##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549




---

FORM 10-Q

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE

SECURITIES EXCHANGE ACT OF 1934


For the period ended September 30, 1999


or

[   ]TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


Commission File Number 1-14094


Meadowbrook Insurance Group, Inc.



Michigan

(State of Incorporation)


38-2626206


(IRS Employer Identification No.)


26600 Telegraph Road, Southfield,
Michigan     48034

(Address, zip code of principal executive offices)


(248) 358-1100

(Registrants telephone number, including
area code)




---

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 aggregate number of shares of the Registrants Common
Stock, $.01 par value, outstanding on November 11, 1999
 was 8,511,655.





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TABLE OF CONTENTS



|                                                                                                                                                                                 |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|TABLE OF CONTENTS                                                                                                                                                               
|PART I -- FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS MEADOWBROOK INSURANCE GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME For the Nine Months Ended September 30,
|MEADOWBROOK INSURANCE GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME For the Quarter Ended September 30,                                                                
|MEADOWBROOK INSURANCE GROUP, INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Nine Months Ended September 30,                                                        
|CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Quarter Ended September 30,                                                                                              
|MEADOWBROOK INSURANCE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                          
|MEADOWBROOK INSURANCE GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the Nine Months Ended September 30,                                                        
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                      
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                      
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                      
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                      
|MANAGEMENT REPRESENTATION                                                                                                                                                       
|PART I -- FINANCIAL INFORMATION                                                                                                                                                 
|ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the Periods ended September 30, 1999 and 1998                                  
|PART II -- OTHER INFORMATION                                                                                                                                                    



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TABLE OF CONTENTS


|                                                           |  |  |    |                                                 |  |  |       | 
|---------------------------------------------------------- |  |  | -- | ----------------------------------------------- |  |  | ----- | 
|                                                           |  |  |    | Page                                           
|                                                           |  |  |    |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|PART I  FINANCIAL INFORMATION                             |  |  |    |                                                
|                                                          
|ITEM 1  FINANCIAL STATEMENTS                              |  |  |    |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | Condensed Consolidated Statements of Income     |  |  | 3-4   | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | Consolidated Statements of Comprehensive Income |  |  | 5     | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | Condensed Consolidated Balance Sheet            |  |  | 6     | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | Condensed Consolidated Statement of Cash Flows  |  |  | 7     | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | Notes to Consolidated Financial Statements      |  |  | 8-12  | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | Management Representation                       |  |  | 13    | 
|                                                          
|ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL |  |  |    |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |  |    | CONDITION AND RESULTS OF OPERATIONS             |  |  | 14-20 | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|PART II  OTHER INFORMATION                                |  |  |    |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|ITEM 1  LEGAL PROCEEDINGS                                 |  |  | 21 |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|ITEM 5  OTHER EVENTS                                      |  |  | 21 |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K                  |  |  | 22 |                                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|SIGNATURES                                                 |  |  | 23 |                                                

2



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##### Table of Contents








PART I  FINANCIAL INFORMATION


ITEM 1


FINANCIAL STATEMENTS


MEADOWBROOK INSURANCE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Nine Months Ended September 30,


(Unaudited)


(in thousands)


|                           |                                                                                                   |                                   |        |         |         |   |     |         |        | 
|-------------------------- | ------------------------------------------------------------------------------------------------- | --------------------------------- | ------ | ------- | ------- | - | --- | ------- | ------ | 
|                           |                                                                                                   | 1999                              |        | 1998   
|                           |                                                                                                   |                                   |        |        
|Revenues:                  |                                                                                                   |                                   |        |         |         |   |     |        
|                          
|                          
|                          
|                          
|                           | Net premium earned                                                                                |                                   | $      | 88,482  |         |   | $   | 63,798  |       
|                          
|                          
|                          
|                          
|                           | Net commissions and fees                                                                          |                                   |        | 27,503  |         |   |     | 23,739  |       
|                          
|                          
|                          
|                          
|                           | Net investment income                                                                             |                                   |        | 8,340   |         |   |     | 7,016   |       
|                           |                                                                                                   |                                   |        |         |         |   |     |        
|                           |                                                                                                   | Total Revenues                    |        |         | 124,325 |   |     |         | 94,553 | 
|                          
|                          
|                          
|                          
|                          
|Expenses:                  |                                                                                                   |                                   |        |         |         |   |     |        
|                          
|                          
|                          
|                          
|                           | Loss and loss adjustment expenses                                                                 |                                   |        | 139,014 |         |   |     | 79,978  |       
|                          
|                          
|                          
|                          
|                           | Reinsurance recoveries                                                                            |                                   |        | (73,327 | )       |   |     | (38,904 | )     
|                           |                                                                                                   |                                   |        |         |         |   |     |        
|                           | Net loss and loss adjustment expenses                                                             |                                   |        | 65,687  |         |   |     | 41,074  |       
|                          
|                          
|                          
|                          
|                          
|                           | Other operating expenses                                                                          |                                   |        | 30,211  |         |   |     | 21,331  |       
|                          
|                          
|                          
|                          
|                           | Salaries and employee benefits                                                                    |                                   |        | 31,576  |         |   |     | 26,666  |       
|                          
|                          
|                          
|                          
|                           | Interest on notes payable                                                                         |                                   |        | 2,498   |         |   |     | 1,228   |       
|                          
|                          
|                          
|                          
|                           | Amortization of intangible assets                                                                 |                                   |        | 1,155   |         |   |     | 728     |       
|                           |                                                                                                   |                                   |        |         |         |   |     |        
|                           |                                                                                                   | Total Expenses                    |        |         | 131,127 |   |     |         | 91,027 | 
|                          
|                          
|                          
|                          
|                          
|                           |                                                                                                   | (Loss) income before income taxes |        |         | (6,802  | ) |     |         | 3,526  | 
|                          
|                          
|                          
|                          
|                          
|Federal income tax benefit |                                                                                                   |                                   | (3,140 | )       |         |   | (54 | )      
|                          
|                          
|                          
|                          
|                          
|                           | Net (loss) income before cumulative effect of accounting
	change                                  |                                   | $      | (3,662  | )       |   | $   | 3,580   |       
|                           |                                                                                                   |                                   |        |         |         |   |     |        
|                          
|                           | Cumulative effect of accounting for insurance related
	assessments, net of deferred taxes of $879 |                                   |        | (1,706  | )       |   |     |        |       
|                           |                                                                                                   |                                   |        |         |         |   |     |        
|                          
|                           | Net (loss) income                                                                                 |                                   | $      | (5,368  | )       |   | $   | 3,580   |       
|                           |                                                                                                   |                                   |        |         |         |   |     |        
|                          
|Per Share Data:            |                                                                                                   |                                   |        |         |         |   |     |        
|                          
|                          
|                          
|                          
|                           | Basic                                                                                             |                                   | $      | (0.62   | )       |   | $   | 0.41    |       
|                          
|                          
|                          
|                          
|                           | Diluted                                                                                           |                                   | $      | (0.62   | )       |   | $   | 0.39    |       

The accompanying notes are an integral part of the
consolidated financial statements.

3



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##### Table of Contents








MEADOWBROOK INSURANCE GROUP, INC.


CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Quarter Ended September 30,


(Unaudited)


(in thousands)


|                           |                                       |                          |        |         |        |   |        |         |        |  
|-------------------------- | ------------------------------------- | ------------------------ | ------ | ------- | ------ | - | ------ | ------- | ------ | -
|                           |                                       | 1999                     |        | 1998   
|                           |                                       |                          |        |        
|Revenues:                  |                                       |                          |        |         |        |   |        |        
|                          
|                          
|                          
|                          
|                           | Net premium earned                    |                          | $      | 32,541  |        |   | $      | 23,785  |       
|                          
|                          
|                          
|                          
|                           | Net commissions and fees              |                          |        | 9,307   |        |   |        | 7,460   |       
|                          
|                          
|                          
|                          
|                           | Net investment income                 |                          |        | 2,863   |        |   |        | 2,531   |       
|                           |                                       |                          |        |         |        |   |        |        
|                           |                                       | Total Revenues           |        |         | 44,711 |   |        |         | 33,776 |  
|                          
|                          
|                          
|                          
|                          
|Expenses:                  |                                       |                          |        |         |        |   |        |        
|                          
|                          
|                          
|                          
|                           | Loss and loss adjustment expenses     |                          |        | 50,784  |        |   |        | 34,138  |       
|                          
|                          
|                          
|                          
|                           | Reinsurance recoveries                |                          |        | (26,800 | )      |   |        | (14,564 | )     
|                           |                                       |                          |        |         |        |   |        |        
|                           | Net loss and loss adjustment expenses |                          |        | 23,984  |        |   |        | 19,574  |       
|                          
|                          
|                          
|                          
|                          
|                           | Other operating expenses              |                          |        | 13,325  |        |   |        | 9,345   |       
|                          
|                          
|                          
|                          
|                           | Salaries and employee benefits        |                          |        | 11,517  |        |   |        | 10,021  |       
|                          
|                          
|                          
|                          
|                           | Interest on notes payable             |                          |        | 1,037   |        |   |        | 600     |       
|                          
|                          
|                          
|                          
|                           | Amortization of intangible assets     |                          |        | 472     |        |   |        | 361     |       
|                           |                                       |                          |        |         |        |   |        |        
|                           |                                       | Total Expenses           |        |         | 50,335 |   |        |         | 39,901 |  
|                          
|                          
|                          
|                          
|                          
|                           |                                       | Loss before income taxes |        |         | (5,624 | ) |        |         | (6,125 | )
|                          
|                          
|                          
|                          
|                          
|Federal income tax benefit |                                       |                          | (1,768 | )       |        |   | (2,559 | )      
|                          
|                          
|                          
|                          
|                          
|                           | Net loss                              |                          | $      | (3,856  | )      |   | $      | (3,566  | )     
|                           |                                       |                          |        |         |        |   |        |        
|                          
|Per Share Data:            |                                       |                          |        |         |        |   |        |        
|                          
|                          
|                          
|                          
|                           | Basic                                 |                          | $      | (0.45   | )      |   | $      | (0.41   | )     
|                          
|                          
|                          
|                          
|                           | Diluted                               |                          | $      | (0.45   | )      |   | $      | (0.39   | )     

The accompanying notes are an integral part of the
consolidated financial statements.

4



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##### Table of Contents








MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30,


(Unaudited)


(in thousands)


|                         |                                       |                                  |                                                                     |   |  |        |  
|------------------------ | ------------------------------------- | -------------------------------- | ------------------------------------------------------------------- | - |  | ------ | -
|                         |                                       | 1999                            
|                         |                                       |                                 
|Net Loss                 |                                       | $                                | (5,368                                                              | )
|                        
|                        
|                        
|                        
|                         | Other comprehensive loss, net of tax: |                                  |                                                                     |   | 
|                        
|                        
|                        
|                        
|                         |                                       | Unrealized losses on securities: |                                                                     |   |  |       
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Unrealized holding losses arising during the period                 |   |  | (4,824 | )
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Less: reclassification adjustment for gains included in net
	income |   |  | (23    | )
|                         |                                       |                                  |                                                                     |  
|Other comprehensive loss |                                       |                                  | (4,847                                                              | )
|                         |                                       |                                  |                                                                     |  
|Comprehensive loss       |                                       | $                                | (10,215                                                             | )
|                         |                                       |                                  |                                                                     |  

|                           |                                         |                                 |                                                                     |  |  |       |  
|-------------------------- | --------------------------------------- | ------------------------------- | ------------------------------------------------------------------- |  |  | ----- | -
|                           |                                         | 1998                           
|                           |                                         |                                
|Net Income                 |                                         | $                               | 3,580                                                               | 
|                          
|                          
|                          
|                          
|                           | Other comprehensive income, net of tax: |                                 |                                                                     |  | 
|                          
|                          
|                          
|                          
|                           |                                         | Unrealized gains on securities: |                                                                     |  |  |      
|                          
|                          
|                          
|                          
|                           |                                         |                                 | Unrealized holding gains arising during the period                  |  |  | 1,350 |  
|                          
|                          
|                          
|                          
|                           |                                         |                                 | Less: reclassification adjustment for gains included in net
	income |  |  | (43   | )
|                           |                                         |                                 |                                                                     | 
|Other comprehensive income |                                         |                                 | 1,307                                                               | 
|                           |                                         |                                 |                                                                     | 
|Comprehensive income       |                                         | $                               | 4,887                                                               | 
|                           |                                         |                                 |                                                                     | 






CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


For the Quarter Ended September 30,


(Unaudited)


(in thousands)


|                         |                                       |                                  |                                                                      |   |        |    | 
|------------------------ | ------------------------------------- | -------------------------------- | -------------------------------------------------------------------- | - | ------ | -- | 
|                         |                                       | 1999                            
|                         |                                       |                                 
|Net loss                 |                                       | $                                | (3,856                                                               | )
|                        
|                        
|                        
|                        
|                         | Other comprehensive loss, net of tax: |                                  |                                                                      |   |       
|                        
|                        
|                        
|                        
|                         |                                       | Unrealized losses on securities: |                                                                      |   | (1,249 | ) 
|                         |                                       |                                  | Unrealized holding losses arising during the period                  |   |        |    | 
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Plus: reclassification adjustment for losses included in
	net income |   |        | 25 | 
|                         |                                       |                                  |                                                                      |  
|Other comprehensive loss |                                       |                                  | (1,224                                                               | )
|                         |                                       |                                  |                                                                      |  
|Comprehensive loss       |                                       | $                                | (5,080                                                               | )
|                         |                                       |                                  |                                                                      |  

|                           |                                         |                                 |                                                                      |   |  |       | 
|-------------------------- | --------------------------------------- | ------------------------------- | -------------------------------------------------------------------- | - |  | ----- | 
|                           |                                         | 1998                           
|                           |                                         |                                
|Net Loss                   |                                         | $                               | (3,566                                                               | )
|                          
|                          
|                          
|                          
|                           | Other comprehensive income, net of tax: |                                 |                                                                      |   | 
|                          
|                          
|                          
|                          
|                           |                                         | Unrealized gains on securities: |                                                                      |   |  |      
|                          
|                          
|                          
|                          
|                           |                                         |                                 | Unrealized holding gains arising during the period                   |   |  | 1,564 | 
|                          
|                          
|                          
|                          
|                           |                                         |                                 | Plus: reclassification adjustment for losses included in net
	income |   |  | 4     | 
|                           |                                         |                                 |                                                                      |  
|Other comprehensive income |                                         |                                 | 1,568                                                                |  
|                           |                                         |                                 |                                                                      |  
|Comprehensive loss         |                                         | $                               | (1,998                                                               | )
|                           |                                         |                                 |                                                                      |  

The accompanying notes are an integral part of the
consolidated financial statements.

