<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 September 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)

<TABLE>

<S>                                                <C>
                 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)
</TABLE>


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 November 11, 1999 was 8,236,565.


<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 September 30, 1999             3
                                (Unaudited) and December 31, 1998

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

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

                                Condensed Consolidated Statements of Cash Flows for the Nine            6
                                Months Ended September 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                20-22

PART II. OTHER INFORMATION


                Item 6.    Exhibits and Reports on Form 8-K                                             22

                Signatures                                                                              23
</TABLE>




                                      -2-
<PAGE>   3

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                            PROFESSIONALS GROUP, INC.
                                AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                        September 30,            December 31,
                                   Assets                                                    1999                    1998
                                   ------                                             ------------------        ---------------
                                                                                          (Unaudited)
<S>                                                                                   <C>                       <C>
Investments:
   Fixed maturities available for sale, at fair value
      (amortized cost:  $761,852,000 and $646,864,000)                                   $  751,669,000           $669,118,000
   Equity securities available for sale, at fair value
      (cost:  $4,102,000 and $4,035,000)                                                      4,326,000              3,901,000
   Short-term investments, at cost                                                           21,162,000             17,593,000
   Real estate, at cost, net of accumulated depreciation                                        405,000                421,000
                                                                                      -----------------         --------------
               Total investments                                                            777,562,000            691,033,000
Cash                                                                                         13,509,000                379,000
Restricted cash                                                                               2,070,000              2,070,000
Premiums due from policyholders                                                              28,671,000             27,580,000
Reinsurance balances                                                                        194,780,000            106,692,000
Accrued investment income                                                                     9,848,000             10,743,000
Deferred federal income taxes                                                                49,051,000             24,501,000
Property and equipment, at cost, net of
  accumulated depreciation                                                                    9,607,000              9,117,000
Prepaid reinsurance premiums                                                                  8,557,000              4,917,000
Deferred policy acquisition costs                                                             2,271,000              1,500,000
Other assets                                                                                  9,252,000             10,679,000
                                                                                      -----------------         --------------
               Total assets                                                              $1,105,178,000           $889,211,000
                                                                                      =================         ==============

                    Liabilities and Shareholders' Equity
                    ------------------------------------
Liabilities:
   Loss and loss adjustment expense reserves                                             $  655,541,000           $540,583,000
   Reserve for extended reporting period claims                                              27,424,000             26,674,000
   Unearned premiums                                                                         98,000,000             48,201,000
   Long-term debt                                                                            17,500,000             20,000,000
   Surplus contributions                                                                     10,094,000             10,094,000
   Excess of net assets acquired over cost                                                   19,099,000                --
   Minority interest                                                                         22,610,000                --
   Accrued expenses and other liabilities                                                    38,058,000             21,562,000
                                                                                      -----------------         --------------
               Total liabilities                                                            888,326,000            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;
      8,266,728 and 8,383,924 shares issued and
      outstanding in 1999 and 1998, respectively                                              8,267,000              8,384,000
   Additional paid-in capital                                                                30,496,000             33,982,000
   Retained earnings                                                                        184,662,000            165,132,000
   Accumulated other comprehensive income (loss),
      net of deferred federal income taxes                                                   (6,573,000)            14,599,000
                                                                                      -----------------         --------------
               Total shareholders' equity                                                   216,852,000            222,097,000
                                                                                      -----------------         --------------
               Total liabilities and shareholders' equity                                $1,105,178,000           $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
                                                                              September 30,
                                                                  ---------------------------------------
                                                                        1999                 1998
                                                                  ------------------   ------------------
<S>                                                               <C>                  <C>
Revenues and other income:
   Net premiums written                                                 $62,753,000          $43,997,000
   Increase in unearned premiums, net of
      prepaid reinsurance premiums                                       (4,675,000)          (3,522,000)
                                                                  -----------------    -----------------
   Premiums earned, net                                                  58,078,000           40,475,000
   Net investment income                                                 11,504,000            9,765,000
   Net realized investment gains (losses)                                   (81,000)             489,000
   Reinsurance experience refunds                                           --                   --
   Other                                                                    776,000            1,143,000
                                                                  -----------------    -----------------
      Total revenues and other income                                    70,277,000           51,872,000
                                                                  -----------------    -----------------

Expenses:
   Losses and loss adjustment expenses, net                              45,360,000           34,865,000
   Increase in reserve for extended reporting
      period claims                                                         250,000              185,000
   Policy acquisition and other underwriting expenses                    13,376,000           10,809,000
   Interest expense                                                         254,000              322,000
   Amortization expense, net                                               (209,000)             307,000
   Other                                                                    477,000              619,000
                                                                  -----------------    -----------------
      Total expenses                                                     59,508,000           47,107,000
                                                                  -----------------    -----------------

      Income (loss) from operations before federal income
        taxes (benefit), minority interest and extraordinary item        10,769,000            4,765,000

