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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549



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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000

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.

(Exact name of registrant as specified in its charter)

|                                  |  |                                             
|--------------------------------- |  | --------------------------------------------
|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)



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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         No

The aggregate number of shares of the Registrants Common Stock, $.01 par
value, outstanding on November 10, 2000 was 8,512,008.

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TABLE OF CONTENTS



|                                                                                               |                                         |  |  |  |  |  |  | 
|---------------------------------------------------------------------------------------------- | --------------------------------------- |  |  |  |  |  |  | 
|PART 1  FINANCIAL INFORMATION                                                                
|ITEM 1  FINANCIAL STATEMENTS                                                                 
|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                    
|CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                                
|CONDENSED CONSOLIDATED BALANCE SHEET                                                          
|CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                                
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT REPRESENTATION                      
|ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II  OTHER INFORMATION                                                                   
|                                                                                               | ITEM 1. LEGAL PROCEEDINGS              
|                                                                                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
|SIGNATURES                                                                                    
|Amendment to the Articles of Incorporation                                                    
|Amendment to Revolving Credit Agreement                                                       
|Statement re computation of per share earnings                                                
|Financial Data Schedule                                                                       



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TABLE OF CONTENTS

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|--------------------------------------------- | ---------- | ------------------------------------- | ------------------------------------------------------------------------ | -- | ----- | ---- | 
|                                              |            |                                       |                                                                          |    | PAGE 
|PART I  FINANCIAL INFORMATION               
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|ITEM 1 - FINANCIAL STATEMENTS                
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|                                              |            |                                       | Condensed Consolidated Statement of Income                               |    |       | 3-4  | 
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|                                              |            |                                       | Consolidated Statement of Comprehensive Income                           |    |       | 5    | 
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|                                              |            |                                       | Condensed Consolidated Balance Sheet                                     |    |       | 6    | 
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|                                              |            |                                       | Condensed Consolidated Statement of Cash Flows                           |    |       | 7    | 
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and Management Representation |    |       | 8-14 | 
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|ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS
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|                                              |            | OF FINANCIAL CONDITION AND RESULTS OF
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|                                              |            | OPERATIONS                            |                                                                          |    | 15-22 |     
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|PART II  OTHER INFORMATION                  
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|ITEM 1  LEGAL PROCEEDINGS                    |            |                                       | 23                                                                       |   
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|ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K     |            |                                       | 24                                                                       |   
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|                                              | SIGNATURES |                                       |                                                                          | 25 |      

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##### Table of Contents









PART 1  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)

|                                     |                                                                                                  |                                   |     |          |         |      |        |         |         |  
|------------------------------------ | ------------------------------------------------------------------------------------------------ | --------------------------------- | --- | -------- | ------- | ---- | ------ | ------- | ------- | -
|                                     |                                                                                                  |                                   |     | 2000     |         | 1999
|                                     |                                                                                                  |                                   |     |          |         |     
|Revenues:                           
|                                    
|                                    
|                                    
|                                    
|                                     | Net premium earned                                                                               |                                   | $   | 118,874  |         |      | $      | 88,482  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Net commissions and fees                                                                         |                                   |     | 30,589   |         |      |        | 27,503  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Net investment income                                                                            |                                   |     | 9,823    |         |      |        | 8,340   |        
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|                                     |                                                                                                  | Total Revenues                    |     |          | 159,286 |      |        |         | 124,325 |  
|                                    
|                                    
|                                    
|                                    
|Expenses:                           
|                                    
|                                    
|                                    
|                                    
|                                     | Loss and loss adjustment expenses                                                                |                                   |     | 186,246  |         |      |        | 139,014 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Reinsurance recoveries                                                                           |                                   |     | (101,455 | )       |      |        | (73,327 | )      
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|                                     | Net loss and loss adjustment expenses                                                            |                                   |     | 84,791   |         |      |        | 65,687  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other operating expenses                                                                         |                                   |     | 35,554   |         |      |        | 30,211  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Salaries and employee benefits                                                                   |                                   |     | 31,609   |         |      |        | 31,576  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest on notes payable                                                                        |                                   |     | 3,895    |         |      |        | 2,498   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Amortization of intangible assets                                                                |                                   |     | 1,461    |         |      |        | 1,155   |        
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|                                     |                                                                                                  | Total Expenses                    |     |          | 157,310 |      |        |         | 131,127 |  
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                                  | Income (Loss) Before Income Taxes |     |          | 1,976   |      |        |         | (6,802  | )
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|Federal income tax expense (benefit) |                                                                                                  |                                   | 249 |          |         |      | (3,140 | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss) before cumulative
effect of accounting change                                  |                                   |     | 1,727    |         |      |        | (3,662  | )      
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|                                     | Cumulative effect of accounting for insurance
related assessments, net of deferred taxes of $879 |                                   |     |         |         |      |        | (1,706  | )      
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|                                     | Net Income (Loss)                                                                                |                                   | $   | 1,727    |         |      | $      | (5,368  | )      
|                                     |                                                                                                  |                                   |     |          |         |      |        |        
|Basic EPS                           
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss) before cumulative effect of accounting change                                  |                                   | $   | 0.20     |         |      | $      | (0.43   | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Cumulative effect of accounting change                                                           |                                   |     |         |         |      | $      | (0.19   | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss)                                                                                |                                   | $   | 0.20     |         |      | $      | (0.62   | )      
|                                    
|                                    
|                                    
|                                    
|Diluted EPS                         
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss) before cumulative effect of accounting change                                  |                                   | $   | 0.20     |         |      | $      | (0.43   | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Cumulative effect of accounting change                                                           |                                   |     |         |         |      | $      | (0.19   | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss)                                                                                |                                   | $   | 0.20     |         |      | $      | (0.62   | )      