5



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##### Table of Contents








MEADOWBROOK INSURANCE GROUP, INC.


CONDENSED CONSOLIDATED BALANCE SHEET

ASSETS

(in thousands)


|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |         |         | 
|--------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ------------ | ------- | - | ------- | ------- | ------- | 
|                                                                                                                      |                                                                                    | (Unaudited)                                     |         |             
|                                                                                                                      |                                                                                    | September 30,                                   |         | December 31,
|                                                                                                                      |                                                                                    | 1999                                            |         | 1998        
|                                                                                                                      |                                                                                    |                                                 |         |             
|Investments:                                                                                                          |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Debt securities available for sale, at fair value
	(cost of $182,015 and $167,163) |                                                 | $       | 180,609      |         |   | $       | 172,617 |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Equity securities available for sale, at fair value
	(cost of $16,812 and $7,585)  |                                                 |         | 16,746       |         |   |         | 7,898   |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Cash and cash equivalents                                                                                             |                                                                                    |                                                 | 25,919  |              |         |   | 20,510  |        
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                      |                                                                                    | Total investments and cash and cash equivalents |         |              | 223,274 |   |         |         | 201,025 | 
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Premiums and agent balances receivable                                                                                |                                                                                    |                                                 | 72,235  |              |         |   | 63,487  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Reinsurance recoverable on:                                                                                           |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Paid losses                                                                        |                                                 |         | 13,933       |         |   |         | 10,912  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Unpaid losses                                                                      |                                                 |         | 100,182      |         |   |         | 64,590  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Deferred policy acquisition costs                                                                                     |                                                                                    |                                                 | 10,735  |              |         |   | 8,900   |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Prepaid reinsurance premiums                                                                                          |                                                                                    |                                                 | 40,503  |              |         |   | 36,336  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Intangible assets                                                                                                     |                                                                                    |                                                 | 34,079  |              |         |   | 22,055  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Other assets                                                                                                          |                                                                                    |                                                 | 42,983  |              |         |   | 32,770  |        
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                      |                                                                                    | Total assets                                    |         | $            | 537,924 |   |         | $       | 440,075 | 
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                 
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Liabilities:                                                                                                          |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Reserve for losses and loss adjustment expenses                                                                       |                                                                                    | $                                               | 217,083 |              |         | $ | 148,844 |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Unearned premiums                                                                                                     |                                                                                    |                                                 | 88,783  |              |         |   | 77,948  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Notes payable, bank                                                                                                   |                                                                                    |                                                 | 57,999  |              |         |   | 40,953  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Other liabilities                                                                                                     |                                                                                    |                                                 | 67,524  |              |         |   | 52,763  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Contingencies and commitments                                                                                         |                                                                                    |                                                 |        |              |         |   |        |        
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|Total liabilities                                                                                                     |                                                                                    |                                                 | 431,389 |              |         |   | 320,508 |        
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                     
|Shareholders Equity:                                                                                                 |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Common stock, $.01 stated value; authorized 20,000,000 shares;
	8,511,655 and 8,663,434 shares issued and outstanding |                                                                                    |                                                 | 85      |              |         |   | 87      |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Additional paid-in capital                                                                                            |                                                                                    |                                                 | 67,902  |              |         |   | 71,190  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Retained earnings                                                                                                     |                                                                                    |                                                 | 40,256  |              |         |   | 45,105  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Note receivable from officer                                                                                          |                                                                                    |                                                 | (707    | )            |         |   | (661    | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Accumulated other comprehensive income                                                                                |                                                                                    |                                                 | (1,001  | )            |         |   | 3,846   |        
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                      |                                                                                    | Total shareholders equity                      |         |              | 106,535 |   |         |         | 119,567 | 
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        
|                                                                                                                      |                                                                                    | Total liabilities and shareholders equity      |         | $            | 537,924 |   |         | $       | 440,075 | 
|                                                                                                                      |                                                                                    |                                                 |         |              |         |   |         |        

The accompanying notes are an integral part of the
consolidated financial statements.

6



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MEADOWBROOK INSURANCE GROUP, INC.


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30,


(Unaudited)


(in thousands)


|                                               |                                                            |                                           |        |         |         |   |        |         |         |  
|---------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------- | -
|                                               |                                                            | 1999                                      |        | 1998   
|                                               |                                                            |                                           |        |        
|Net cash provided by operating activities      |                                                            | $                                         | 20,565 |         |         | $ | 17,168 |        
|                                               |                                                            |                                           |        |         |         |   |        |        
|                                              
|Cash flows from investing activities:          |                                                            |                                           |        |         |         |   |        |        
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase of debt securities available for sale             |                                           |        | (55,008 | )       |   |        | (33,669 | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase of equity securities available for sale           |                                           |        | (10,600 | )       |   |        | (4,239  | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from sale of debt securities available for sale   |                                           |        | 51,328  |         |   |        | 21,883  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from sale of equity securities available for sale |                                           |        | 1,341   |         |   |        | 3,615   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Net capital proceeds (expenditures)                        |                                           |        | (3,151  | )       |   |        | (3,724  | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase of subsidiaries                                   |                                           |        | (16,593 | )       |   |        | (18,373 | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Net cash of acquired subsidiaries                          |                                           |        | 3,795   |         |   |        | 23,019  |        
|                                               |                                                            |                                           |        |         |         |   |        |        
|                                              
|                                               |                                                            | Net cash used in investing activities     |        |         | (28,888 | ) |        |         | (11,488 | )
|                                               |                                                            |                                           |        |         |         |   |        |        
|                                              
|Cash flows from financing activities:          |                                                            |                                           |        |         |         |   |        |        
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from bank loan                                    |                                           |        | 16,594  |         |   |        | 22,772  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Dividends paid on common stock                             |                                           |        | (775    | )       |   |        | (521    | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Retirement of common stock                                 |                                           |        | (2,087  | )       |   |        | (1,227  | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Issuance of common stock                                   |                                           |        |        |         |   |        | 4       |        
|                                               |                                                            |                                           |        |         |         |   |        |        
|                                              
|                                               |                                                            | Net cash provided by financing activities |        |         | 13,732  |   |        |         | 21,028  |  
|                                               |                                                            |                                           |        |         |         |   |        |        
|                                              
|Increase in cash and cash equivalents          |                                                            |                                           | 5,409  |         |         |   | 26,708 |        
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                            |                                           | 20,510 |         |         |   | 20,215 |        
|                                               |                                                            |                                           |        |         |         |   |        |        
|Cash and cash equivalents, end of period       |                                                            | $                                         | 25,919 |         |         | $ | 46,923 |        
|                                               |                                                            |                                           |        |         |         |   |        |        

The accompanying notes are an integral part of the
consolidated financial statements.

