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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2000

OR

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

For the transition period from  to

Commission file number 001-14673

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MEEMIC Holdings, Inc.(Exact name of registrant as specified in its charter)

Michigan(State or other jurisdiction
of incorporation or organization)

38-3436541(I.R.S. Employer Identification No.)691 North Squirrel Road, Suite 100
Auburn Hills, Michigan(Address of principal executive offices)

48321(Zip Code)


Registrant's
telephone number, including area code: (888) 463-3642

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

The
number of shares outstanding of the registrant's common stock, no par value per share, as of August 9, 2000 was 6,599,500.

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-1-

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## 

TABLE OF CONTENTS

|         |  |                       |  |                                                                                                                                        |  | Page No.
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                       
|         |  | Item 1.               |  | Financial Statements                                                                                                                   |  |         
|         |  |                       |  | Condensed Consolidated Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999                                               |  | 3       
|         |  |                       |  | Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2000 and 1999 (Unaudited)               |  | 4       
|         |  |                       |  | Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2000 and 1999 (Unaudited) |  | 5       
|         |  |                       |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 (Unaudited)                            |  | 6       
|         |  |                       |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                       |  | 7-9     
|         |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                  |  | 10-13   
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                                             |  | 13-14   
|Part II. |  | OTHER INFORMATION     |  |                                                                                                                                       
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                                    |  | 15      
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                                                       |  | 15      
|         |  | Signatures            |  | 16                                                                                                                                    
|         |  |                       |  |                                                                                                                                        |  |         

-2-

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## 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MEEMIC Holdings, Inc.
and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                 |                                                                                                                                                                        | June 30, 2000
(Unaudited)                  |        | December 31, 1999 |        
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------------- | -------
|
|ASSETS                                                           |                                                                                                                                                                       
|Investments:                                                     |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 | Fixed maturities available for sale, at fair value (amortized cost of $166,972 and $160,112 in 2000 and 1999, respectively)                                            |                                            | $      | 164,452           |        
|                                                                 | Short-term investments, at cost, which approximates fair value                                                                                                         |                                            |        | 7,081             |        
|                                                                 | Real estate, at cost                                                                                                                                                   |                                            |        | 2,300             |        
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 |                                                                                                                                                                        | Total investments                          |        |                   | 173,833
|Cash                                                             |                                                                                                                                                                        |                                            | 7,551  |                   |        
|Premiums due from policyholders                                  |                                                                                                                                                                        |                                            | 6,034  |                   |        
|Amounts recoverable from reinsurers                              |                                                                                                                                                                        |                                            | 48,191 |                   |        
|Amounts recoverable from reinsurers, related party               |                                                                                                                                                                        |                                            | 8,785  |                   |        
|Accrued investment income                                        |                                                                                                                                                                        |                                            | 2,435  |                   |        
|Deferred federal income taxes                                    |                                                                                                                                                                        |                                            | 4,828  |                   |        
|Property and equipment, at cost, net of accumulated depreciation |                                                                                                                                                                        |                                            | 4,514  |                   |        
|Deferred policy acquisition costs                                |                                                                                                                                                                        |                                            | 2,799  |                   |        
|Intangible assets, net of amortization                           |                                                                                                                                                                        |                                            | 34,882 |                   |        
|Other assets                                                     |                                                                                                                                                                        |                                            | 829    |                   |        
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 |                                                                                                                                                                        | Total assets                               |        | $                 | 294,681
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|LIABILITIES AND SHAREHOLDERS' EQUITY                             |                                                                                                                                                                       
|Liabilities:                                                     |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 | Loss and loss adjustment expense reserves                                                                                                                              |                                            | $      | 104,761           |        
|                                                                 | Unearned premiums                                                                                                                                                      |                                            |        | 35,881            |        
|                                                                 | Payable related to acquisition                                                                                                                                         |                                            |        | 1,066             |        
|                                                                 | Accrued expenses and other liabilities                                                                                                                                 |                                            |        | 11,555            |        
|                                                                 | Accrued expenses and other liabilities, related party                                                                                                                  |                                            |        | 169               |        
|                                                                 | Premiums ceded payable                                                                                                                                                 |                                            |        | 5,520             |        
|                                                                 | Federal income taxes payable                                                                                                                                           |                                            |        | 746               |        
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 |                                                                                                                                                                        | Total liabilities                          |        |                   | 159,698
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|Shareholders' equity:                                            |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 | Common stock, no par value; 10,000,000 shares authorized; 6,599,500 shares issued and outstanding in 2000 and 1999                                                     |                                            |        | 65,295            |        
|                                                                 | Retained earnings                                                                                                                                                      |                                            |        | 71,326            |        
|                                                                 | Accumulated other comprehensive loss: Net unrealized depreciation on investments, net of deferred federal income taxes of $882 and $938 in 2000 and 1999, respectively |                                            |        | (1,638            | )      
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 |                                                                                                                                                                        | Total shareholders' equity                 |        |                   | 134,983
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        
|                                                                 |                                                                                                                                                                        | Total liabilities and shareholders' equity |        | $                 | 294,681
|                                                                 |                                                                                                                                                                        |                                            |        |                   |        