Federal income taxes (benefit)                                            3,014,000              342,000
                                                                  -----------------    -----------------

      Income (loss) before minority interest and
        extraordinary item                                                7,755,000            4,423,000

Minority interest                                                        (1,280,000)             --
                                                                  -----------------    -----------------

      Income (loss) before extraordinary item                             6,475,000            4,423,000

Extraordinary item:
  Gain on early extinguishment of debt, net of taxes of $681,000
    for the three and nine months ended September 30, 1999                1,322,000              --
                                                                  -----------------    -----------------

      Net income (loss)                                                 $ 7,797,000          $ 4,423,000
                                                                  =================    =================


Income (loss) per common share - basic:
  Income (loss) before extraordinary item                               $      0.78          $      0.53
  Income from extraordinary item                                               0.16              --
                                                                  -----------------    -----------------
      Net income (loss) per common share - basic                        $      0.94          $      0.53
                                                                  =================    =================

Income (loss) per common share - assuming dilution:
  Income (loss) before extraordinary item                               $      0.77          $      0.52
  Income from extraordinary item                                               0.16              --
                                                                  -----------------    -----------------
      Net income (loss) per common share - assuming dilution            $      0.93          $      0.52
                                                                  =================    =================

Weighted average shares outstanding - basic                               8,317,661            8,383,924
                                                                  =================    =================

Weighted average shares outstanding - assuming dilution                   8,395,834            8,521,572
                                                                  =================    =================

<CAPTION>
                                                                                 Nine Months Ended
                                                                                   September 30,
                                                                  ---------------------------------------------
                                                                          1999                    1998
                                                                  ---------------------   ---------------------
<S>                                                               <C>                     <C>
Revenues and other income:
   Net premiums written                                                   $149,592,000            $114,021,000
   Increase in unearned premiums, net of
      prepaid reinsurance premiums                                         (12,987,000)               (475,000)
                                                                  --------------------    --------------------
   Premiums earned, net                                                    136,605,000             113,546,000
   Net investment income                                                    30,108,000              29,172,000
   Net realized investment gains (losses)                                    2,588,000               4,549,000
   Reinsurance experience refunds                                              --                    3,095,000
   Other                                                                     3,014,000               2,628,000
                                                                  --------------------    --------------------
      Total revenues and other income                                      172,315,000             152,990,000
                                                                  --------------------    --------------------

Expenses:
   Losses and loss adjustment expenses, net                                109,682,000             139,256,000
   Increase in reserve for extended reporting
      period claims                                                            750,000                 430,000
   Policy acquisition and other underwriting expenses                       33,284,000              28,006,000
   Interest expense                                                            808,000               1,016,000
   Amortization expense, net                                                   352,000                 712,000
   Other                                                                     1,397,000                 619,000
                                                                  --------------------    --------------------
      Total expenses                                                       146,273,000             170,039,000
                                                                  --------------------    --------------------

      Income (loss) from operations before federal income
        taxes (benefit), minority interest and extraordinary item           26,042,000             (17,049,000)

Federal income taxes (benefit)                                               6,528,000              (6,913,000)
                                                                  --------------------    --------------------

      Income (loss) before minority interest and
        extraordinary item                                                  19,514,000             (10,136,000)

Minority interest                                                           (1,280,000)                --
                                                                  --------------------    --------------------

      Income (loss) before extraordinary item                               18,234,000             (10,136,000)

Extraordinary item:
  Gain on early extinguishment of debt, net of taxes of $681,000
    for the three and nine months ended September 30, 1999                   1,322,000                 --
                                                                  --------------------    --------------------

      Net income (loss)                                                   $ 19,556,000            ($10,136,000)
                                                                  ====================    ====================


Income (loss) per common share - basic:
  Income (loss) before extraordinary item                                 $       2.18                  ($1.21)
  Income from extraordinary item                                                  0.16                 --
                                                                  --------------------    --------------------
      Net income (loss) per common share - basic                          $       2.34                  ($1.21)
                                                                  ====================    ====================

Income (loss) per common share - assuming dilution:
  Income (loss) before extraordinary item                                 $       2.15                  ($1.21)
  Income from extraordinary item                                                  0.16                 --
                                                                  --------------------    --------------------
      Net income (loss) per common share - assuming dilution              $       2.31                  ($1.21)
                                                                  ====================    ====================

Weighted average shares outstanding - basic                                  8,357,586               8,363,640
                                                                  ====================    ====================

Weighted average shares outstanding - assuming dilution                      8,465,426               8,363,640
                                                                  ====================    ====================
</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
                                                                                     September 30,
                                                                        -----------------------------------------
                                                                              1999                   1998
                                                                        -----------------      ------------------

<S>                                                                     <C>                    <C>
Net income (loss)                                                             $7,797,000             $ 4,423,000
                                                                        ----------------       -----------------