7



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1  Earnings Per Share (EPS)

|                                                                 |  |                     |           |      |  |   |           | 
|---------------------------------------------------------------- |  | ------------------- | --------- | ---- |  | - | --------- | 
|                                                                 |  |                    
|                                                                 |  | For the Nine Months
|                                                                 |  | Ended September 30,
|                                                                 |  |                    
|                                                                 |  |                    
|                                                                 |  | (Unaudited)        
|                                                                 |  |                    
|                                                                 |  | 1999                |           | 1998
|                                                                 |  |                     |           |     
|Basic EPS                                                        |  |                     |           |      |  |   |           | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Net (loss) income before cumulative effect of accounting
	change |  | $                   | (0.43     | )    |  | $ | 0.41      | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Cumulative effect of accounting change                           |  | $                   | (0.19     | )    |  |   |          | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Net (loss) income                                                |  | $                   | (0.62     | )    |  | $ | 0.41      | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted EPS                                                      |  |                     |           |      |  |   |           | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Net (loss) income before cumulative effect of accounting
	change |  | $                   | (0.43     | )    |  | $ | 0.39      | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Cumulative effect of accounting change                           |  | $                   | (0.19     | )    |  |   |          | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Net (loss) income                                                |  | $                   | (0.62     | )    |  | $ | 0.39      | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Weighted average of number of common shares outstanding:         |  |                     |           |      |  |   |           | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Basic                                                            |  |                     | 8,614,016 |      |  |   | 8,693,843 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted                                                          |  |                     | 8,614,016 |      |  |   | 9,065,665 | 

8



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1  Earnings Per Share (EPS)

|                                                       |  |                       |           |      |  |   |           |  
|------------------------------------------------------ |  | --------------------- | --------- | ---- |  | - | --------- | -
|                                                       |  |                      
|                                                       |  | For the Quarter Ended
|                                                       |  | September 30,        
|                                                       |  |                      
|                                                       |  |                      
|                                                       |  | (Unaudited)          
|                                                       |  |                      
|                                                       |  | 1999                  |           | 1998
|                                                       |  |                       |           |     
|Basic EPS                                              |  |                       |           |      |  |   |           |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Net loss before cumulative effect of accounting change |  | $                     | (0.45     | )    |  | $ | (0.41     | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Cumulative effect of accounting change                 |  |                       |          |      |  |   |          |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Net loss                                               |  | $                     | (0.45     | )    |  | $ | (0.41     | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Diluted EPS                                            |  |                       |           |      |  |   |           |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Net loss before cumulative effect of accounting change |  | $                     | (0.45     | )    |  | $ | (0.39     | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Cumulative effect of accounting change                 |  |                       |          |      |  |   |          |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Net loss                                               |  | $                     | (0.45     | )    |  | $ | (0.39     | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Weighted average number of common shares outstanding:  |  |                       |           |      |  |   |           |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Basic                                                  |  |                       | 8,553,479 |      |  |   | 8,732,043 |  
|                                                      
|                                                      
|                                                      
|                                                      
|Diluted                                                |  |                       | 8,553,479 |      |  |   | 9,049,201 |  

In 1999, the basic and diluted weighted average number of common
shares outstanding are the same due to the fact that the
inclusion of options in the calculation have an anti-dilutive
effect on earnings per share.

Note 2  Commitments & Contingencies

On June 26, 1995, two shareholders and an officer of a
former agent (the Primary Plaintiffs) of Star
Insurance Company (Star), and a former spouse of one
shareholder and an employee of the former agent (the
Individual Plaintiffs) initiated legal proceedings
against, among others, Star and Meadowbrook Inc.
(Meadowbrook ) in the District Court for Washoe
County, Reno, Nevada. All of the plaintiffs requested injunctive
relief, compensatory damages, punitive and exemplary damages, and
 attorneys fees in an unspecified amount. The Nevada
Insurance Department revoked the license of one of the Primary
Plaintiffs and one of the Individual Plaintiffs and denied
further licensing of the other Primary Plaintiffs.

9



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Meadowbrook Insurance Group, Inc. (the Company)


Meadowbrook and Star vigorously defended themselves and filed
counter-claims against the Primary Individual Plaintiffs. On
April 1, 1998, the Court issued an Order dismissing all
claims of the Primary Plaintiffs with prejudice.

On January 12, 1999, the remaining claims of the Individual
Plaintiffs and the counterclaims of Meadowbrook and Star against
the Primary and Individual Plaintiffs were tried. On
February 2, 1999, the jury returned a verdict in favor of
Meadowbrook and Star against the Primary Plaintiffs and
Individual Plaintiffs. In addition, the jury found against the
Individual Plaintiffs and in favor of Meadowbrook and Star on
their remaining claims. On April 21, 1999, the Court found
in favor of Meadowbrook and Star and against the Primary and
Individual Plaintiffs on all outstanding claims for equitable
relief. It is not expected that the outcome of this litigation
will have a material impact on the financial condition of the
Company.

A Final Judgment has been entered with the Court. All Plaintiffs
have filed an appeal with the Nevada Supreme Court.

Note 3  Cumulative Effect of Accounting Change

As described in our 1998 Annual report, the Accounting Standards
Executive Committee of the American Institute of Certified Public
 Accountants issued Statement of Position 97-3,
Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments (SOP 97-3).
SOP 97-3 provides guidance for determining when an entity
should recognize a liability for guaranty-fund and other
insurance-related assessments, how to measure that liability, and
 when an asset may be recognized for the recovery of such
assessments through premium tax offsets or policy surcharges. As
required, the Company adopted SOP 97-3 in the quarter ended
March 31, 1999. The adoption of SOP 97-3 resulted in an
 after-tax, non-cash $1.7 million, or $0.19 per share,
cumulative effect accounting charge.

Note 4  Segment Information

Effective December 31, 1998, the Company adopted Statement
Financial Accounting Standards No. 131, Disclosures
About Segments of an Enterprise and Related Information.
Upon adoption, the Company defined its operations as agency
operations and program business operations based upon differences
 in products and services. The separate financial information of
these segments is consistent with the way results are regularly
evaluated by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. Intersegment
revenue is eliminated in consolidation.

10



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##### Table of Contents








NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Program Business

The program business segment is engaged primarily in developing
and managing alternative market risk management programs for
defined client groups and their members. This includes providing
services, such as reinsurance brokering, risk management
consulting, claims handling, and administrative services, along
with various types of property and casualty insurance coverage,
including workers compensation, general liability and
commercial multiple peril. Insurance coverage is primarily
provided to associations or similar groups of members, commonly
referred to as programs. A program is a set of coverages and
services tailored to meet the specific requirements of a group of
 clients.

Agency Operations

The agency segment was formed in 1955 as Meadowbrooks
original business. The insurance agency places principally
commercial insurance, as well as personal property, casualty,
life and accident and health insurance, with more than 50
insurance carriers from which it earns commission income. The
agency has grown to be one of the largest agencies in Michigan
and, with recent acquisitions has expanded into Florida and
California.

