment. When a security in the Company's investment portfolio
has a decline in market value which is other than temporary, the Company is
required by GAAP to reduce the carrying value of such security to its net
realizable value. All declines in market values of the Company's investment
securities at June 30, 1999 were deemed to be temporary.

      The Company currently has no market risk exposure to foreign currency
exchange rate risk or commodity price risk.

                                      -20-
<PAGE>   21


Quantitative Information About Market Risk:

      Financial instruments subject to interest rate risk as of June 30, 1999
were as follows:

<TABLE>
<CAPTION>

                                                                                Market Value
                                                      --------------------------------------------------------------------

                                                        -200 bps      -100 bps                    +100 bps     +200 bps
                                                         Change        Change        Actual        Change       Change
                                                      --------------------------------------------------------------------
                                                                                (in thousands)

<S>                                                    <C>            <C>          <C>          <C>             <C>
U.S. Treasury securities and obligations of U.S.
  government corporations and agencies                 $     38,413   $   36,487   $    34,947  $      33,654   $    32,493


Debt securities issued by states of the United
  States and political subdivisions of the states           339,595      319,477       300,459        282,430       265,470

Corporate debt securities                                   121,651      115,667       110,479        105,968       101,998

Mortgage-backed securities                                  129,270      125,784       120,530        114,236       108,034

Asset-backed securities                                      38,291       36,966        35,625         34,214        32,790
Redeemable preferred stocks                                  17,135       16,511        16,112         15,726        15,352
Short-term investments                                       51,642       51,642        51,642         51,642        51,642
                                                       -------------- ------------ ------------- -------------- -------------

                                                       $    735,997   $  702,534   $   669,794   $    637,870   $   607,779
                                                       ============== ============ ============= ============== =============
</TABLE>


      The Company does not invest in fixed maturity securities for trading
purposes. Exposure to risk is represented in terms of changes in fair value due
to selected hypothetical movements in market rates. Bonds and preferred stocks
are individually priced to yield to the worst case scenario. Securities issued
by states of the United States and political subdivisions of the states are
assumed to hold their prepayment patterns. Mortgage-backed and asset-backed
securities are priced assuming deal specific prepayment scenarios, considering
the deal structure, prepayment penalties, yield maintenance agreements and the
underlying collateral. All of the preferred stocks have mechanisms that are
expected to provide an opportunity to liquidate at par.

                                      -21-

<PAGE>   22



      Financial instruments subject to equity market risk as of June 30, 1999
were as follows:

<TABLE>
<CAPTION>


                                                                                    Hypothetical Market
                                                                  Actual                 Changes
                                                                  Market        ------------------------------
                                                                  Value              +10%             -10%
                                                               ------------     -------------    -------------


<S>                                                            <C>              <C>              <C>
      Common stock (in thousands)                              $      4,496     $      4,946     $       4,046
                                                               ============     =============    =============

</TABLE>

      The table above summarizes the Company's equity price risk as of June 30,
1999 and shows the effects of a hypothetical 10% increase and 10% decrease in
the market prices as of June 30, 1999. The selected hypothetical change does not
reflect what could be considered the best or worst case scenarios.

      The Company generally does not invest in equity securities for trading
purposes. As of June 30, 1999, equity securities represented less than 1% of the
Company's total assets. The carrying values of publicly traded investments
subject to equity price risk are based on quoted market prices as of the balance
sheet date. Market prices are subject to fluctuation and, consequently, the
amount realized in the subsequent sale of the investment may significantly
differ from the reported market value. Fluctuation in the market price of a
security may result from perceived changes in the underlying economic
characteristics of the investee, the relative prices of alternative investments
and general market conditions. Furthermore, amounts realized in the sale of a
particular security may be affected by the relative quantity of the security
being sold. The carrying values of privately held investments are subject to
equity price risk which are based on the forgoing market price considerations
and also on the underlying value of the issuer and other buyer's perceptions of
such value, as well as lack of liquidity considerations.


PART II.  OTHER INFORMATION

Item 4.     Submission of Matters to a Vote of Security Holders

      On June 2, 1999, at the 1999 Annual Meeting of Stockholders of
Professionals Group, the stockholders elected Louis P. Brady, M.D., Mr. Jerry
D. Campbell, Richard P. Horsch, M.D., William H. Woodhams, M.D., and Donald S.
Young, Esq. to the Professionals Group Board for three year terms expiring in
the year 2002 and upon the re-election and qualification of their respective
successors or upon their earlier resignation or removal.

      The vote of shareholders with respect to the election of directors was as
follows: Louis P. Brady, M.D. received 5,177,124 shares for election and 75,283
shares were withheld; Mr. Jerry D. Campbell received 5,222,251 shares for
election and 31,156 shares were withheld; Richard P. Horsch, M.D. received
5,213,070 shares for election and 40,337 shares were withheld; William H.
Woodhams, M.D. received 5,219,494 shares for election and 33,913 shares were
withheld; and Donald S. Young, Esq. received 5,218,584 shares for election and
34,823 shares were withheld.


                                      -22-

<PAGE>   23

         In addition, incumbent directors Victor T. Adamo, Esq., Eliot H. Berg,
      M.D., John F. McCaffrey, Isaac J. Powell, M.D., Edward S. Truppman, M.D.,
      Richard G. Alper, M.D., R. Kevin Clinton, John F. Dodge, Jr., Esq., H.
      Harvey Gass, M.D., and Ann F. Putallaz, Ph.D., continued in office.

         The above matters are more fully described in Professionals Group's
      Proxy Statement dated May 7, 1999.

      Item 6.     Exhibits and Reports on Form 8-K

      (a)         Exhibits.

<TABLE>
<CAPTION>
                Item 601
             Regulation S-K
           Exhibit Reference
                Number                 Exhibit Description
         -----------------------       --------------------------

         <S>                          <C>
                  (11)                 No statement re: computation of per share
                                       earnings is required to be filed because
                                       the computations can be clearly
                                       determined from the materials contained
                                       herein.

                  (27)                 Financial Data Schedule of registrant.*
</TABLE>
-----------------------------------

      *  Filed herewith.

      (b)         Reports on Form 8-K.

               The Company filed a Current Report on Form 8-K dated July 1, 1999
      disclosing (i) under Item 2 (Acquisition or Disposition of Assets) of Form
      8-K the Company's acquisition of 76.8% of the outstanding common stock of
      MEEMIC Holdings, Inc., and under Item 7 (Financial Statements, Pro Forma
      Financial Information and Exhibits) the required financial statements and
      pro forma financial information would be filed as an amendment to this
      Current Report on Form 8-K no later than September 14, 1999.

               No other reports were filed during the three months ended June
30, 1999.

                                      -23-

<PAGE>   24


 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.

                                            PROFESSIONALS GROUP, INC.


DATE:  August 12, 1999              /s/ John F. Lang
                                   --------------------------------------------
                                   John F. Lang
                                   Vice President, Treasurer and
                                   Chief Accounting Officer (Principal Financial
                                   Officer and Principal Accounting Officer)

                                      -24-
<PAGE>   25


                               INDEX TO EXHIBITS


EXHIBIT NO.                     DESCRIPTION
-----------                     -----------

    Item 601
 Regulation S-K
Exhibit Reference
     Number              Exhibit Descriiption
     ------              --------------------

      (11)               No statement re: computation of per share earnings is
                         required to be filed because the computations can be
                         clearly determined from the materials contained herein.

      (27)               Financial Data Schedule of registrant.*

----------------------------

*Filed herewith.

                                      -25-