Other comprehensive income (loss):
  Unrealized holding gains (losses) on securities arising
   during the period (net of income taxes of $2,128,000 and
   $4,156,000 for three months in 1999 and 1998, respectively and
   $10,027,000 and $6,021,000 for nine months in 1999 and 1998,
   respectively)                                                              (4,130,000)              8,068,000
  Less reclassification adjustment for realized (gains) losses
   included in net income (loss) (net of income taxes of $28,000
   and $166,000 for three months in 1999 and 1998, respectively
   and $880,000 and $1,547,000 for nine months in 1999 and 1998,
   respectively)                                                                  53,000                (323,000)
                                                                        ----------------       -----------------
         Other comprehensive income (loss)                                    (4,077,000)              7,745,000
                                                                        ----------------       -----------------

         Comprehensive income (loss)                                          $3,720,000             $12,168,000
                                                                        ================       =================

<CAPTION>
                                                                                     Nine Months Ended
                                                                                       September 30,
                                                                        --------------------------------------------
                                                                               1999                    1998
                                                                        -------------------     --------------------

<S>                                                                     <C>                     <C>
Net income (loss)                                                              $19,556,000             ($10,136,000)
                                                                        ------------------      -------------------

Other comprehensive income (loss):
  Unrealized holding gains (losses) on securities arising
   during the period (net of income taxes of $2,128,000 and
   $4,156,000 for three months in 1999 and 1998, respectively and
   $10,027,000 and $6,021,000 for nine months in 1999 and 1998,
   respectively)                                                               (19,464,000)              11,688,000
  Less reclassification adjustment for realized (gains) losses
   included in net income (loss) (net of income taxes of $28,000
   and $166,000 for three months in 1999 and 1998, respectively
   and $880,000 and $1,547,000 for nine months in 1999 and 1998,
   respectively)                                                                (1,708,000)              (3,002,000)
                                                                        ------------------      -------------------
         Other comprehensive income (loss)                                     (21,172,000)               8,686,000
                                                                        ------------------      -------------------

         Comprehensive income (loss)                                           ($1,616,000)             ($1,450,000)
                                                                        ==================      ===================
</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>
                                                                                            Nine Months Ended September 30,
                                                                                       -----------------------------------------
                                                                                             1999                   1998
                                                                                       ------------------    -------------------

<S>                                                                                    <C>                   <C>
Net cash provided by operating activities                                                    $28,396,000            $12,902,000
                                                                                       -----------------     ------------------

Cash flows from investing activities:
 Proceeds from sale or maturity of short-term investments                                    838,472,000            439,968,000
 Purchases of short-term investments                                                        (838,962,000)          (409,990,000)
 Proceeds from maturity of securities available for sale                                       3,556,000              4,584,000
 Proceeds from sale of securities available for sale                                         220,834,000            171,396,000
 Purchases of securities available for sale                                                 (237,933,000)          (215,202,000)
 Purchases of property and equipment                                                          (1,576,000)              (801,000)
 Cash acquired in excess of cash paid related to MEEMIC acquisition                           20,338,000                --
 Payment on liability for purchased book of business                                            (637,000)              (600,000)
                                                                                       -----------------     ------------------
    Net cash provided by (used in) investing activities                                        4,092,000            (10,645,000)
                                                                                       -----------------     ------------------

Cash flows from financing activities:
 Repayment of long-term debt                                                                  (2,500,000)            (2,500,000)
 Book overdrafts                                                                                 --                     753,000
 Common stock repurchased                                                                     (4,330,000)               --
 Repayment of payable related to an acquisition                                              (12,502,000)               --
 Cash paid in lieu of fractional shares                                                          --                     (67,000)
 Cash paid for dissenter's rights                                                                (26,000)               --
                                                                                       -----------------     ------------------
    Net cash used in financing activities                                                    (19,358,000)            (1,814,000)
                                                                                       -----------------     ------------------

Net increase in cash                                                                          13,130,000                443,000

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

Cash, end of period                                                                          $13,509,000            $ 3,079,000
                                                                                       =================     ==================

Supplemental schedule of noncash investing and financing activities:
 Issuance of common stock as compensation                                                    $   727,000            $   795,000
                                                                                       =================     ==================
 Exchange of assets for ownership interest in MEEMIC                                         $23,022,000                --
                                                                                       =================     ==================
</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 together with its
         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 seven wholly owned subsidiaries and two majority owned
         subsidiaries. The wholly owned subsidiaries are ProNational Insurance
         Company ("ProNational"), ProNational Insurance Agency, Inc. ("PIA"),
         Professionals Group Services Corporation ("PGSC"), American Insurance
         Management Corporation ("AIMC"), PICOM Claims Services Corporation
         ("PCSC"), ProNational Casualty Company ("ProNational Casualty") and
         Physicians Protective Plan, Inc. ("PPP"). The majority owned
         subsidiaries are MedAdvantage, Inc. ("MedAdvantage") and MEEMIC
         Holdings, Inc. ("MEEMIC Holdings").