The following table set forth the segment results (in thousands):

|               |                                    |                     |   |         |   |  |   |        |  
|-------------- | ---------------------------------- | ------------------- | - | ------- | - |  | - | ------ | -
|               |                                    |                    
|               |                                    | For the Nine Months
|               |                                    | Ended September 30,
|               |                                    |                    
|               |                                    | 1999                |   | 1998   
|               |                                    |                     |   |        
|Revenues       |                                    |                     |   |         |   |  |   |       
|              
|              
|              
|              
|               | Net earned premiums                |                     | $ | 88,482  |   |  | $ | 63,798 |  
|              
|              
|              
|              
|               | Management fees                    |                     |   | 16,046  |   |  |   | 13,217 |  
|              
|              
|              
|              
|               | Investment income                  |                     |   | 8,340   |   |  |   | 7,016  |  
|               |                                    |                     |   |         |   |  |   |       
|               | Program business segment           |                     |   | 112,868 |   |  |   | 84,031 |  
|              
|              
|              
|              
|               | Agency operations                  |                     |   | 11,963  |   |  |   | 10,903 |  
|              
|              
|              
|              
|               | Intersegment revenues              |                     |   | (506    | ) |  |   | (381   | )
|               |                                    |                     |   |         |   |  |   |       
|              
|               | Consolidated revenue               |                     |   | 124,325 |   |  |   | 94,553 |  
|               |                                    |                     |   |         |   |  |   |       
|Pre-tax Income |                                    |                     |   |         |   |  |   |       
|              
|              
|              
|              
|               | Program business                   |                     |   | (7,515  | ) |  |   | 2,232  |  
|              
|              
|              
|              
|               | Agency operations                  |                     |   | 2,310   |   |  |   | 2,347  |  
|              
|              
|              
|              
|               | Reconciling items                  |                     |   | (1,597  | ) |  |   | (1,053 | )
|               |                                    |                     |   |         |   |  |   |       
|               | Consolidated pre-tax (loss)/income |                     | $ | (6,802  | ) |  | $ | 3,526  |  
|               |                                    |                     |   |         |   |  |   |       

11



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##### Table of Contents








NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


|               |                                    |                     |   |        |   |  |   |        |  
|-------------- | ---------------------------------- | ------------------- | - | ------ | - |  | - | ------ | -
|               |                                    |                    
|               |                                    | For the Quarter    
|               |                                    | Ended September 30,
|               |                                    |                    
|               |                                    | 1999                |   | 1998  
|               |                                    |                     |   |       
|Revenues       |                                    |                     |   |        |   |  |   |       
|              
|              
|              
|              
|               | Net earned premiums                |                     | $ | 32,541 |   |  | $ | 23,785 |  
|              
|              
|              
|              
|               | Management fees                    |                     |   | 6,136  |   |  |   | 3,944  |  
|              
|              
|              
|              
|               | Investment income                  |                     |   | 2,863  |   |  |   | 2,534  |  
|               |                                    |                     |   |        |   |  |   |       
|               | Program business segment           |                     |   | 41,540 |   |  |   | 30,263 |  
|              
|              
|              
|              
|               | Agency operations                  |                     |   | 3,275  |   |  |   | 3,623  |  
|              
|              
|              
|              
|               | Other revenues                     |                     |   |       |   |  |   |       |  
|              
|              
|              
|              
|               | Intersegment revenue               |                     |   | (104   | ) |  |   | (110   | )
|               |                                    |                     |   |        |   |  |   |       
|               | Consolidated revenue               |                     |   | 44,711 |   |  |   | 33,776 |  
|               |                                    |                     |   |        |   |  |   |       
|              
|Pre-tax Income |                                    |                     |   |        |   |  |   |       
|              
|              
|              
|              
|               | Program business                   |                     |   | (5,003 | ) |  |   | (6,155 | )
|              
|              
|              
|              
|               | Agency operations                  |                     |   | 70     |   |  |   | 409    |  
|              
|              
|              
|              
|               | Reconciling items                  |                     |   | (691   | ) |  |   | (379   | )
|               |                                    |                     |   |        |   |  |   |       
|               | Consolidated pre-tax (loss)/income |                     | $ | (5,624 | ) |  | $ | (6,125 | )
|               |                                    |                     |   |        |   |  |   |       

The pre-tax income reconciling items represent other expenses
relating to the holding company which are not allocated among the
 segments.

Note 5  Line of credit

On August 3, 1999 the Company renegotiated its credit line
with a two bank group. The facility was increased from
$50 million to $60 million. The new expiration date is
August 1, 2002. Under the terms of the line the Company and
its subsidiaries have the option to borrow at prime-based or
eurocurrency-based rates. Prime-based loans are at prime or prime
 less .50% depending on a pricing grid based on certain ratios.
Eurocurrency-based loans are at the eurocurrency rate plus a
variable spread depending on the pricing grid.

Note 6  Acquisition

On August 6, 1999, the Company purchased for cash the assets
 of TPA Associates, Inc. and all the outstanding stock of TPA
Insurance Agency, Inc. and Preferred Holdings, Inc., which also
included all of the outstanding stock of Preferred Insurance
Company, Ltd., and Preferred Holdings, Inc.s ownership of
approximately 94% of the outstanding stock of Preferred Insurance
 Company, Ltd., (collectively, TPA). This transaction
 was accounted for as a purchase. This acquisition is not
expected to have a material impact on the Companys
financial position or results of operations. This transaction
resulted in goodwill of $12.7 million.

12



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##### Table of Contents








MANAGEMENT REPRESENTATION


In the opinion of management, the financial statements reflect
all adjustments of a normal recurring nature necessary for a fair
 presentation of the interim periods. Preparation of financial
statements under GAAP requires management to make estimates.
Actual results could differ from those estimates. Interim results
 are not necessarily indicative of results expected for the
entire year. These financial statements should be read in
conjunction with the Companys 1998 Form 10-K, as filed
 with the Securities and Exchange Commission.

Certain statements made by the Company in this document may
constitute forward-looking statements. Actual results could
differ materially from those projected in forward-looking
statements. These forward-looking statements involve risk and
uncertainties including, but not limited to the following: the
frequency and severity of claims; uncertainties inherent in
reserve estimates; catastrophic events; a change in the demand
for, pricing of, or supply of reinsurance or insurance; increased
 competitive pressure; changing rates of inflation; general
economic conditions; and Year 2000 expense estimates.

13



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##### Table of Contents








PART I  FINANCIAL INFORMATION







ITEM 2


MANAGEMENTS DISCUSSION AND ANALYSIS OF


FINANCIAL CONDITION AND RESULTS OF OPERATIONS


For the Periods ended September 30, 1999 and 1998


(Tables are in Thousands)


Results of Operations

For the Nine Months Ended September 30, 1999 and 1998

The Company reported a net loss for the nine months ended
September 30, 1999 of $5.4 million, a decrease of
$9 million from the $3.6 million in income for the same
 period in 1998. Net loss before cumulative effect of accounting
change was $3.7 million in 1999 compared to net income of
$3.6 million in 1998. Results in 1999 reflect reserve
strengthening of $2.7 million, a reduction in anticipated
recoveries on the discontinued surety bond program of
$2.0 million, higher losses and loss adjustment expenses in
the current accident year, and higher operating expenses. These
items were somewhat offset by growth in revenues of 31%.