See the accompanying notes to the unaudited condensed consolidated financial statements.

-3-

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MEEMIC Holdings, Inc.
and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

|                                                                      |                                                                                                                                  | Three Months Ended
June 30,                  |                                                                           | Six Months Ended
June 30, |       
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------------------- | ------------------------- | ------
|
|
|Revenues and other income:                                            |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      | Premiums written                                                                                                                 |                                              | $                                                                         | 33,764                    |       
|                                                                      | Premiums ceded, related party                                                                                                    |                                              |                                                                           |                          |       
|                                                                      | Premiums ceded, other                                                                                                            |                                              |                                                                           | (2,268                    | )     
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  | Net premiums written                         |                                                                           |                           | 31,496
|                                                                      | Increase in unearned premiums, net of prepaid reinsurance premiums                                                               |                                              |                                                                           | (2,409                    | )     
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  | Net premiums earned                          |                                                                           |                           | 29,087
|                                                                      | Net investment income                                                                                                            |                                              |                                                                           | 2,573                     |       
|                                                                      | Net realized investment losses on fixed maturities                                                                               |                                              |                                                                           |                          |       
|                                                                      | Other income                                                                                                                     |                                              |                                                                           | 543                       |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  | Total revenues and other income              |                                                                           |                           | 32,203
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Expenses:                                                             |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      | Loss and loss adjustment expenses incurred, net                                                                                  |                                              |                                                                           | 18,227                    |       
|                                                                      | Policy acquisition and other underwriting expenses:                                                                              |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  | Policy acquisition and underwriting expenses |                                                                           |                           | 5,881 
|                                                                      |                                                                                                                                  | Ceding commissions, related party            |                                                                           |                           |      
|                                                                      |                                                                                                                                  | Management fees, related party               |                                                                           |                           | 100   
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  |                                              | 5,981                                                                     |                           |       
|                                                                      | Interest expense, related party                                                                                                  |                                              |                                                                           |                          |       
|                                                                      | Amortization expense                                                                                                             |                                              |                                                                           | 731                       |       
|                                                                      | Other expenses                                                                                                                   |                                              |                                                                           | 12                        |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  | Total expenses                               |                                                                           |                           | 24,951
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  |                                              | Income from operations before federal income taxes and extraordinary item |                           |       
|Federal income taxes                                                  |                                                                                                                                  |                                              | 2,124                                                                     |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  |                                              | Income before extraordinary item                                          |                           |       
|Extraordinary item:                                                   |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      | Early extinguishment of debt, net of federal income taxes of $89 and $66 for the three and six month periods ended June 30, 1999 |                                              |                                                                           |                          |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|                                                                      |                                                                                                                                  | Net income                                   |                                                                           | $                         | 5,128 
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Earnings per common sharebasic                                       |                                                                                                                                  |                                              |                                                                           |                           |       
|Income before extraordinary item per common sharebasic               |                                                                                                                                  | $                                            | 0.78                                                                      |                           |       
|Income per share attributable to extraordinary itembasic             |                                                                                                                                  |                                              |                                                                          |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Net income per common sharebasic                                     |                                                                                                                                  | $                                            | 0.78                                                                      |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Earnings per common shareassuming dilution                           |                                                                                                                                  |                                              |                                                                           |                           |       
|Income before extraordinary item per common shareassuming dilution   |                                                                                                                                  | $                                            | 0.76                                                                      |                           |       
|Income per share attributable to extraordinary itemassuming dilution |                                                                                                                                  |                                              |                                                                          |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Net income per common shareassuming dilution                         |                                                                                                                                  | $                                            | 0.76                                                                      |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Weighted average shares outstandingbasic                             |                                                                                                                                  |                                              | 6,599,500                                                                 |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       
|Weighted average shares outstandingassuming dilution                 |                                                                                                                                  |                                              | 6,705,128                                                                 |                           |       
|                                                                      |                                                                                                                                  |                                              |                                                                           |                           |       