         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. MEEMIC Holdings is a publicly traded Michigan business
         corporation that provides personal auto and homeowners coverages to
         teachers and other educational employees through MEEMIC Insurance
         Company.

         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.

         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 and nine month periods ended September
         30, 1999 are not necessarily indicative of the results to be expected
         for the year ending December 31, 1999.

         Certain 1998 amounts have been reclassified to conform to the 1999
         presentation.





                                      -7-


<PAGE>   8

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


(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
         Physicians Protective Trust Fund, a medical malpractice self-insurance
         trust fund located in Coral Gables, Florida ("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                         Nine months ended
                                                               September 30,                             September 30,
                                                  -------------------------------------    -------------------------------------
                                                         1999                 1998               1999                 1998
                                                  ------------------------------------------------------------------------------
                                                                                 (in thousands)
<S>                                                    <C>                    <C>                 <C>                  <C>
REVENUES:
      Professional liability lines                     $   28,543             $ 29,723            $ 84,557             $ 85,003
      Personal lines                                       29,535               10,752              52,048               31,638
      Investment operations                                11,423               10,254              32,696               33,721
      Corporate and other                                     776                1,143               3,014                2,628
                                                  ---------------      ---------------     ---------------     ----------------

         Total revenues                                $   70,277             $ 51,872            $172,315             $152,990
                                                  ===============      ===============     ===============     ================

INCOME (LOSS) BEFORE INCOME TAXES:
      Professional liability lines                     $   (2,942)            $ (4,703)           $(12,914)            $(50,617)
      Personal lines                                        2,440                 (274)              5,803                 (434)
      Investment operations                                11,423               10,254              32,696               33,721
      Corporate and other                                    (152)                (512)                457                  281
                                                  ---------------      ---------------     ---------------     ----------------

         Total income (loss) before income taxes
                                                       $   10,769             $  4,765            $ 26,042             $(17,049)
                                                  ===============      ===============     ===============     ================

IDENTIFIABLE ASSETS:
      Property and casualty insurance                  $1,097,762             $872,955
      Corporate and other                                   7,416                6,377
                                                  ---------------      ---------------

         Total identifiable assets                     $1,105,178             $879,332
                                                  ===============      ===============
</TABLE>




                                      -9-

<PAGE>   10

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


(5)      Acquisition

         On July 1, 1999, Michigan Educational Employees Mutual Insurance
         Company completed its conversion to a stock insurance company and
         changed its name to MEEMIC Insurance Company ("MEEMIC"). 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 77%, of the outstanding common stock of
         MEEMIC Holdings, at a cost of $50.6 million. Of these shares, 2,302,209
         shares were acquired upon the conversion of a $21.5 million promissory
         note (plus accrued interest of $1.5 million) previously issued by
         MEEMIC to ProNational. The remaining 2,763,308 shares were purchased by
         ProNational for cash of $27.6 million. This acquisition was accounted
         as a purchase. The excess of net assets acquired over cost was $19.6
         million, and is being amortized on the straight-line method over 10
         years. Beginning with the third quarter of 1999, the financial results
         of MEEMIC Holdings have been consolidated into the financial results of
         the Company. The following unaudited pro forma information presents a
         summary of the consolidated results of operations of the Company for
         the nine months ended September 30, 1999 and 1998, as if this
         acquisition had occurred on January 1, 1998 (in thousands, except per
         share data):

<TABLE>
<CAPTION>
                                                                              1999              1998
                                                                              ----              ----
<S>                                                                         <C>               <C>
         Total revenues                                                     $208,403          $204,687
         Income (loss) before extraordinary item                              21,547            (3,801)
         Net income (loss)                                                    22,996            (3,801)
         Diluted income (loss) per common share before extraordinary item       2.57             (0.45)
         Diluted net income (loss) per common share                             2.74             (0.45)
</TABLE>


         These unaudited pro forma results have been prepared for comparative
         purposes only and do not purport to be indicative of the results of
         operations which would have actually resulted had this acquisition
         occurred on January 1, 1998, or of future results of operations 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 -- September 30, 1999 Compared to December 31, 1998:

      Professionals Group's insurance subsidiaries comprise the majority of its
operations. Professional liability insurance coverage and services to health
care providers are provided by its wholly owned subsidiary ProNational Insurance
Company. Personal auto and homeowners coverage to teachers and other educational
employees ("personal lines") are provided by its majority owned subsidiary
MEEMIC Holdings, Inc. through MEEMIC Insurance Company.

      Commencing with the third quarter of 1999, MEEMIC Holdings was
consolidated into Professionals Group's financial statements as a result of
Professionals Group obtaining majority ownership (see Note 5 in the accompanying
condensed consolidated financial statements).