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

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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)

|                                     |                                       |                                   |     |         |        |      |        |         |        |  
|------------------------------------ | ------------------------------------- | --------------------------------- | --- | ------- | ------ | ---- | ------ | ------- | ------ | -
|                                     |                                       |                                   |     | 2000    |        | 1999
|                                     |                                       |                                   |     |         |        |     
|Revenues:                           
|                                    
|                                    
|                                    
|                                    
|                                     | Net premium earned                    |                                   | $   | 47,777  |        |      | $      | 32,541  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Net commissions and fees              |                                   |     | 9,887   |        |      |        | 9,307   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Net investment income                 |                                   |     | 3,644   |        |      |        | 2,863   |       
|                                     |                                       |                                   |     |         |        |      |        |        
|                                     |                                       | Total Revenues                    |     |         | 61,308 |      |        |         | 44,711 |  
|                                    
|                                    
|                                    
|                                    
|Expenses:                           
|                                    
|                                    
|                                    
|                                    
|                                     | Loss and loss adjustment expenses     |                                   |     | 68,491  |        |      |        | 50,784  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Reinsurance recoveries                |                                   |     | (34,812 | )      |      |        | (26,800 | )     
|                                     |                                       |                                   |     |         |        |      |        |        
|                                     | Net loss and loss adjustment expenses |                                   |     | 33,679  |        |      |        | 23,984  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Other operating expenses              |                                   |     | 13,997  |        |      |        | 13,325  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Salaries and employee benefits        |                                   |     | 10,611  |        |      |        | 11,517  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Interest on notes payable             |                                   |     | 1,277   |        |      |        | 1,037   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Amortization of intangible assets     |                                   |     | 500     |        |      |        | 472     |       
|                                     |                                       |                                   |     |         |        |      |        |        
|                                     |                                       | Total Expenses                    |     |         | 60,064 |      |        |         | 50,335 |  
|                                    
|                                    
|                                    
|                                    
|                                     |                                       | Income (Loss) Before Income Taxes |     |         | 1,244  |      |        |         | (5,624 | )
|                                     |                                       |                                   |     |         |        |      |        |        
|Federal income tax expense (benefit) |                                       |                                   | 536 |         |        |      | (1,768 | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Net Income (Loss)                     |                                   | $   | 708     |        |      | $      | (3,856  | )     
|                                     |                                       |                                   |     |         |        |      |        |        
|Basic EPS                           
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss)                     |                                   | $   | 0.08    |        |      |        | ($0.45  | )     
|                                    
|                                    
|                                    
|                                    
|Diluted EPS                         
|                                    
|                                    
|                                    
|                                    
|                                     | Net income (loss)                     |                                   | $   | 0.08    |        |      |        | ($0.45  | )     

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

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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)

|                           |                                       |                                  |                                                                     |   |      |        |  
|-------------------------- | ------------------------------------- | -------------------------------- | ------------------------------------------------------------------- | - | ---- | ------ | -
|                           |                                       |                                  |                                                                     |   | 2000
|                           |                                       |                                  |                                                                     |   |     
|Net income                 |                                       | $                                | 1,727                                                               |  
|                          
|                          
|                          
|                          
|                           | Other comprehensive loss, net of tax:
|                          
|                          
|                          
|                          
|                           |                                       | Unrealized gains on securities: 
|                          
|                          
|                          
|                          
|                           |                                       |                                  | Unrealized holding gains arising during the period                  |   |      | 1,319  |  
|                          
|                          
|                          
|                          
|                           |                                       |                                  | Less: reclassification adjustment for losses included in net income |   |      | 135    |  
|                           |                                       |                                  |                                                                     |  
|Other comprehensive income |                                       |                                  | 1,454                                                               |  
|                           |                                       |                                  |                                                                     |  
|Comprehensive income       |                                       | $                                | 3,181                                                               |  
|                           |                                       |                                  |                                                                     |  
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|                           |                                       |                                  | 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 loss    |   |      | (23    | )
|                           |                                       |                                  |                                                                     |  
|Other comprehensive loss   |                                       |                                  | (4,847                                                              | )
|                           |                                       |                                  |                                                                     |  
|Comprehensive loss         |                                       | $                                | (10,215                                                             | )
|                           |                                       |                                  |                                                                     |  

MEADOWBROOK INSURANCE GROUP, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Quarter Ended September 30,
(Unaudited)
(in thousands)

|                           |                                         |                                  |                                                                     |   |      |        |  
|-------------------------- | --------------------------------------- | -------------------------------- | ------------------------------------------------------------------- | - | ---- | ------ | -
|                           |                                         |                                  |                                                                     |   | 2000
|                           |                                         |                                  |                                                                     |   |     
|Net income                 |                                         | $                                | 708                                                                 |  
|                          
|                          
|                          
|                          
|                           | Other comprehensive income, net of tax:
|                          
|                          
|                          
|                          
|                           |                                         | Unrealized gains on securities: 
|                          
|                          
|                          
|                          
|                           |                                         |                                  | Unrealized holding gains arising during the period                  |   |      | 1,575  |  
|                          
|                          
|                          
|                          
|                           |                                         |                                  | Less: reclassification adjustment for losses included in net income |   |      | 14     |  
|                           |                                         |                                  |                                                                     |  
|Other comprehensive income |                                         |                                  | 1,589                                                               |  
|                           |                                         |                                  |                                                                     |  
|Comprehensive income       |                                         | $                                | 2,297                                                               |  
|                           |                                         |                                  |                                                                     |  
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|                           |                                         |                                  | 1999                                                                |  
|                           |                                         |                                  |                                                                     |  
|Net loss                   |                                         | $                                | (3,856                                                              | )
|                          
|                          
|                          
|                          
|                           | Other comprehensive loss, net of tax:  
|                          
|                          
|                          
|                          
|                           |                                         | Unrealized losses on securities:
|                          
|                          
|                          
|                          
|                           |                                         |                                  | Unrealized holding losses arising during the period                 |   |      | (1,249 | )
|                          
|                          
|                          
|                          
|                           |                                         |                                  | Less: reclassification adjustment for losses included in net loss   |   |      | 25     |  
|                           |                                         |                                  |                                                                     |  
|Other comprehensive loss   |                                         |                                  | (1,224                                                              | )
|                           |                                         |                                  |                                                                     |  
|Comprehensive loss         |                                         | $                                | (5,080                                                              | )
|                           |                                         |                                  |                                                                     |  

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

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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.