See the accompanying notes to the unaudited condensed consolidated financial statements.

-4-

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MEEMIC Holdings, Inc.
and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

|                      |                                                                                                                                                                                                                                                                            | Three Months Ended
June 30, |   | Six Months Ended
June 30, | 
|--------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | - | ------------------------- | 
|
|
|Comprehensive income: |                                                                                                                                                                                                                                                                            |                             |   |                           | 
|                      | Net income                                                                                                                                                                                                                                                                 |                             | $ | 5,128                     | 
|                      | Net unrealized appreciation (depreciation) on investments, net of reclassification adjustment and net of deferred federal income taxes of $135 and ($734) for three months in 2000 and 1999, respectively and $56
and ($994) for six months in 2000 and 1999, respectively |                             |   | 250                       | 
|                      |                                                                                                                                                                                                                                                                            |                             |   |                           | 
|                      | Comprehensive income                                                                                                                                                                                                                                                       |                             | $ | 5,378                     | 
|                      |                                                                                                                                                                                                                                                                            |                             |   |                           | 

See
the accompanying notes to the unaudited condensed consolidated financial statements.

-5-

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MEEMIC Holdings, Inc.
and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2000 and 1999 (Unaudited)

|                                                  |                                                                                   | 2000                                               |                                           | 1999                                      |      
|------------------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | -----
|
|Cash flows from operating activities:             |                                                                                   |                                                    |                                           |                                           |      
|                                                  | Net income                                                                        |                                                    | $                                         | 7,615                                     |      
|                                                  | Adjustments to reconcile net income to net cash provided by operating activities: |                                                    |                                           |                                           |      
|                                                  |                                                                                   | Depreciation and amortization                      |                                           |                                           | 2,081
|                                                  |                                                                                   | Realized losses on investments                     |                                           |                                           | 15   
|                                                  |                                                                                   | Net accretion of discount on investments           |                                           |                                           | 29   
|                                                  |                                                                                   | Deferred federal income taxes                      |                                           |                                           | (247 
|                                                  |                                                                                   | Extraordinary gain on early extinguishment of debt |                                           |                                           |     
|                                                  |                                                                                   | Changes in assets and liabilities:                 |                                           |                                           |      
|                                                  |                                                                                   |                                                    | Premiums due from policyholders           |                                           |      
|                                                  |                                                                                   |                                                    | Amounts due from reinsurers               |                                           |      
|                                                  |                                                                                   |                                                    | Accrued investment income                 |                                           |      
|                                                  |                                                                                   |                                                    | Deferred policy acquisition costs         |                                           |      
|                                                  |                                                                                   |                                                    | Other assets                              |                                           |      
|                                                  |                                                                                   |                                                    | Loss and loss adjustment expense reserves |                                           |      
|                                                  |                                                                                   |                                                    | Unearned premiums                         |                                           |      
|                                                  |                                                                                   |                                                    | Accrued expenses and other liabilities    |                                           |      
|                                                  |                                                                                   |                                                    | Federal income taxes payable              |                                           |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|                                                  |                                                                                   |                                                    |                                           | Net cash provided by operating activities |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|Cash flows from investing activities:             |                                                                                   |                                                    |                                           |                                           |      
|                                                  | Proceeds from sale or maturity of short-term investments                          |                                                    |                                           |                                          |      
|                                                  | Purchases of short-term investments                                               |                                                    |                                           | (7,081                                    | )    
|                                                  | Proceeds from maturity of securities available for sale                           |                                                    |                                           | 10,465                                    |      
|                                                  | Purchases of securities available for sale                                        |                                                    |                                           | (17,369                                   | )    
|                                                  | Proceeds from sales of property and equipment                                     |                                                    |                                           | 5                                         |      
|                                                  | Purchases of property and equipment                                               |                                                    |                                           | (1,953                                    | )    
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|                                                  |                                                                                   |                                                    |                                           | Net cash used in investing activities     |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|Cash flows from financing activities:             |                                                                                   |                                                    |                                           |                                           |      
|                                                  | Payment on payable related to acquisition                                         |                                                    |                                           |                                          |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|                                                  |                                                                                   |                                                    |                                           | Net cash used in financing activities     |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|Net (decrease) increase in cash                   |                                                                                   |                                                    | (1,228                                    | )                                         |      
|Cash, beginning of year                           |                                                                                   |                                                    | 8,779                                     |                                           |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|Cash, end of period                               |                                                                                   | $                                                  | 7,551                                     |                                           | $    
|                                                  |                                                                                   |                                                    |                                           |                                           |      
|Supplemental disclosure of cash flow information: |                                                                                   |                                                    |                                           |                                           |      
|                                                  | Federal income taxes paid                                                         |                                                    | $                                         | 3,788                                     |      
|                                                  |                                                                                   |                                                    |                                           |                                           |      