      Total assets increased by $216.0 million, or 24.3%, to $1,105.2 million at
September 30, 1999, compared to $889.2 million at December 31, 1998. The
acquisition of MEEMIC Holdings increased total assets by $244.2 million.
Invested assets increased 12.5% to $777.6 million, or approximately 70% of the
Company's total assets at September 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 increase in invested assets was primarily due to the
acquisition of MEEMIC Holdings, which added $153.0 million. Offsetting this
increase is a reduction in the fair value of the fixed maturity portfolio, as
further discussed below. Reinsurance balances increased by $88.1 million, or
82.6%, to $194.8 million at September 30, 1999, from $106.7 million at December
31, 1998 due primarily to the acquisition of MEEMIC Holdings, which added $55.5
million. The remainder of the increase was due to increased business in states
that have higher limits, resulting in greater reinsurance participation,
therefore the reinsurance recoverables have continued to increase.

      The Company's investment portfolio continues to be dominated by fixed
maturity securities at September 30, 1999, and primarily consists of U.S.
government and agency bonds, high-quality corporate bonds, mortgage-backed and
asset-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 September 30, 1999, the fixed maturity portfolio had a fair value
that was $10.2 million less than the $761.9 million amortized cost of such
portfolio. At December 31, 1998, the




                                      -11-
<PAGE>   12

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.

      Deferred federal income taxes increased by $24.6 million, or 100.2%, to
$49.1 million at September 30, 1999, from $24.5 million at December 31, 1998.
This increase was primarily attributable to the acquisition of MEEMIC Holdings,
which added $17.7 million and from unrealized losses on the investment
portfolio.

      Loss and loss adjustment expense reserves represented approximately 74%
and 81% of the Company's consolidated liabilities at September 30, 1999 and
December 31, 1998, respectively. The decrease in this percentage was due to the
acquisition of MEEMIC Holdings, which has a much shorter duration on its
reserves compared to professional liability reserves, therefore the percentage
of reserves to total liabilities has decreased. 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 reserves, and especially 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 $114.9 million, or
21.3%, to $655.5 million at September 30, 1999, from $540.6 million at December
31, 1998. This increase was primarily attributable to the acquisition of MEEMIC
Holdings, which added $96.1 million. The remainder of 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 $49.8 million, or 103.3%, to
$98.0 million at September 30, 1999, from $48.2 million at December 31, 1998.
The increase was due mainly to the acquisition of MEEMIC Holdings, which added
$34.0 million. The remainder of the increase was due to the timing of renewals
of the Company's professional liability book of business, a significant portion
of which renews during the third quarter.

      The $19.1 million excess of assets acquired over cost and the minority
interest of $22.6 million at September 30, 1999 were related to the acquisition
of MEEMIC Holdings (see Note 5 in the accompanying condensed consolidated
financial statements).

      Shareholders' equity decreased by 2.4% to $216.9 million at September 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 $21.2
million and other decreases in shareholders' equity of $3.6 million (primarily
related to the Company's stock repurchase program), which was offset by net
income of $19.6 million during the nine month period ended September 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.



                                      -12-
<PAGE>   13

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

Professional Liability Insurance Operations:

      Professional liability net premiums written were $32.4 million for the
three months ended September 30, 1999, a decrease of $0.9 million, or 2.7%,
compared to net premiums written of $33.3 million for the three months ended
September 30, 1998. The decrease in professional liability net premiums written
was mainly due to continued price-based competition and the Company's reluctance
to offer its products at lower prices, particularly in Florida. Professional
liability net premiums earned were $28.5 million for the three months ended
September 30, 1999, a decrease of $1.2 million, or 4.0%, compared to $29.7
million for the three months ended September 30, 1998. The decrease in net
premiums earned was also a result of the continued price-based competition.

      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.

      Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $25.2 million for the three months ended September 30, 1999, a
decrease of $2.1 million, or 7.8%, compared to $27.3 million for the three
months ended September 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 88.3% for the three months ended September 30, 1999, compared to
92.0% for the same period of 1998. 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 professional liability book of business in the Midwest.

      Professional liability policy acquisition and underwriting expenses were
$6.7 million for the three months ended September 30, 1999, a decrease of $0.8
million, or 10.7%, compared to policy acquisition and underwriting expenses of
$7.5 million for the same period of 1998. As a percentage of premiums earned,
the underwriting expense ratio decreased to 23.4% for the three months ended
September 30, 1999, from 25.2% for the same period of 1998. The underwriting
expense ratio was higher in 1998 due to $2.3 million of expenses incurred
related to the closing of the merger with PPTF.