Revenue

Revenue for the nine months ended September 30, 1999 was
$124.3 million, an increase of $29.7 million, or 31.5%,
 from 1998s revenue of $94.6 million.

|                                   |  |                   |         |      |  |   |        | 
|---------------------------------- |  | ----------------- | ------- | ---- |  | - | ------ | 
|                                   |  |                  
|                                   |  | Nine Months Ended
|                                   |  | September 30,    
|                                   |  |                  
|                                   |  | 1999              |         | 1998
|                                   |  |                   |         |     
|(In Thousands)                     |  |                   |         |      |  |   |        | 
|                                  
|                                  
|                                  
|                                  
|Risk management fees & commissions |  | $                 | 27,503  |      |  | $ | 23,739 | 
|                                  
|                                  
|                                  
|                                  
|Net earned premiums                |  |                   | 88,482  |      |  |   | 63,798 | 
|                                  
|                                  
|                                  
|                                  
|Net investment income              |  |                   | 8,340   |      |  |   | 7,016  | 
|                                   |  |                   |         |      |  |   |        | 
|                                   |  | $                 | 124,325 |      |  | $ | 94,553 | 
|                                   |  |                   |         |      |  |   |        | 

14



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##### Table of Contents



Risk Management Fees and Commissions

Net fees and commission income increased by $3.8 million, or
 15.9%, to $27.5 million for the nine months ended
September 30, 1999 from $23.7 million for the same
period in 1998. The $3.8 million increase is primarily the
result of additional revenue the TPA acquisition made this
quarter and the Villari & Associates, Inc.
(Villari) and Florida Preferred Administrators, Inc.
(Florida Preferred) acquisitions made during 1998.

Insurance Premiums

The Companys gross premiums written increased
$33.0 million, or 24.4%, to $168.5 million for the nine
 months ended September 30, 1999 from $135.5 million
for the same period in 1998. Existing business contributed
$44.1 million, which includes $18.1 million related to
the Ameritrust Insurance Corporation (Ameritrust)
acquisition. New business contributed $14.0 million, which
includes $2.1 million related to the TPA acquisition. This
growth was somewhat offset by expected reductions of
$7.0 million in gross written premium on the fronted,
non-risk surety bond program, $6.3 million of gross written
premium in the terminated workers compensation program in
the Southeast, and $5.6 million from the cancellation of a
non risk-bearing program. The remaining variance reflects changes
 in residual market premium and retrospective premium.

Net premiums written increased by $26.2 million, or 40.6%,
to $90.8 million for the nine months ended
September 30, 1999 from $64.6 million for the same
period in 1998. Existing business grew by $22.3 million,
which included $16.4 million from the Ameritrust
acquisition, offset slightly by decreases in other programs. New
business contributed $8.2 million of the increase, which
includes $2.1 million related to the TPA acquisition. This
growth was somewhat offset by the selective reduction in
unprofitable programs. The greater increase of net over gross
written premium reflects an increased focus on fronted programs
or programs in which the Company retains limited risk. Excluding
the impact of discontinued fronted programs, gross written
premium associated with fronted programs represented 20% of gross
 written premium. This compares to 12% in 1998.

Net earned premiums increased by $24.7 million, or 38.7%, to
 $88.5 million for the nine months ended September 30,
1999 from $63.8 million for the same period in 1998.
Existing business grew by $21.0 million, which included
$12.4 million associated with Ameritrust. New business
accounted for $5.0 million of the increase, which includes
$2.1 million related to the TPA acquisition. This growth was
 somewhat offset by the selective reduction in unprofitable
programs, as well as increased reinsurance costs.

Net Investment Income

Net investment income increased by $1.3 million or 18.9%, to
 $8.3 million for the nine months ended September 30,
1999 from $7.0 million for the same period in the prior
year. This increase represents an increase in invested assets of
24.7% that is primarily related to the acquisition of Ameritrust.
 The pre-tax weighted average yield

15



---



##### Table of Contents



on invested assets was 5.2% and 5.3% for the first nine months of
 1999 and 1998, respectively. The Companys investment
philosophy is one of maximizing after-tax earnings through
significant investments in tax-exempt bonds. Accordingly, the
weighted average yield on invested assets on an after-tax basis
was 4.4% in 1999, which is consistent with the prior year of
4.6%.

Expenses

Total expenses increased $40.1 million, or 44.1%, to
$131.1 million at September 30, 1999 from
$91.0 million for the same period in 1998.

|                               |  |                   |         |      |  |   |        | 
|------------------------------ |  | ----------------- | ------- | ---- |  | - | ------ | 
|                               |  |                  
|                               |  | Nine Months Ended
|                               |  | September 30,    
|                               |  |                  
|                               |  | 1999              |         | 1998
|                               |  |                   |         |     
|(In Thousands)                 |  |                   |         |      |  |   |        | 
|                              
|                              
|                              
|                              
|Losses and LAE incurred        |  | $                 | 65,687  |      |  | $ | 41,074 | 
|                              
|                              
|                              
|                              
|Salaries and employee benefits |  |                   | 31,576  |      |  |   | 26,666 | 
|                              
|                              
|                              
|                              
|Other operating expenses       |  |                   | 30,211  |      |  |   | 21,331 | 
|                              
|                              
|                              
|                              
|Amortization                   |  |                   | 1,155   |      |  |   | 728    | 
|                              
|                              
|                              
|                              
|Interest on notes payable      |  |                   | 2,498   |      |  |   | 1,228  | 
|                               |  |                   |         |      |  |   |        | 
|                               |  | $                 | 131,127 |      |  | $ | 91,027 | 
|                               |  |                   |         |      |  |   |        | 

Losses and Loss Adjustment Expenses (LAE) Incurred

Losses and LAE incurred increased by $24.6 million, or
59.9%, to $65.7 million for the nine months ended
September 30, 1999 from $41.1 million for the same
period in 1998. The GAAP loss and loss adjustment expense ratio
increased to 77.0% in 1999 from 68.1% in 1998. The prior year
reflects a $7.3 million one-time charge for reserve
strengthening. Adjusting for this one-time charge, the loss and
LAE ratio would have been 56.7% in 1998. The increase in the
ratio this year reflects $2.7 million of reserve
strengthening, a $2.0 million reduction in anticipated
recoveries of the discontinued surety bond program, and
$2.2 million relating to claims activity on previously
discontinued programs. Adjusting for these items, the loss and
LAE ratio would have been 69.2%. The remaining increase in the
ratio reflects higher than expected claims activity this quarter
and adverse development of claims in the 1999 accident year.

Salaries and Employee Benefits

Salaries and employee benefits increased by $4.9 million, or
 18.4%, to $31.6 million for the nine months ended
September 30, 1999 compared to $26.7 million for the
same period in 1998. The increase is primarily the result of
additional staff from the Villari, Ameritrust and TPA
acquisitions.

Other Operating Expenses

Other operating expenses increased by $8.9 million, or
41.6%, to $30.2 million for the nine months ended
September 30, 1999 from $21.3 million for the same
period in 1998. Analyzing expenses utilizing GAAP insurance
ratios, the expense ratio increased to 33.7% in 1999, from 31.9%
in 1998. This reflects increases in insurance related assessments
 and commissions and was somewhat offset by the

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impact of fees received for programs in which the Company retains
 limited risk.

Interest Expense

Interest expense of $2.5 million and $1.2 million was
recorded for the nine months ended September 30, 1999 and
1998, respectively. This interest related to utilization of the
Companys line of credit. The increase in interest expense
is a result of a higher average daily loan balance during the
first three quarters of 1999 as compared to 1998. The Company
drew on this line of credit during 1998 and 1999 primarily to
meet acquisition cash flow needs, as well as to fund stock
repurchases.

Amortization Expense

Amortization expense of $1.2 million and $728,000 was
recorded for the nine months ended September 30, 1999 and
1998, respectively. This increase in amortization is related to
the goodwill recorded on the various acquisitions made since
May 1998.