See
the accompanying notes to the unaudited condensed consolidated financial statements.

-6-

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MEEMIC Holdings, Inc.
and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) Description of Business

MEEMIC Holdings, Inc. and subsidiaries (the "Company") is an insurance holding company incorporated under Michigan law in October 1998. The
Company owns all of the issued and outstanding common stock of MEEMIC Insurance Company and MEEMIC Insurance Services Corp. MEEMIC Insurance Company ("MEEMIC") (formerly "Michigan Educational
Employees Mutual Insurance Company") is a property and casualty insurance company that operates as a single segment writing private passenger automobile, homeowner, boat and umbrella insurance
products primarily for educational employees and their immediate families exclusively in the State of Michigan. MEEMIC sells its insurance contracts through its sister company, MEEMIC Insurance
Services Corp., d/b/a MEIA Insurance Agency, which is the exclusive distributor of the Company's products.

(2) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been
prepared in accordance with generally accepted accounting principles ("GAAP") as required by Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they have not been audited and they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All
significant intercompany transactions have been eliminated in consolidation.

In
the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position and results of operations
have been included. The operating results for the three and six month periods ended June 30, 2000 are not necessarily indicative of the results to be expected for the year ending
December 31, 2000.

In
preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the
balance sheets and revenues and expenses for the periods then ended. Actual results may differ from those estimates.

The
most significant estimates that are susceptible to significant change in the near term relate to the determination of the losses and loss adjustment expense reserves. Although
considerable variability is inherent in these estimates, management believes that the reserves are adequate. The estimates are reviewed regularly and adjusted as necessary. Such adjustments are
reflected in current operations.

(3) Conversion

On July 1, 1999 MEEMIC converted from a mutual to a stock insurance company and became a wholly-owned subsidiary of the Company. Prior to the
conversion, the Company did not engage in any significant operations and did not have assets or liabilities. Net proceeds of the initial public offering of the Company were $42,973,000, before
offering costs of $700,000 and a donation to the MEEMIC Foundation of $500,000. MEEMIC policyholders subscribed for 1,533,983 shares of common stock in the Company. Also pursuant to the plan of
conversion, Professionals Group, Inc. converted a $21.5 million surplus note (plus accrued interest) of MEEMIC owned by ProNational Insurance Company ("ProNational"), a wholly-owned
subsidiary of Professionals Group, Inc. into 2,302,209 shares of the Company; and, Professionals Group, Inc. fulfilled its obligations as standby purchaser by purchasing an additional 2,763,308
shares in the subscription offering. As a result, Professionals Group, Inc. owns 77.3% of the issued and outstanding shares of the Company. Since July 2, 1999, the Company has been trading on
the Nasdaq National Market under the symbol "MEMH".