CONDENSED CONSOLIDATED BALANCE SHEET

ASSETS
(in thousands)

|                                                            |                                                                                   |                                                 |         |         |               |   |              |         |         |  | 
|----------------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ------- | ------------- | - | ------------ | ------- | ------- |  | 
|                                                            |                                                                                   |                                                 |         |         | (Unaudited)  
|                                                            |                                                                                   |                                                 |         |         | September 30, |   | December 31,
|                                                            |                                                                                   |                                                 |         |         | 2000          |   | 1999        
|                                                            |                                                                                   |                                                 |         |         |               |   |             
|Investments:                                               
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Debt securities available for sale, at fair value
(cost of $199,046 and $188,755) |                                                 | $       | 198,088 |               |   | $            | 185,241 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Equity securities available for sale, at fair value
(cost of $16,815 and $17,087) |                                                 |         | 15,737  |               |   |              | 16,569  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Cash and cash equivalents                                   |                                                                                   |                                                 | 28,887  |         |               |   | 23,713       |        
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|                                                            |                                                                                   | Total investments and cash and cash equivalents |         |         | 242,712       |   |              |         | 225,523 | 
|                                                           
|                                                           
|                                                           
|                                                           
|Premiums and agent balances receivable                      |                                                                                   |                                                 | 92,924  |         |               |   | 85,707       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Reinsurance recoverable on:                                
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Paid losses                                                                       |                                                 |         | 19,208  |               |   |              | 14,051  |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unpaid losses                                                                     |                                                 |         | 133,796 |               |   |              | 101,744 |        
|                                                           
|                                                           
|                                                           
|                                                           
|Deferred policy acquisition costs                           |                                                                                   |                                                 | 15,428  |         |               |   | 10,030       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Prepaid reinsurance premiums                                |                                                                                   |                                                 | 47,970  |         |               |   | 42,073       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Intangible assets                                           |                                                                                   |                                                 | 31,905  |         |               |   | 32,885       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Other assets                                                |                                                                                   |                                                 | 47,732  |         |               |   | 39,964       |        
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|                                                            |                                                                                   | Total assets                                    |         | $       | 631,675       |   |              | $       | 551,977 | 
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|LIABILITIES AND SHAREHOLDERS EQUITY                       
|                                                           
|                                                           
|                                                           
|                                                           
|Liabilities:                                               
|                                                           
|                                                           
|                                                           
|                                                           
|Reserve for losses and loss adjustment expenses             |                                                                                   | $                                               | 288,938 |         |               | $ | 229,244      |        
|                                                           
|                                                           
|                                                           
|                                                           
|Unearned premiums                                           |                                                                                   |                                                 | 114,407 |         |               |   | 90,095       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Notes payable, bank                                         |                                                                                   |                                                 | 51,786  |         |               |   | 58,463       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Other liabilities                                           |                                                                                   |                                                 | 73,880  |         |               |   | 73,767       |        
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|                                                            | Total liabilities                                                                 |                                                 |         | 529,011 |               |   |              | 451,569 |        
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|Contingencies and commitments                              
|                                                           
|                                                           
|                                                           
|                                                           
|Shareholders
Equity:                                      
|                                                           
|                                                           
|                                                           
|                                                           
|Common stock, $.01 par value; authorized 30,000,000 shares:
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | 8,512,008 shares issued and outstanding                                           |                                                 |         | 85      |               |   |              | 85      |        
|                                                           
|                                                           
|                                                           
|                                                           
|Additional paid-in capital                                  |                                                                                   |                                                 | 67,922  |         |               |   | 67,907       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Retained earnings                                           |                                                                                   |                                                 | 36,770  |         |               |   | 35,809       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Note receivable from officer                                |                                                                                   |                                                 | (759    | )       |               |   | (720         | )      
|                                                           
|                                                           
|                                                           
|                                                           
|Accumulated other comprehensive income                      |                                                                                   |                                                 | (1,354  | )       |               |   | (2,673       | )      
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|                                                            | Total shareholders equity                                                        |                                                 |         | 102,664 |               |   |              | 100,408 |        
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        
|                                                            |                                                                                   | Total liabilities and shareholders equity      |         | $       | 631,675       |   |              | $       | 551,977 | 
|                                                            |                                                                                   |                                                 |         |         |               |   |              |        

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

6



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.




CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30,
(Unaudited)
(in thousands)

|                                                       |                                                            |                                                     |        |         |         |      |        |         |         |  
|------------------------------------------------------ | ---------------------------------------------------------- | --------------------------------------------------- | ------ | ------- | ------- | ---- | ------ | ------- | ------- | -
|                                                       |                                                            |                                                     |        | 2000    |         | 1999
|                                                       |                                                            |                                                     |        |         |         |     
|Net cash provided by operating activities              |                                                            | $                                                   | 27,678 |         |         | $    | 20,565 |        
|                                                       |                                                            |                                                     |        |         |         |      |        |        
|Cash flows (used in) provided by investing activities:
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchase of debt securities available for sale             |                                                     |        | (56,665 | )       |      |        | (55,008 | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchase of equity securities available for sale           |                                                     |        | (669    | )       |      |        | (10,600 | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Proceeds from sale of debt securities available for sale   |                                                     |        | 46,186  |         |      |        | 51,328  |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Proceeds from sale of equity securities available for sale |                                                     |        | 931     |         |      |        | 1,341   |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other investing activities                                 |                                                     |        | (2,821  | )       |      |        | (15,949 | )      
|                                                       |                                                            |                                                     |        |         |         |      |        |        
|                                                       |                                                            | Net cash used in investing activities               |        |         | (13,038 | )    |        |         | (28,888 | )
|                                                      
|                                                      
|                                                      
|                                                      
|Cash flows (used in) provided by financing activities:
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net (payments) proceeds of bank loan                       |                                                     |        | (6,678  | )       |      |        | 16,594  |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Dividends paid on common stock                             |                                                     |        | (766    | )       |      |        | (775    | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Retirement of common stock                                 |                                                     |        |        |         |      |        | (2,087  | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other financing activities                                 |                                                     |        | (2,022  | )       |      |        |        |        
|                                                       |                                                            |                                                     |        |         |         |      |        |        
|                                                       |                                                            | Net cash (used in) provided by financing activities |        |         | (9,466  | )    |        |         | 13,732  |  
|                                                       |                                                            |                                                     |        |         |         |      |        |        
|Increase in cash and cash equivalents                  |                                                            |                                                     | 5,174  |         |         |      | 5,409  |        
|                                                      
|                                                      
|                                                      
|                                                      
|Cash and cash equivalents, beginning of period         |                                                            |                                                     | 23,713 |         |         |      | 20,510 |        
|                                                       |                                                            |                                                     |        |         |         |      |        |        
|Cash and cash equivalents, end of period               |                                                            | $                                                   | 28,887 |         |         | $    | 25,919 |        
|                                                       |                                                            |                                                     |        |         |         |      |        |        

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

7



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##### Table of Contents






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  Earnings Per Share (EPS)

|                                                                        |  |                                         |           |      |  |   |           |  
|----------------------------------------------------------------------- |  | --------------------------------------- | --------- | ---- |  | - | --------- | -
|                                                                        |  | For the Nine Months Ended September 30,
|                                                                        |  |                                        
|                                                                        |  | (Unaudited)                            
|                                                                        |  | 2000                                    |           | 1999
|                                                                        |  |                                         |           |     
|Basic EPS                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss) before cumulative
effect         of
accounting change |  | $                                       | 0.20      |      |  | $ | (0.43     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cumulative effect of accounting change                                  |  |                                         |          |      |  | $ | (0.19     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss)                                                       |  | $                                       | 0.20      |      |  | $ | (0.62     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Diluted EPS                                                            
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss) before cumulative
effect         of
accounting change |  | $                                       | 0.20      |      |  | $ | (0.43     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cumulative effect of accounting change                                  |  |                                         |          |      |  | $ | (0.19     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss)                                                       |  | $                                       | 0.20      |      |  | $ | (0.62     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Weighted average of number of common        
shares outstanding:       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Basic                                                                   |  |                                         | 8,511,776 |      |  |   | 8,614,016 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Diluted                                                                 |  |                                         | 8,511,776 |      |  |   | 8,614,016 |  

8



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued.

NOTE 1  Earnings Per Share (EPS)

|                                                                        |  |                                     |           |      |  |   |           |  
|----------------------------------------------------------------------- |  | ----------------------------------- | --------- | ---- |  | - | --------- | -
|                                                                        |  | For the Quarter Ended September 30,
|                                                                        |  | (Unaudited)                        
|                                                                        |  | 2000                                |           | 1999
|                                                                        |  |                                     |           |     
|Basic EPS                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss) before cumulative
effect         of
accounting change |  | $                                   | 0.08      |      |  | $ | (0.45     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cumulative effect of accounting change                                  |  |                                     |          |      |  |   |          |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss)                                                       |  | $                                   | 0.08      |      |  | $ | (0.45     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Diluted EPS                                                            
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss) before cumulative
effect         of
accounting change |  | $                                   | 0.08      |      |  | $ | (0.45     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cumulative effect of accounting change                                  |  |                                     |          |      |  |   |          |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income (loss)                                                       |  | $                                   | 0.08      |      |  | $ | (0.45     | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Weighted average of number of common        
shares outstanding:       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Basic                                                                   |  |                                     | 8,512,008 |      |  |   | 8,553,479 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Diluted                                                                 |  |                                     | 8,512,008 |      |  |   | 8,553,479 |  

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 licenses of one of the
Primary Plaintiffs and one of the Individual Plaintiffs and denied further
licensing of the other Primary Plaintiffs.

9



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued.

Meadowbrook and Star vigorously defended themselves and filed counterclaims
against the Primary and 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. A Final
Judgement has been entered with the Court. All plaintiffs have filed an appeal
with the Nevada Supreme Court.

It is not expected that the outcome of this litigation will have a material
impact on the financial condition of the Company.

The Company is involved in other litigation arising in the ordinary course of
operations. While the results of litigation cannot be predicted with
certainty, management is of the opinion, after reviewing these matters with
legal counsel, that the final outcome of such litigation will not have a
material effect upon the Companys financial statements.

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 a
non-cash after-tax $1.7 million (net of tax of $879,064), or $0.19 per share,
cumulative effect accounting change.

NOTE 4  Reclassifications

Certain amounts in the 1999 notes to consolidated financial statements have
been reclassified to conform to the 2000 presentation.

10



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued.

NOTE 5  Segment Information

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,
expanded into Florida and California.

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.