Federal Income Taxes

The provision for income taxes was a $3.1 million benefit
for the nine months ended September 30, 1999, compared to a
$54,000 benefit in 1998. Historically, the Companys tax
rates are significantly lower than the 34% corporate rate due to
its heavily tax-exempt investment portfolio. The decrease in
income taxes and the effective rate in 1999 are the result of the
 higher level of tax-exempt interest in proportion to total
underwriting results experienced this year. It is expected that
the effective tax rate will return to historical levels as the
Companys underwriting results become profitable. Tax exempt
 securities at September 30, 1999 represented 59.0% of the
portfolio, down from 77.9% at year-end. The Company is shifting
its portfolio to taxable securities, by reinvesting cash from
operations and maturing securities and is completing an analysis
of additional sales and purchases to re-balance the fixed income
portfolio aimed to maximize after-tax investment yields and
minimize current outflow related to taxes.

For the Three Months Ended September 30, 1999 and 1998

The net loss for the quarter ended September 30, 1999 was
$3.9 million, as compared to a $3.6 million loss for
the same period in 1998.

Revenue

Revenue increased by $10.9 million, or 32.4%, to
$44.7 million for the quarter ended September 30, 1999
compared to $33.8 million for the same period in 1998.

Earned premium increased by $8.7 million, or 36.8%, to
$32.5 million in the third quarter of 1999 from
$23.8 million in the same period of 1998. Earned premium
from

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existing business grew by $5.2 million and new business
generated an additional $3.7 million in premium
($2.1 million from the TPA acquisition).

Net fees and commissions increased by $1.8 million, or
24.8%, to $9.3 million in the third quarter of 1999 from
$7.5 million in the same period of 1998. The increase in net
 fee and commissions for the quarter is mainly the result of
additional fee revenue generated from the Villari and TPA
acquisitions.

Net investment income increased by $332,000, or 13.1%, to
$2.9 million in the third quarter of 1999 from
$2.5 million in the same period of 1998. Investment income
has grown as a result of increases in cash and invested assets.

Expenses

Expenses increased by $10.4 million, or 26.1%, to
$50.3 million for the quarter ended September 30, 1999
compared to $39.9 million for the same period in 1998.

Net losses and LAE increased by $4.4 million, or 22.5%, from
 $19.6 million to $24.0 million in the third quarter of
 1999. The third quarter GAAP loss and loss adjustment expense
ratio decreased to 75.9% from 86.2%. The 1998 results reflect
reserve strengthening of $7.3. The 1999 results reflect higher
than expected incurred losses in the quarter which include:



| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Adverse development on a previously discontinued workers
	compensation program                                                                                            
|
| |  | The cumulative effect in the calendar quarter caused by higher
	than expected loss ratios and the selection of even higher
	expected loss ratios for the 1999 accident year
|
| |  | Moderate adverse loss development on prior accident years                                                                                                                  
|
| |  | The effects of industry-wide pricing pressures                                                                                                                             

Excluding the cumulative impact of these items, the loss and loss
 expense ratio would have been approximately 62 percent. It
is expected that the 1999 accident year results will continue to
be adversely effected by pricing pressure, and therefore we
expect the fourth quarter loss and loss expense ratio to improve
only slightly over the reported third quarter results.

On a consolidated basis, other operating expenses increased
$4.0 million dollars, or 42.6 percent, to
$13.3 million dollars in third quarter 1999. The expense
ratio of the insurance operations was 39.6 percent in third
quarter 1999, compared to 34.2 percent in 1998. This
increase reflects:



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | The impact of higher contingent commissions in several profitable
	 programs that showed continued improvement over 1998 results
|
| |  | Increased expenses associated with insurance company assessments                                                                
|
| |  | Increased expenses incurred in the run-off of a previously
	discontinued program                                                
|
| |  | Reduction in the capitalization of acquisition costs due to
	increases in anticipated loss and loss adjustment expenses         
|
| |  | Other, principally amortization of deferred acquisition costs.                                                                  

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In addition, increases in expenditures to advance our information
 technology service capabilities contributed to the increase in
expenses over 1998. The expense ratio is expected to improve
slightly in the fourth quarter.

Salaries and benefits increased $1.5 million, or 14.9%, to
$11.5 million in the third quarter of 1999 from
$10.0 million in 1998. This increase is consistent with last
 quarters increase. Excluding the impact of the 1998
acquisitions, salaries and benefits would have increased only
6.8% from third quarter 1998, reflecting minor staff reductions
and stricter hiring controls implemented as part of the 1999
budgeting process and more efficient approaches to processing
business.

Federal Income Taxes

The provision for income taxes was a $1.8 million benefit
for the quarter ended September 30, 1999, as compared to a
$2.6 million benefit in the prior year. As stated within the
 year-to-date results, the decrease in income taxes and the
effective rate in 1999 resulted from the higher level of
tax-exempt interest in proportion to total underwriting results
experienced this quarter.

Liquidity and Capital Resources

The principal sources of funds for the Company are insurance
premiums, investment income, proceeds from the maturity and sale
of invested assets, risk management fees and agency commissions.
Funds are primarily used for the payment of claims, commissions,
salaries and employee benefits, and other operating expenses. In
addition, the Company has a high volume of intercompany
transactions due to the payment of management fees by the
insurance subsidiaries to the risk management subsidiaries, which
 are subject to regulatory approval by state insurance
departments.

Cash flow provided by operations for the nine months ended
September 30, 1999 was $20.5 million as compared to
$17.2 million for the same period in 1998. Cash flow has
significantly improved from the prior year since 1998 reflected
unusually high cash outflow relating to payment of 1997
contingent commissions and premium taxes and assessments made in
the first half of 1998. At September 30, 1999, the Company held
$25.9 million in cash and cash equivalents.

The Company has an unsecured line of credit totaling
$60.0 million, of which $54.5 million was outstanding
at June 30, 1999, $41.0 million was outstanding at
December 31, 1998 and $34.2 million at
September 30, 1998. The line expires on August 1, 2002.
 The Company drew on this line of credit primarily to meet
acquisition cash flow needs.

Shareholders equity was $106.5 million, or $12.52 per
share, at September 30, 1999, compared to
$119.6 million, or $13.80 per share, at December 31,
1998. The decrease primarily represents unrealized depreciation
on debt securities, the net loss, as well as the effect of
Meadowbrooks stock repurchase program initiated in the
fourth quarter of 1998. Excluding the impact of 1999 unrealized

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gains on available-for-sale securities, book value per share at
September 30, 1999 was $12.63 compared to $13.36 at
December 31, 1998.

Impact of Year 2000

The total estimated cost of the required actions necessary to
become Year 2000 compliant is currently estimated at
$6.0 million.

Amounts expected to be spent in 1999 total about
$2.2 million, including about $1.1 million in outside
vendor costs and another $1.1 million in internal
reprogramming and assessment costs. The amount spent through
September 30, 1999 was about $1,800,000.

The Company has implemented a comprehensive program to identify
and remediate potential Year 2000 problems in its business
information systems. Additionally, the Company has communicated
with its vendors and agents to assess and reduce the risk that
the Companys operations could be adversely affected by the
failure of these third parties to adequately address the Year
2000 issue. The Companys remediation, testing and
assessment efforts have been substantially completed. Based on
its activities to date, the Company believes that a substantial
majority (95% or greater) of its critical business systems are
Year 2000 compliant and that any remaining critical business
systems will be Year 2000 compliant by year-end. The Company has
also developed contingency plans to minimize any business
disruption which could potentially be caused by third parties,
such as utility companies, that are critical to the
Companys operations. In view of the foregoing, the Company
does not currently anticipate that it will experience a
significant disruption of its business operations as a result of
the Year 2000 issue.