-7-

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As contemplated in the conversion plan, the amount payable relating to the agency acquisition was substantially repaid. In accordance with the purchase agreement, certain former
Agency shareholders elected to accelerate the individual amounts due to them related to the agency acquisition. Settlements of these early extinguishments of debt resulted in an extraordinary item
reflected on the income statement.

(4) Net Income Per Share

Net income per share is calculated by dividing net income per share by the weighted-average number of common shares outstanding. The weighted-average common
shares used for determining basic income per common share were 6,599,500 for the three and six months ended June 30, 2000. The effect of dilutive stock options added 105,628 shares and 100,982
shares for the three and six month periods ended June 30, 2000 for the computation of diluted income per common share.

(5) Related Party Transactions

As of July 1, 1999 MEEMIC entered into an Expense Allocation Agreement with ProNational covering indirect expenses and salaries of key company
personnel. Expenses related to this agreement were $231,000 for the six months ended June 30, 2000. Prior to July 1, 1999, Professionals Group, Inc. provided MEEMIC with information
system services and certain consulting services under a Management Services Agreement. Fees for such services were $1.1 million for the six months ended June 30, 1999. Also effective
July 1, 1999, MEEMIC cancelled its quota share reinsurance contract with ProNational to cede 40 percent of its net retained premiums on a quota share basis. Ceding commissions were
$3,406,000 and $6,754,000 for the three and six month periods ended June 30, 1999, respectively. Premiums earned ceded to ProNational were $11,352,000 and $22,513,000 for the three and six
months ended June 30, 1999, respectively. Losses and loss adjustment expenses incurred of $7,218,000 and $15,596,000 were ceded to ProNational for the three and six month periods ended
June 30, 1999, respectively.

On
June 23, 2000 Professionals Group, Inc. and Medical Assurance, Inc. jointly announced that they have signed a definitive agreement to consolidate the two companies.
The agreement is subject to required regulatory and shareholder approvals and is expected to be completed in early 2001. Under terms of the definitive agreement the two parties will form a new
holding company, Medical and Professionals Assurance, Inc., that will own all of the stock of Medical Assurance, Inc. and Professionals Group, Inc. Medical Assurance, Inc.,
ProNational and MEEMIC will continue to serve policyholders under the umbrella of the new holding company.

(6) Revenue Information

The Company operates as a single segment offering four insurance productspersonal automobile, homeowners, and beginning March 1, 2000, boat
and umbrella policies. All revenue is from unaffiliated

-8-

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customers. Direct premiums written and net premiums earned from each of these products is as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,2000

1999

2000

1999(In thousands)Direct premiums written:Personal automobile

$
29,255

$
28,165

$
56,476

$
54,122Homeowners


4,390


3,579


7,141


5,795Boat


81





87


Umbrella


38





42


Total

$
33,764

$
31,744

$
63,746

$
59,917Net premiums earned:Personal automobile

$
27,170

$
15,555

$
53,925

$
30,924Homeowners


1,904


1,478


3,752


2,846Boat


12





12


Umbrella


1





1


Total

$
29,087

$
17,033

$
57,690

$
33,770


-9-

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## 

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

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the notes thereto included
elsewhere in this document and in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The following discussion of the financial condition and
results of operations of the Company contains certain forward-looking statements relating to anticipated future financial conditions and operating results of the Company and its current business
plans. In the future, the financial condition and operating results of the Company could differ materially from those discussed herein and its current business plans could be altered in response to
market conditions and other factors beyond the Company's control. Important factors that could cause or contribute to such differences or changes include those discussed under "Item
1BusinessForward-Looking Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 1999.

Overview

We provide private passenger automobile, homeowners, boat and umbrella insurance primarily to educational employees and their immediate families in the State
of Michigan. We sell our insurance contracts through over 90 sales representatives associated with our insurance agency subsidiary, which is the exclusive distributor of our products. As of
June 30, 2000, we had 125,500 policies in force, representing 164,489 insured vehicles, 38,498 homes, 446 boats and 231 personal umbrella policies.