Personal Lines Insurance Operations:

      Personal lines net premiums written were $30.4 million for the three
months ended September 30, 1999, compared to $10.8 million of net premiums
written for the three months ended September 30, 1998 pursuant to the then
existing quota share reinsurance relationship with MEEMIC. Personal lines net
premiums earned were $29.5 million for the three months ended September 30,
1999, compared to $10.8 million of net premiums earned for the three months
ended September 30, 1998 pursuant to the then existing quota share



                                      -13-
<PAGE>   14
reinsurance relationship with MEEMIC. The increase in both net premiums written
and net premiums earned was due to the acquisition of MEEMIC Holdings.

      Personal lines insurance incurred losses and loss adjustment expenses
totaled $20.4 million for the three months ended September 30, 1999, an increase
of $12.7 million, or 165.1%, compared to $7.7 million for the same period of
1998 (pursuant to the then existing quota share reinsurance relationship with
MEEMIC). The increase in incurred losses and loss adjustment expenses was due to
the acquisition of MEEMIC Holdings. As a percentage of premiums earned, the
personal lines insurance incurred loss and loss adjustment expense ratio
decreased to 69.1% for the three months ended September 30, 1999, compared to
71.5% for the same period of 1998. The personal lines insurance incurred loss
and loss adjustment expense ratio was higher in 1998 due to homeowners losses
resulting from a July 1998 Michigan wind storm.

      Personal lines policy acquisition and underwriting expenses were $6.7
million for the three months ended September 30, 1999, an increase of $3.4
million, or 101.1%, compared to policy acquisition and underwriting expenses of
$3.3 million for the same period of 1998 (pursuant to the then existing quota
share reinsurance relationship with MEEMIC). The increase in policy acquisition
and underwriting expenses was due to the acquisition of MEEMIC Holdings.

General Insurance Operations:

      Net investment income, excluding realized investment gains, was $11.5
million for the three months ended September 30, 1999, an increase of $1.7
million, or 17.8%, compared to net investment income of $9.8 million for the
three months ended September 30, 1998. The increase reflects the addition of
MEEMIC's investment portfolio during the quarter due to the acquisition of
MEEMIC Holdings. The weighted average tax equivalent book yield of the fixed
maturity portfolio was 6.8% and 6.8% as of September 30, 1999 and 1998,
respectively. Net realized investment gains were negligible during both three
month periods ended September 30, 1999 and 1998. Interest expense was $0.3
million during both three month periods ended September 30, 1999 and 1998. See
"Liquidity and Capital Resources."

      The Company recorded $3.0 million in federal income tax expense for the
three months ended September 30, 1999, compared to $0.3 million during the same
period in 1998. The effective tax rate was 28.0% for the three months ended
September 30, 1999, compared to an effective tax rate of 7.2% for the three
months ended September 30, 1998. The Company's lower effective tax rate for the
three months ended September 30, 1998 was due primarily to accrual adjustments
attributable to prior periods.

      Net income for the three months ended September 30, 1999 was $7.8 million,
or $0.93 per diluted share on revenues of $70.3 million. This compares to net
income of $4.4 million, or $0.52 per diluted share on revenues of $51.9 million,
for the three months ended September 30, 1998. The improvement in earnings was
primarily attributable to the improvement in the loss and loss adjustment
expense and underwriting expense ratios, as described previously. Two
significant items also impacted net income for the three months ended September
30, 1999. These items were anticipated as a result of MEEMIC's conversion to a
stock insurance company. The first item was a one-time gain on early
extinguishment of debt, which increased net income by $1.3 million. The second
item was the minority interest related to MEEMIC Holdings' minority
shareholders, which reduced net income by $1.3 million. The minority interest
reflects the 23% of MEEMIC Holdings not owned by Professionals Group.




                                      -14-

<PAGE>   15

Results of Operations - Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998:

Professional Liability Insurance Operations:

      Professional liability net premiums written were $96.7 million for the
nine months ended September 30, 1999, an increase of $14.3 million, or 17.4%,
compared to net premiums written of $82.4 million for the nine months ended
September 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.
Professional liability net premiums earned were $84.5 million for the nine
months ended September 30, 1999, an increase of $2.6 million, or 3.2%, compared
to $81.9 million for the nine months ended September 30, 1998. This increase was
due to increased business in the midwestern states.

      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.

      Reinsurance experience refunds were $3.1 million for the nine months ended
September 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.

      Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $77.6 million for the nine months ended September 30, 1999, a
decrease of $39.8 million, or 33.9%, compared to $117.4 million for the nine
months ended September 30, 1998. The decrease was primarily due to comparatively
high loss costs during the nine months ended September 30, 1998, including 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. 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 91.8% for the nine months ended
September 30, 1999, compared to 98.1% 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 professional liability book of business in the Midwest.