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PART II  OTHER INFORMATION


Item 1.  Legal Proceedings

On June 26, 1995, two shareholders and an officer of a
former agent (the Primary Plaintiffs) of Star, and a
former spouse of one shareholder and an employee of the former
agent (the Individual Plaintiffs) initiated legal
proceedings against, among others, Star and Meadowbrook in the
District Court for Washoe County, Reno, Nevada. All of the
plaintiffs requested injunctive relief, compensatory damages,
punitive and exemplary damages, and attorneys fees in an
unspecified amount. The Nevada Insurance Department revoked the
license of one of the Primary Plaintiffs and one of the
Individual Plaintiffs and denied further licensing of the other
Primary Plaintiffs.

Meadowbrook and Star vigorously defended itself and filed
counter-claims against the Primary Individual Plaintiffs. On
April 1, 1998, the Court issued an Order dismissing all
claims of the Primary Plaintiffs with prejudice.

On January 12, 1999, the remaining claims of the Individual
Plaintiffs and the counterclaims of Meadowbrook and Star against
the Primary and Individual Plaintiffs were tried. On
February 2, 1999, the jury returned a verdict in favor of
Meadowbrook and Star against the Primary Plaintiffs and
Individual Plaintiffs. In addition, the jury found against the
Individual Plaintiffs and in favor of Meadowbrook and Star on
their remaining claims. On April 21, 1999, the Court found
in favor of Meadowbrook and Star and against the Primary and
Individual Plaintiffs on all outstanding claims for equitable
relief. It is not expected that the outcome of this litigation
will have a material impact on the financial condition of the
Company.

A Final Judgment has been entered with the Court. All Plaintiffs
have filed an appeal with the Nevada Supreme Court.

Item 5.  Other Events

Rights Agreement Approved

Effective as of September 20, 1999, pursuant to a Rights
Agreement (the Rights Agreement) between the Company
and First Chicago Trust Company of New York, a New York
corporation, as Rights Agent (the Rights Agent), the
Companys Board of Directors (the Board)
declared a dividend of one right (a Right) to
purchase one one-hundredth of a share of the Companys
Series A Preferred Stock (the Series A
Preferred) for each outstanding share of Common Stock
(Common Shares) of the Company. The dividend was
payable on October 15, 1999 (the Record Date) to
 stockholders of record as of the close of business on that date.
 Each Right entitles the registered holder to purchase from the
Company, upon the occurrence of a certain event or events as
described below, one one-hundredth of a share of Series A
Preferred at an exercise price of $80 (the Purchase
Price), subject to adjustment. In addition, under certain
circumstances described more fully herein, the Rights may become
exercisable for a number of Common Shares having a value equal to
 two times the Purchase Price and/or common stock of certain
acquiring companies having a value equal to two times the
Purchase Price. Moreover, under certain circumstances each Right
may be exchanged by the Board at an exchange rate of one share of
 Common Stock (or a fraction of a share of the Preferred Stock
having equivalent market value) per Right. Under certain
circumstances the Company may redeem the Rights in whole, but not
 in part, at a price of $.01 per Right.

Certain Anti-Takeover Effects

The Rights approved by the Board are designed to protect and
maximize the value of the outstanding equity interests in the
Company in the event of an unsolicited attempt by an acquiror to
take over the Company in a manner or on terms not approved by the
 Board. Unsolicited takeover attempts frequently include coercive
 tactics designed to deprive the Board and the Companys
stockholders of any real opportunity to determine the destiny of
the Company.

The Rights have been declared by the Board in order to deter such
 tactics, including a gradual accumulation in the open market of
a 15% or greater position to be followed by a merger or a partial
 or two-tier tender offer that does not treat all stockholders
equally. These tactics can operate to unfairly pressure
stockholders, force them out of their investment and deprive them
 of the full value of their shares in the Company.

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The Rights are not intended to prevent a takeover of the Company
and will not do so. The Rights may be redeemed by the Company at
$.01 per Right within ten days (or on such later date as may be
determined by a majority of the Continuing Directors (as defined
in the Rights Agreement)) after the accumulation of 15% or more
of the Companys Common Shares by a single acquiror or
group. Accordingly, the Rights should not interfere with any
merger or business combination approved by the Board.

However, the Rights may have the effect of rendering more
difficult or discouraging an acquisition of the Company deemed
undesirable by the Board. The Rights may cause substantial
dilution to a person or group that attempts to acquire the
Company on terms or in a manner not approved by the Board, except
 pursuant to an offer conditioned upon the negation, purchase or
redemption of the Rights. As a result, while the Rights may
provide the Board with leverage to obtain a higher price from a
potential acquiror, they may also prevent or deter offers not
approved by the Board, and therefore deprive stockholders,
without providing them with the opportunity to vote thereon, of
the benefits of offers which may be at a higher price than the
current market price of the Companys Common Shares. In
addition, assuming an active trading market in the Rights
themselves does not develop, stockholders with lesser financial
means might not be able to take full economic advantage of the
Rights. Further, the implementation of a rights plan may heighten
 the susceptibility of the Company to greenmail by stockholders
who threaten to acquire a sufficient equity position to pass the
Rights triggering threshold, although the Board can respond
 to any such action by redeeming the Rights at $.01 per Right.

Issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The
 issuance of the Rights themselves has no dilutive effect, will
not affect reported earnings per share, should not be taxable to
the Company or to its stockholders, and will not change the way
in which the Companys Common Shares are presently traded.
The Companys Board believes that the Rights represent a
sound and reasonable means of addressing the complex issues of
corporate policy created by the current takeover environment.

Item 6.  Exhibits and Reports on Form 8K

(A)  The following documents are filed as part of this
Report:

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 11   |             |  | Statement re-computation of per share earnings                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 27   |             |  | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99.1 |             |  | Rights Agreement, dated as of September 20, 1999, by and
	between Meadowbrook Insurance Group, Inc. and First Chicago Trust
	 Company of New York, including the Certificate of Designation,
	the form of Rights Certificate and the Summary of Rights attached
	 thereto as Exhibits A, B and C, respectively (incorporated
	by reference to Exhibit 99.1 to the Companys
	Form 8-A filed with the Securities and Exchange Commission
	on October 12, 1999).

(B)  Reports on Form 8-K  None

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SIGNATURES

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

|    |  |                                  
|--- |  | ---------------------------------
|    |  | Meadowbrook Insurance Group, Inc.
|   
|By: |  | /s/ William J. Lohmeyer          
|    |  |                                  
|    |  | Sr. Vice President and           
|    |  | Chief Financial Officer          

Dated: November 12, 1999

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INDEX TO EXHIBITS

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 11   |             |  | Statement re-computation of per share earnings                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 27   |             |  | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99.1 |             |  | Rights Agreement, dated as of September 20, 1999, by and
	between Meadowbrook Insurance Group, Inc. and First Chicago Trust
	 Company of New York, including the Certificate of Designation,
	the form of Rights Certificate and the Summary of Rights attached
	 thereto as Exhibits A, B and C, respectively (incorporated
	by reference to Exhibit 99.1 to the Companys
	Form 8-A filed with the Securities and Exchange Commission
	on October 12, 1999).