Financial ConditionJune 30, 2000 Compared to December 31, 1999

Our total assets increased to $294.7 million at June 30, 2000 from $274.6 million at December 31, 1999. The majority of our assets
consist of investments and cash, which together totaled $181.4 million at June 30, 2000 and $168.4 million at December 31, 1999. We primarily invest in high quality bonds
with the objective of providing stable income while maintaining liquidity at appropriate levels for our current and long-term requirements. Our portfolio consists primarily of government
bonds, municipal bonds, collateralized mortgage obligations, and investment grade corporate bonds. The modified duration of investments was 3.83 years at June 30, 2000 compared to
3.97 years at December 31, 1999. At June 30, 2000, the portfolio had an average Standard & Poor's security quality rating of AA (Excellent), and
there were no securities in default concerning the timely payment of interest and principal. Our gross unrealized gains and gross unrealized losses in investments in securities were $530,000 and
$3.0 million, respectively, at June 30, 2000 and $488,000 and $3.2 million, respectively, at December 31, 1999. These changes in our gross unrealized gains and losses are a
result of fluctuating bond market values due to volatility of interest rates in the marketplace.

Our
recorded estimates of loss and loss adjustment expense reserves were $104.8 million at June 30, 2000 compared to $96.0 million at December 31, 1999.
The $8.8 million increase in reserves at June 30, 2000 was due to general allowances for growth in the number of insured vehicles and homeowner policies in force.

Unearned
premiums were $35.9 million at June 30, 2000 and $34.1 million at December 31, 1999. The increase in unearned premiums at June 30, 2000
compared to December 31, 1999 of 5.3% is comparable to the growth in premiums written.

Other
liabilities were $19.1 million at June 30, 2000 and $17.3 million at December 31, 1999. The increase in 2000 for accrued expenses and other
liabilities is due primarily to the acquisition of a mail processing machine which was recorded as a capital lease.

Our
shareholders' equity increased $7.8 million to $135.0 million at June 30, 2000 from $127.2 million at December 31, 1999. This increase was due
to net income of $7.6 million, and an

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increase in other comprehensive income that consisted of unrealized gains on the investment portfolio of $183,000.

Results of OperationsThree and Six Months Ended June 30, 2000 Compared to Three and Six Months Ended June 30, 1999

Net income for the three and six months ended June 30, 2000 was $5.1 million and $7.6 million, respectively, compared to
$2.1 million and $3.2 million for the same periods in 1999. Overall, our income from operations before taxes and extraordinary item was $7.3 million and $11.0 million,
respectively, for the three and six months ended June 30, 2000 compared to $2.6 million and $4.6 million for the same
periods in 1999. The primary reasons for the increase in net income and income from operations before taxes and extraordinary item for the three month period ended June 30, 2000 compared to
1999 were the termination of the ProNational quota share agreement, the repayment of the $21.5 million surplus note and the cancellation of the management agreement with Professionals Group,
all of which occurred in July 1999 in connection with the conversion. We retained approximately $11.4 million and $22.5 million of premiums during the second quarter and first six
months of 2000, respectively, that would have been ceded to ProNational under the now cancelled quota share agreement. Expenses relating to interest on the surplus note and the management agreement
were $900,000 and $1.7 million for the second quarter and first six months of 1999, respectively, and are no longer being incurred in 2000.

Our
direct premiums written were $33.8 million and $63.7 million for the three and six months ended June 30, 2000, respectively, an increase of 6.4% compared to
comparable periods in 1999. Direct premiums written for automobile coverage were $29.3 million and $56.5 million for the three and six months ended June 30, 2000, respectively, an
increase of 3.9% and 4.4%, respectively, compared to the comparable periods of 1999. The increases in auto premiums reflect policyholder growth and an increase in the value of autos being insured. The
number of insured vehicles increased 2.3% to 164,489 at June 30, 2000 from 160,718 at June 30, 1999. Our homeowners business also continued to increase. Direct premiums written for
homeowners were $4.4 million and $7.1 million for the three and six months ended June 30, 2000, respectively, an increase of 22.7% and 23.2%, respectively, compared to the
comparable periods in 1999. The increases in homeowners premiums were due to policyholder growth and an increase in the value of homes being insured. The number of homeowner policies in force
increased 19.3% to 38,498 at June 30, 2000 from 32,261 at June 30, 1999. On March 1, 2000, we also began offering boat and umbrella policies, which contributed $119,000 to direct
written premiums for the three months ended June 30, 2000.