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

|                       |                                    |  |                                         |         |      |  |   |         |  
|---------------------- | ---------------------------------- |  | --------------------------------------- | ------- | ---- |  | - | ------- | -
|                       |                                    |  | For the Nine Months Ended September 30,
|                       |                                    |  |                                        
|                       |                                    |  | 2000                                    |         | 1999
|                       |                                    |  |                                         |         |     
|Revenues:             
|                      
|                      
|                      
|                      
|                       | Net earned premiums                |  | $                                       | 118,874 |      |  | $ | 88,482  |  
|                      
|                      
|                      
|                      
|                       | Management fees                    |  |                                         | 18,369  |      |  |   | 16,046  |  
|                      
|                      
|                      
|                      
|                       | Investment income                  |  |                                         | 9,823   |      |  |   | 8,340   |  
|                       |                                    |  |                                         |         |      |  |   |        
|                       | Program business segment           |  |                                         | 147,066 |      |  |   | 112,868 |  
|                      
|                      
|                      
|                      
|                       | Agency operations                  |  |                                         | 12,669  |      |  |   | 11,963  |  
|                      
|                      
|                      
|                      
|                       | Intersegment revenue               |  |                                         | (449    | )    |  |   | (506    | )
|                       |                                    |  |                                         |         |      |  |   |        
|                       | Consolidated revenue               |  | $                                       | 159,286 |      |  | $ | 124,325 |  
|                       |                                    |  |                                         |         |      |  |   |        
|Pre-tax income (loss):
|                      
|                      
|                      
|                      
|                       | Program business                   |  | $                                       | 4,421   |      |  | $ | (5,273  | )
|                      
|                      
|                      
|                      
|                       | Agency operations                  |  |                                         | 3,088   |      |  |   | 2,564   |  
|                      
|                      
|                      
|                      
|                       | Reconciling items * (see below)    |  |                                         | (5,533  | )    |  |   | (4,093  | )
|                       |                                    |  |                                         |         |      |  |   |        
|                       | Consolidated pre-tax income (loss) |  | $                                       | 1,976   |      |  | $ | (6,802  | )
|                       |                                    |  |                                         |         |      |  |   |        

11



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued.

|                       |                                    |  |                                     |        |      |  |   |        |  
|---------------------- | ---------------------------------- |  | ----------------------------------- | ------ | ---- |  | - | ------ | -
|                       |                                    |  | For the Quarter Ended September 30,
|                       |                                    |  |                                    
|                       |                                    |  | 2000                                |        | 1999
|                       |                                    |  |                                     |        |     
|Revenues:             
|                      
|                      
|                      
|                      
|                       | Net earned premiums                |  | $                                   | 47,777 |      |  | $ | 32,541 |  
|                      
|                      
|                      
|                      
|                       | Management fees                    |  |                                     | 6,097  |      |  |   | 6,136  |  
|                      
|                      
|                      
|                      
|                       | Investment income                  |  |                                     | 3,644  |      |  |   | 2,863  |  
|                       |                                    |  |                                     |        |      |  |   |       
|                       | Program business segment           |  |                                     | 57,518 |      |  |   | 41,540 |  
|                      
|                      
|                      
|                      
|                       | Agency operations                  |  |                                     | 3,930  |      |  |   | 3,275  |  
|                      
|                      
|                      
|                      
|                       | Intersegment revenue               |  |                                     | (140   | )    |  |   | (104   | )
|                       |                                    |  |                                     |        |      |  |   |       
|                       | Consolidated revenue               |  | $                                   | 61,308 |      |  | $ | 44,711 |  
|                       |                                    |  |                                     |        |      |  |   |       
|Pre-tax income (loss):
|                      
|                      
|                      
|                      
|                       | Program business                   |  | $                                   | 2,317  |      |  | $ | (4,148 | )
|                      
|                      
|                      
|                      
|                       | Agency operations                  |  |                                     | 702    |      |  |   | 134    |  
|                      
|                      
|                      
|                      
|                       | Reconciling items * (see below)    |  |                                     | (1,775 | )    |  |   | (1,610 | )
|                       |                                    |  |                                     |        |      |  |   |       
|                       | Consolidated pre-tax income (loss) |  | $                                   | 1,244  |      |  | $ | (5,624 | )
|                       |                                    |  |                                     |        |      |  |   |       



|* |  | The pre-tax income reconciling items represent other expenses relating to the
holding company, amortization and interest expense, which are not allocated
among the segments.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
1999 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, availability or
collectability of reinsurance; increased rate pressure on premiums; obtainment
of certain rate increases in current market conditions; investment rate of
return; changes in and adherence of insurance regulation; obtainment of certain
processing efficiencies; changing rates of inflation; and general economic
conditions.

13



---



##### Table of Contents






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

For the Periods ended September 30, 2000 and 1999

Meadowbrook Insurance Group, Inc. (the Company) is a program-oriented risk
management company specializing in alternative risk management solutions for
agents, brokers, profession/trade associations, and insureds of all sizes. The
Company owns insurance carriers, which are essential elements of the risk
management process. Management defines its business segments as agency
operations and program business operations based upon differences in products
and services.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

Overview

2000 compared to 1999:

Results from operations, excluding the cumulative effect of an accounting
change, improved $5.4 million to net income of $1.7 million in 2000 from a loss
of $3.7 million in 1999.

Revenues increased $35.0 million, or 28%, to $159.3 million for the nine months
ended September 30, 2000 from $124.3 million for the comparable period in 1999.
Revenues from program business increased $34.2 million, or 30.3%, to $147.1
million for the nine months ended September 30, 2000 from $112.9 million for
the comparable period in 1999. Agency revenues increased $706,000, or 5.9% to
$12.7 million for the nine months ended September 30, 2000 from $12.0 million
for the comparable period in 1999.