                                      -15-

<PAGE>   16

      Professional liability policy acquisition and underwriting expenses were
$19.8 million for the nine months ended September 30, 1999, an increase of $1.6
million, or 9.0%, compared to policy acquisition and underwriting expenses of
$18.2 million for the same period of 1998. As a percentage of premiums earned,
the underwriting expense ratio increased to 23.5% for the nine months ended
September 30, 1999, from 22.2% for the same period of 1998. The increase was
mainly attributable to $2.0 million in severance expenses incurred during the
nine months ended September 30, 1999 due to the resignation of three executives
that joined Professionals Group from PPTF. Excluding these severance expenses,
the expense ratio was 21.1% for the nine months ended September 30, 1999.

Personal Lines Insurance Operations:

      Personal lines net premiums written were $52.9 million for the nine months
ended September 30, 1999, compared to $31.6 million of net premiums written for
the nine months ended September 30, 1998 pursuant to the then existing quota
share reinsurance relationship with MEEMIC. Personal lines net premiums earned
were $52.0 million for the nine months ended September 30, 1999, compared to
$31.6 million of net premiums earned for the nine months ended September 30,
1998 pursuant to the then existing quota share reinsurance relationship with
MEEMIC. The increase in both net premiums written and net premiums earned was
due to the acquisition of MEEMIC Holdings.

      Personal lines insurance incurred losses and loss adjustment expenses
totaled $32.8 million for the nine months ended September 30, 1999, an increase
of $10.5 million, or 47.3%, compared to $22.3 million for the same period of
1998 (pursuant to the then existing quota share reinsurance relationship with
MEEMIC). The increase in incurred losses and loss adjustment expenses was due to
the acquisition of MEEMIC Holdings. As a percentage of premiums earned, the
personal lines insurance incurred loss and loss adjustment expense ratio
decreased to 63.0% for the nine months ended September 30, 1999, compared to
70.4% for the same period of 1998. The decrease in the personal lines insurance
incurred loss and loss adjustment expense ratio was attributable to a reduction
in IBNR reserves recorded by Professionals Group related to the quota share
reinsurance agreement prior to the acquisition of MEEMIC Holdings.

      Personal lines policy acquisition and underwriting expenses were $13.4
million for the nine months ended September 30, 1999, an increase of $3.6
million, or 37.2%, compared to policy acquisition and underwriting expenses of
$9.8 million for the same period of 1998 (pursuant to the then existing quota
share reinsurance relationship with MEEMIC). The increase in policy acquisition
and underwriting expenses was due to the acquisition of MEEMIC Holdings.

General Insurance Operations:

      Net investment income, excluding realized investment gains, was $30.1
million for the nine months ended September 30, 1999, an increase of $0.9
million, or 3.2%, compared to net investment income of $29.2 million for the
nine months ended September 30, 1998. The increase reflects the addition of
MEEMIC's investment portfolio during the third quarter of 1999 due to the
acquisition of MEEMIC Holdings. The weighted average tax equivalent book yield
of the fixed maturity portfolio was 6.6% and 6.9% as of September 30, 1999 and
1998, respectively. Net realized investment gains were $2.6 million and $4.5
million during the nine months ended September 30, 1999 and 1998, respectively.
The significant amount of investment gains recorded in the first nine months of
1998 was attributable to the sale of a majority of the




                                      -16-
<PAGE>   17

Company's common stock portfolio due to the Company's desire to maximize
after-tax investment yield in 1998 and future years. Interest expense was $0.8
million and $1.0 million during the nine month periods ended September 30, 1999
and 1998, respectively. See "Liquidity and Capital Resources."

      The Company recorded $6.5 million in federal income tax expense for the
nine months ended September 30, 1999, compared to a $6.9 million tax benefit
during the same period in 1998 (due to the pretax loss generated). The effective
tax rate was 25.1% for the nine months ended September 30, 1999, compared to a
tax benefit rate of (40.5%) for the nine months ended September 30, 1998. The
Company's relatively low effective tax rate for the nine months ended September
30, 1999 was due primarily to an increase in the percentage of tax-exempt
municipal bonds held in 1999.

      Net income for the nine months ended September 30, 1999 was $19.6 million,
or $2.31 per diluted share on revenues of $172.3 million. This compares to a net
loss of $10.1 million, or a loss of $1.21 per diluted share on revenues of
$153.0 million, for the nine months ended September 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. Two significant items also
impacted net income for the nine months ended September 30, 1999. These items
were anticipated as a result of MEEMIC's conversion to a stock insurance
company. The first item was a one-time gain on early extinguishment of debt,
which increased net income by $1.3 million. The second item was the minority
interest related to MEEMIC Holdings' minority shareholders, which reduced net
income by $1.3 million. The minority interest reflects the 23% of MEEMIC
Holdings not owned by Professionals Group.

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 nine month
periods ended September 30, 1999 or 1998. As of September 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 September 30, 1999), and payable
quarterly (the "Credit Agreement"). As of September 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;




                                      -17-
<PAGE>   18

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
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 September 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 149,941 shares under this plan at an average
cost of $28.88 per share during the nine months ended September 30, 1999.