Net
premiums written were $31.5 million and $59.4 million for the three and six months ended June 30, 2000, respectively, an increase of 63.2% and 68.1%,
respectively, compared to the comparable periods in 1999. Net premiums earned were $29.1 million and $57.7 million for the three and six months ended June 30, 2000, respectively,
an increase of 70.8% compared to the comparable periods in 1999. The increases in net premiums written and net premiums earned were primarily due to the cancellation of the ProNational quota share
agreement and to the increase in direct premiums written.

Our
combined ratio was 83.2% and 88.7% for the three and six months ended June 30, 2000, respectively, compared to 90.0% and 92.1% for the three and six months ended
June 30, 1999, respectively. Overall, our net loss ratio for the three and six months ended June 30, 2000 was 55.6% and 59.2%, respectively, compared to 56.9% and 60.1% for the three and
six months ended June 30, 1999, respectively.

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Net loss ratios for the personal automobile and homeowners products were as follows:

For the Three Months
Ended June 30,

For the Six Months
Ended June 30,2000

1999

2000

1999Personal auto liability

31.0
%
46.8
%
45.1
%
45.5
%Personal auto physical damage

64.2
%
56.0
%
64.8
%
58.1
%Total personal auto

53.4
%
53.0
%
58.4
%
54.0
%Homeowners

86.8
%
97.9
%
70.8
%
126.3
%Overall loss ratio

55.6
%
56.9
%
59.2
%
60.1
%


The
auto physical damage loss ratios for second quarter and first six months of 2000 were higher than the same periods in 1999 due to a hailstorm in Michigan in the second quarter of
2000 and increased costs of auto repair parts. The increase in auto physical damage losses in 2000 was offset by a reduction in bodily injury claims, which resulted in consistent personal auto loss
ratios for the second quarter and first six months of 2000 compared to the same periods in 1999. The homeowners loss
ratios for the second quarter and first six months of 2000 were also affected by the hailstorm, but were still lower than the same periods in 1999 due to the more severe January 1999 winter
storm.

Policy
acquisition and underwriting expenses were $6.0 million and $12.8 million for the three and six months ended June 30, 2000, respectively, compared to
$3.7 million and $7.0 million for the same periods in 1999. The underwriting expenses ratio decreased to 20.6% for the three months ended June 30, 2000 from 21.7% for the three
months ended June 30, 1999. This decrease was due primarily to MEEMIC retaining an additional $11.4 million of net earned premiums from reinsurance contracts without incurring additional
fixed costs. The underwriting expenses ratio increased to 22.3% for the six months ended June 30, 2000 from 20.8% for the six months ended June 30, 1999. This increase was due to the
cancellation of the quota share agreement with ProNational whereby MEEMIC was receiving a commission for business ceded. The increase in underwriting expenses for 2000 from eliminating the ceding
commission was offset by a corresponding decrease in loss adjustment expenses for 2000, also as a result of the cancellation of the quota share agreement with ProNational.

Net
investment income, before interest expense and excluding realized investment gains, was $2.6 million and $5.1 million for the three and six months ended
June 30, 2000, respectively, compared to $1.8 million and $3.5 million for the three and six months ended June 30, 1999, respectively. These increases in investment income
were due to increases in invested assets from proceeds of the conversion and related subscription offering and positive cash flow from operations. Consistent with 1999, investment income for the three
and six months ended June 30, 2000 was earned primarily from interest income and not from realized capital gains and losses. The annualized tax equivalent total rate of return, which includes
both income and changes in market value of securities, was 7.62% and 7.30% for the three and six months ended June 30, 2000, respectively, compared to -0.17% and 1.84% for the three
and six months ended June 30, 1999, respectively. The increase of the returns in 2000 was due to higher interest rates and a lower level of security market value reductions. The weighted
average tax equivalent book yield of the fixed maturity portfolio was 6.90% for the six months ended June 30, 2000 compared to 6.70% for the same period in 1999.