14



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

Program Business

The following table sets forth the revenues and results from operations for
program business (in thousands):

|                       |                     |  |                                 |         |      |  |   |         |  
|---------------------- | ------------------- |  | ------------------------------- | ------- | ---- |  | - | ------- | -
|                       |                     |  | Nine Months Ended September 30,
|                       |                     |  |                                
|                       |                     |  | 2000                            |         | 1999
|                       |                     |  |                                 |         |     
|Revenue:              
|                      
|                      
|                      
|                      
|                       | Net earned premiums |  | $                               | 118,874 |      |  | $ | 88,482  |  
|                      
|                      
|                      
|                      
|                       | Management fees     |  |                                 | 18,369  |      |  |   | 16,046  |  
|                      
|                      
|                      
|                      
|                       | Investment income   |  |                                 | 9,823   |      |  |   | 8,340   |  
|                       |                     |  |                                 |         |      |  |   |        
|                       | Total Revenue       |  | $                               | 147,066 |      |  | $ | 112,868 |  
|                       |                     |  |                                 |         |      |  |   |        
|Pre-tax income (loss):
|                      
|                      
|                      
|                      
|                       | Program business    |  | $                               | 4,421   |      |  | $ | (5,273  | )
|                       |                     |  |                                 |         |      |  |   |        

2000 compared to 1999:

Revenue from program business increased $34.2 million, or 30.3%, to $147.1
million for the nine months ended September 30, 2000 from $112.9 million for
the comparable period in 1999. This increase reflects 34.3% growth in net
earned premiums to $118.9 million from $88.5 million for the nine months ended
September 30, 2000 and 1999, respectively. This increase reflects the 1999
acquisition of TPA Associates, Inc., which contributed $8.1 million. Excluding
the impact of the 1999 acquisition, net earned premium increased 25.8%, or
$22.3 million. This $22.3 million increase in net earned premium includes an
increase in existing business of $20.0 million. Earned premiums from programs,
which were discontinued in 2000, contributed $8.4 million to the growth in
earned premium. These increases were offset by a planned reduction of $5.5
million on programs discontinued in 1999 and prior, and a reduction of $600,000
on residual markets and retrospectively rated policies. Management fees grew
$2.3 million, or 14.5%, to $18.4 million from $16.1 million. Excluding the
1999 acquisition of TPA Associates, Inc., management fees would be slightly
lower reflecting an anticipated decrease in other management fees on a
discontinued managed program. The remaining increase in program business
revenue reflects an increase in net investment income of $1.5 million, or
17.8%, from $8.3 million for the nine months ended September 30, 1999 to $9.8
million for the comparable period in 2000. This increase in net investment
income reflects an increase in average invested assets of $17.2 million, or
9.0%, relating to both the growth in existing business and the acquisition of
TPA associates. Also contributing to this increase is the effect of shifting a
larger portion of the investment portfolio to taxable securities to maximize
after-tax cash flow.

15



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

Program business for the nine months ended September 30, 2000 generated pre-tax
income of $4.4 million, which compares to a pre-tax loss of $5.3 million for
the same period in 1999.
The 1999 pre-tax loss in program business reflects the impact of the $4.7
million reserve strengthening charge. The 2000 pre-tax income in program
business reflects the improved profit margins from management fees as the
Company continues to realize the benefits of the expense reductions initiated
in late 1999 and have resulted in savings of over $4.0 million for the nine
months ended September 30, 2000.

Agency Operations

The following table sets forth the revenues and results from operations for
agency operations (in thousands):

|               |  |                                 |        |      |  |   |        | 
|-------------- |  | ------------------------------- | ------ | ---- |  | - | ------ | 
|               |  | Nine Months Ended September 30,
|               |  |                                
|               |  | 2000                            |        | 1999
|               |  |                                 |        |     
|Net commission |  | $                               | 12,669 |      |  | $ | 11,963 | 
|              
|              
|              
|              
|Pre-tax income |  | $                               | 3,088  |      |  | $ | 2,564  | 

2000 compared to 1999:

Agency commissions for the nine months ended September 30, 2000 increased
$706,000, or 5.9%, to $12.7 million from $12.0 million for the same period in
1999. This growth reflects an increase in the volume of business produced.
The agency operation pre-tax income increased $524,000, or 20.4%, from $2.6
million for the nine months ended September 30, 1999 to $3.1 million for the
comparable period in 2000.

Other Items

Interest Expense

Interest expense was $3,895,000 and $2,498,000 for the nine months ended
September 30, 2000 and 1999, respectively. This interest is principally
related to the utilization of the Companys Line of Credit. The increase in
interest expense is a result of both a higher average daily loan balance and
higher average interest rates during 2000 as compared to 1999. The average
daily loan balances at September 30, 2000 and 1999 were $52.1 million and $42.1
million, respectively. The average interest rate increased from approximately
8.3% at September 30, 1999 to approximately 9.1% at September 30, 2000. The
outstanding balance on this line was $45.1 million at September 30, 2000 as
compared to $55.7 million at December 31, 1999.

Amortization Expense

Amortization expense was $1,461,000 and $1,155,000 for the nine months ended
September 30, 2000 and 1999, respectively. This increase in amortization is
related to the goodwill recorded on the 1999 acquisition.

16



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

Taxes

The provision for income taxes was a $249,000 expense for the nine months ended
September 30, 2000, and a $3.1 million benefit for the same period in 1999,
representing effective tax rates of 12.6% and (46.2%), respectively. During the
third quarter taxes were impacted by a one-time adjustment of $332,000 relating
to a write off of tax assets. Excluding this adjustment the effective tax rate
for the nine months ended September 30, 2000 would have been a benefit of
4.2%. Historically, the Companys tax rates vary from the 34% corporate rate
due to its heavily tax-exempt investment portfolio. Tax exempt securities at
September 30, 2000 represented 36.1% of the portfolio, down from 53.1% at
year-end, and down from 59.0% at September 30, 1999. The Company has shifted a
larger portion of the investment portfolio to taxable debt securities to
maximize after-tax investment yields and minimize current outflow related to
taxes.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 2000 AND 1999

Overview

2000 compared to 1999:

Results from operations increased $4.6 million, or 118.4%, to net income of
$708,000 in 2000 from a net loss of $3.9 million in 1999.