      On July 1, 1999, MEEMIC 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 77%, of the outstanding common stock of MEEMIC
Holdings, at a cost of $50.6 million. Of these shares, 2,302,209 shares were
acquired upon the conversion of a $21.5 million promissory note (plus accrued
interest of $1.5 million) previously issued by MEEMIC to ProNational. The
remaining 2,763,308 shares were purchased by ProNational for cash of $27.6
million. The excess of net assets acquired over cost was $19.6 million. This
acquisition was accounted for as a purchase. Beginning with the third quarter of
1999, the financial results of MEEMIC Holdings have been consolidated into the
financial results of the Company (see note 5 in the accompanying condensed
consolidated financial statements).

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:

      Professionals Group utilizes computerized information systems across its
entire operation. The inability of any of Professionals Group's systems to
recognize a date using "00" as the year 2000 could result in information system
errors or failures. Accordingly, Professionals Group has been working to resolve
the



                                      -18-
<PAGE>   19

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 Professionals Group,
Professionals Group currently believes that the costs incurred by it in
connection with its efforts to become Year 2000-compliant will not have a
material adverse impact on Professionals Group's operating results or financial
position.

      Professionals Group 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. As of September 30,
1999 management believes that Professionals Group's primary computerized
information systems are Year 2000-compliant.

      Although Professionals Group 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, Professionals Group continues to bear some risk related to the Year
2000 issue due to its voluntary interaction with other persons and entities not
affiliated with Professionals Group (e.g., vendors and customers) who must
address their own Year 2000 issues. For this reason, Professionals Group has
been monitoring the Year 2000 issues of certain third parties with which it
interacts. Professionals Group has asked such third parties to demonstrate, or
give some indication as to their ability to become Year 2000-compliant by
September 30, 1999. With respect to any third party who appears unlikely to
remedy its Year 2000 issues, Professionals Group 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 Professionals
Group'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 Professionals Group's operations, operating results or financial
position.

      Both internal and external resources have been utilized in Professionals
Group's efforts to become Year 2000-compliant. During 1998 and 1997,
approximately $160,000 and $150,000, respectively, of costs were incurred by
Professionals Group in connection with its efforts to become Year
2000-compliant. During the nine months ended September 30, 1999, approximately
$140,000 of costs were incurred by Professionals Group in connection with its
efforts to become Year 2000-compliant. The total costs of Professionals Group'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 Professionals Group's
efforts to become 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.

      MEEMIC's computer systems are also believed to be Year 2000-compliant. See
MEEMIC Holdings' Form 10-Q for the quarterly period ended September 30, 1999 for
a more complete discussion of MEEMIC's Year 2000 readiness.




                                      -19-

<PAGE>   20

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.

      As of September 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 and asset-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 ProNational's duration to a defined
range of 3.5 to 5.5 years and limiting MEEMIC's duration to a maximum of 300% of
the duration of MEEMIC's liabilities. 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 September 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 September 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>
Total portfolio value                      $844,868          $808,438          $772,831         $737,108          $704,081
                                      ==============     =============    ==============    =============    ==============
</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 interest 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.

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

<TABLE>
<CAPTION>
                                                                 Actual              Hypothetical Market
                                                                 Market                    Changes
                                                                 Value          ------------------------------
                                                                                    +10%             -10%
                                                               ------------     -------------    -------------

<S>                                                                 <C>               <C>              <C>
      Common stock (in thousands)                                   $4,326            $4,759           $3,893
                                                               ============     =============    =============
</TABLE>


      The table above summarizes the Company's equity price risk as of September
30, 1999 and shows the effects of a hypothetical 10% increase and 10% decrease
in the market prices as of September 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 September 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






                                      -21-
<PAGE>   22

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 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, as amended by a Current Report on Form 8-K/A (Amendment No. 1) filed
      September 13, 1999, disclosing (i) under Item 2 (Acquisition or
      Disposition of Assets) of Form 8-K the Company's acquisition of 77% of the
      outstanding common stock of MEEMIC Holdings, Inc., and (ii) under Item 7
      (Financial Statements, Pro Forma Financial Information and Exhibits) the
      required financial statements and pro forma financial information related
      to such acquisition.

               The Company filed a Current Report on Form 8-K dated August 27,
      1999 disclosing under Item 4 (Changes in Registrant's Certifying
      Accountant) of Form 8-K the Company's change in independent accountants
      from KPMG LLP to PricewaterhouseCoopers LLP as well as other items
      required to be disclosed under Item 4 when a registrant changes
      independent accountants.

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





                                      -22-

<PAGE>   23


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




                                      -23-


<PAGE>   24

                                 Exhibit Index

<TABLE>
<CAPTION>
Exhibit No.              Description
-----------              -----------
<S>                      <C>
   27                    Financial Data Schedule
</TABLE>