Liquidity and Capital Resources

Our primary sources of cash are from premiums, investment income and proceeds from maturities of portfolio investments. The principal uses of cash are for
payments of claims, commissions, taxes, operating expenses and purchases of investments. Cash flow and liquidity are managed to meet anticipated short-term payment obligations, and to
maximize opportunities to earn interest on those funds not immediately required.

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Cash provided by operations for the six months ended June 30, 2000 was $14.7 million compared to $5.8 million for the six months ended June 30, 1999. The
$8.9 million increase was primarily due to retaining more of our premiums as a result of terminating the ProNational quota share agreement. The net decrease in cash overall was
$1.2 million for the six months ended June 30, 2000 compared to a net increase in cash of $1.7 million for the six months ended June 30, 1999. The $1.2 million
decrease in cash reflects a net increase in new investments from $14.7 million provided by operations and $1.2 million in previously uninvested funds.

Effects of New Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management of Market Risk

Market risk is the risk of loss due to adverse changes in market rates and prices. Our primary market risk exposure is to changes in interest rates. The active
management of interest rate risk is essential to our operations.

We
manage market risk through an investment committee consisting of senior officers of the Company, consultants and a professional investment advisor. The committee periodically
measures the impact that an instantaneous rise in interest rates would have on the fair value of securities. The committee also measures the duration, or interest rate sensitivity, of a fixed income
security or portfolio. Our
investment policy limits the duration of our portfolio to a maximum of 300% of the duration of our liabilities.

We
are vulnerable to interest rate risk because, like other insurance companies, we invest primarily in fixed maturity securities, which are interest-sensitive assets. We do not
invest in fixed maturity securities for trading purposes. Mortgage-backed securities, which make up approximately 20% of our investment portfolio, are particularly susceptible to interest rate
changes. We invest primarily in classes of mortgage-backed securities that are less subject to prepayment risk and, as a result, somewhat less susceptible to interest rate risk than other
mortgage-backed securities.

Our
fixed maturity investment portfolio was valued at $164 million at June 30, 2000 and had a duration of 3.83 years. The following table shows the effects of a
change in interest rate on the fair value and duration of our portfolio. We have assumed an immediate increase or decrease of 1% or 2%

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---

in interest rate. You should not consider this assumption or the values shown in the table to be a prediction of actual future results.

Change in Rates

Portfolio Value

Change in Value

Modified Duration(dollars in thousands)+2%

$
152,045

$
(12,407
)
3.82+1%

$
158,117

$
(6,335
)
3.900%

$
164,452




3.83-1%

$
170,819

$
6,367

3.55-2%

$
176,949

$
12,497

3.32


The
other financial instruments, which include cash, premiums due from reinsurers and accrued investment income, do not produce a significant difference in fair value when included in
the market risk analysis due to their short-term nature. The payable related to acquisition is not significantly affected by market risk as the discount rate for early extinguishment is
fixed.

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## 

PART II. OTHER INFORMATION

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

The Company held its Annual Meeting of Shareholders on May 24, 2000, at which time the shareholders considered and voted on the election of six
directors. Each of the nominees for director was an incumbent and all nominees were elected. The following table sets forth the number of shares voted for and withheld with respect to each nominee.

Nominee

For

WithheldVictor T. Adamo

6,178,964

3,000R. Kevin Clinton

6,178,964

3,000Annette E. Flood

6,178,714

3,250Thomas E. Hoeg

6,178,864

3,100Lynn M. Kalinowski

6,168,065

13,899James O. Wood

6,178,964

3,000


Item 6. Exhibits and Reports on Form 8-K

Exhibit Number

Exhibit Description27

Financial Data Schedule




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## 

SIGNATURES

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

|                     |  | MEEMIC HOLDINGS, INC.
|-------------------- |  | ---------------------
|DATE: August 9, 2000 |  | By:                  

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