Revenues for the quarter increased $16.6 million, or 37.1%, to $61.3 million in
2000 from $44.7 million in 1999. Revenues from program business increased
$16.0 million, or 38.5%, to $57.5 million for the quarter ended September 30,
2000, from $41.5 million for the same quarter in 1999. Agency revenues
increased $655,000, or 20.0%, to $3.9 million during the third quarter 2000
from $3.3 million for the comparable period in 1999.

17



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MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

Program Business

The following table sets forth the revenues and results from operations for
program business (in thousands):

|                       |                     |  |                              |        |      |  |   |        |  
|---------------------- | ------------------- |  | ---------------------------- | ------ | ---- |  | - | ------ | -
|                       |                     |  | Quarters Ended September 30,
|                       |                     |  |                             
|                       |                     |  | 2000                         |        | 1999
|                       |                     |  |                              |        |     
|Revenue:              
|                      
|                      
|                      
|                      
|                       | Net earned premiums |  | $                            | 47,777 |      |  | $ | 32,541 |  
|                      
|                      
|                      
|                      
|                       | Management fees     |  |                              | 6,097  |      |  |   | 6,136  |  
|                      
|                      
|                      
|                      
|                       | Investment income   |  |                              | 3,644  |      |  |   | 2,863  |  
|                       |                     |  |                              |        |      |  |   |       
|                       | Total Revenue       |  | $                            | 57,518 |      |  | $ | 41,540 |  
|                       |                     |  |                              |        |      |  |   |       
|Pre-tax income (loss):
|                      
|                      
|                      
|                      
|                       | Program business    |  | $                            | 2,317  |      |  | $ | (4,148 | )
|                       |                     |  |                              |        |      |  |   |       

2000 compared to 1999:

Revenue from program business increased $16.0 million, or 38.5%, to $57.5
million for the three months ended September 30, 2000 from $41.5 million
compared to the same period in 1999. This increase reflects a 46.8% growth in
net earned premiums to $47.8 million from $32.5 million during the quarter
ended September 30, 2000 compared to the same period in 1999. This increase
reflects the 1999 acquisition, which contributed $1.4 million. Excluding the
impact of the 1999 acquisition, net earned premium increased 45.4%, or $13.8
million. This $13.8 million increase in net earned premium includes an
increase in existing business of $12.0 million. Earned premiums from
programs, which were discontinued in 2000, contributed $4.5 million to the
growth in earned premium. These increases were offset by a planned reduction of
$2.4 million on programs discontinued in 1999 and prior, and a reduction of
$300,000 on residual markets and retrospectively rated policies. Management
fees were flat at $6.1 million for the three months ended September 30, 2000
and 1999. The remaining increase reflects an increase in net investment income
of $781,000, or 27.3%, from $2.9 to $3.6 million for the three months ended
September 30, 1999 and 2000, respectively. This increase in net investment
income reflects an increase in average invested assets of $17.2 million, or
9.0%, relating to both growth in existing business and the acquisition in 1999.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

Program business for the three months ended September 30, 2000 generated a
pre-tax income of $2.3 million, which compares to a pre-tax loss of $4.1
million for the same period in 1999. The improvement in program business
reflects:



| |  | A $3.4 million improvement in the net profits on the management fees as a
result of both growth in fee based revenue and the impact of the expense
reduction initiatives taken in late 1999.                                                                                                                                                                                                                                                                        
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | A $781,000 increase in net investment income.                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | A $2.1 million improvement in underwriting results to a loss of $2.9
million for the three months ended September 30, 2000 from $5.0 million
for the comparable period in 1999. The third quarter 1999 underwriting
results reflect adverse development, and 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
in the third quarter of 1999.
| 
| |  | The achievement of rate increases in virtually all lines of business.                                                                                                                                                                                                                                                                                                                                                                                               

Agency Operations

The following table sets forth the revenues and results from operations for
agency operations (in thousands):

|               |  |                              |       |      |  |   |       | 
|-------------- |  | ---------------------------- | ----- | ---- |  | - | ----- | 
|               |  | Quarters Ended September 30,
|               |  |                             
|               |  | 2000                         |       | 1999
|               |  |                              |       |     
|Net commission |  | $                            | 3,930 |      |  | $ | 3,275 | 
|              
|              
|              
|              
|Pre-tax income |  | $                            | 702   |      |  | $ | 134   | 

2000 compared to 1999:

Agency commissions increased $655,000, or 20%, to $3.9 million for the three
months ended September 30, 2000 from $3.3 million in the comparable period in
1999. This growth reflects an increase in the volume of business produced.
Agency operations generated pre-tax income of $702,000 in 2000 compared to
$134,000 in 1999.

Other Items

Interest Expense

Interest expense was $1,277,000 and $1,037,000 for the three months ended
September 30, 2000 and 1999, respectively. This interest is related to the
utilization of the Companys Line of Credit. The increase in interest expense
is a result of both a higher average daily loan balance and higher average
interest rates during 2000 as compared to 1999. The average daily loan
balances during 2000 and 1999 were $48.6 million and $45.9 million,
respectively. The average interest rate increased from approximately 9% at
September 30, 1999 to approximately 10.5% at September 30, 2000. The
outstanding balance on this line was $45.1 million at September 30, 2000, as
compared to $55.7 million at December 31, 1999.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

Amortization Expense

Amortization expense was $500,000 and $472,000 for the three months ended
September 30, 2000 and 1999, respectively. This increase in amortization is
related to the goodwill recorded on the 1999 acquisition.

Taxes

The provision for income taxes was a $536,000 expense for the three months
ended September 30, 2000, and a $1,768,000 benefit for the same period in 1999,
representing effective tax rates of 43.1% and (31.4%), respectively. The third
quarter was impacted by a one-time adjustment of $332,000 relating to a write
off of tax assets. Excluding this adjustment the effective tax rate for the
third quarter of 2000 would have been 16.4%. Historically, the Companys tax
rates vary from the 34% corporate rate due to its heavily tax-exempt investment
portfolio. Tax exempt securities at September 30, 2000 represented 36.1% of
the portfolio, down from 53.1% at year-end, and down from 59.0% at September
30, 1999. The Company has shifted a larger portion of the investment portfolio
to taxable debt securities to maximize after-tax investment yields and minimize
current outflow related to taxes.

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, 2000
and 1999 was $27.7 million and $20.6 million, respectively. At September 30,
2000, the Company held $28.9 million in cash and cash equivalents.

The Company has an unsecured Revolving Line of Credit (Line of Credit)
totaling $50.0 million, of which $45.1 million was outstanding at September 30,
2000 and $55.7 million was outstanding at December 31, 1999. The Line of
Credit expires on August 1, 2002. The Company drew on this Line of Credit
during 1999 primarily to meet acquisition and cash flow needs. The Company also
has subordinated debt $3.5 million outstanding at terms substantially
equivalent to the unsecured bank line.

The Company had agreed to reduce the Line of Credit from $50
million to $40 million by September 30, 2000. Effective September 30,
2000, the Company and the bank group agreed to reduce the Line of
Credit to $48 million rather than $40 million. The Company and the
bank group have agreed to further reduce the Line of Credit to $33
million by April 30, 2001. The Company is currently engaged in
efforts to complete this transaction by April 30, 2001. Effective
September 30, 2000, the Company and the bank group have amended the
Line of Credit to reflect these changes.

In addition, a non-insurance subsidiary had a Line of Credit with a bank which
permits borrowings up to 80% of the accounts receivable which collateralize the
line. This Line of Credit will expire March 31, 2001, and is automatically
renewable each year. At September 30, 2000, $3.2 million was outstanding under
this Line of Credit.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

One of the Companys principal corporate objectives is to operate at
appropriate leverage ratios.

The Companys leverage ratios as of September 30, 2000
were 4.2, 3.4, and 2.3 on a gross written premium, gross written excluding fronted
business, and net written premium basis, respectively. These ratios are in excess of the Company's
targeted leverage ratios of 4.0, 3.0, and 2.0, respectively. The
third quarter ratios were impacted by a number of unusual items, primarily the
growth in gross written premium associated with the acceleration of premium
processing and the new account of $4.7 million which is a retrospectively rated
policy in which we take no risk. The Company has taken actions to reduce the
leverage ratios  these include termination of under performing programs and
utilization of other fronting companies and the purchase of additional
reinsurance. Excluding the impact of the terminated programs, the pro-forma
leverage ratios on a gross written premium, gross written excluding fronted
business, and net written premium basis would have been 3.5, 2.9, and 1.9,
respectively. These pro-forma ratios are within the targeted range.

Other matters

The insurance company subsidiaries cede insurance to other insurers under pro
rata and excess-of-loss contracts. The Company also
assumes insurance from other insurers and reinsurers, both domestic and
foreign, under pro rata and excess-of-loss contracts. These reinsurance agreements diversify the
Companys business and minimize its losses arising from large risks or from
hazards of an unusual nature. The ceding of insurance does not discharge the
original insurer from its primary liability to its policyholder, and in the
event that all or any of the reinsuring companies are unable to meet their
obligations, the insurance company subsidiaries would be liable for such
defaulted amounts. Therefore, the Company is subject to a credit risk with
respect to the obligations of its reinsurers. In order to minimize its
exposure to significant losses from reinsurer insolvencies, the Company
evaluates the financial condition of its reinsurers and monitors the economic
characteristics of the reinsurers on an ongoing basis.

The Company receives ceding commissions in conjunction with reinsurance
activities. These ceding commissions are offset against the related
underwriting expenses and were $28,442,998 and $24,270,087 for the nine months
ended September 30, 2000 and 1999, respectively.

The Company has reinsurance recoverables for paid and unpaid losses of
$153,004,000. The Company strives to secure reinsurance balances due from
non-admitted reinsurers through funds withheld trusts or letters of credit.
The largest unsecured reinsurance recoverable is due from a reinsurer with an
A++ A.M. Best rating and accounts for 13% of the total recoverable for paid
and unpaid losses. At September 30, 2000 the Companys total reinsurance
recoverables not secured by funds withheld trust or letters of credit from
non-admitted reinsurers equaled approximately $4.6 million or 3% of its total
reinsurance recoverables. While it is always possible that certain amounts may
not be collected, management currently believes that these amounts should be
collectible as and when claims are paid.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended September 30, 2000 and 1999

In December, 1996, the Company entered into a five-year joint underwriting
agreement with Connecticut Surety Company (CSC), whereby the Company
transferred the underwriting risk on the majority of the Companys existing
surety bond business. Effective June 1, 2000, CSC no longer assumes risk on new
or renewal business from the Company, however, one of CSCs subsidiaries
continues to act as a general agent for the Company. This new and renewal
business is now 100% reinsured to unaffiliated reinsurers with an A.M. Best
Rating of A or better.

CSC executed a Subordinated Surplus Note in favor of the Company in the
principal sum $195,000.  50% of the principal amount is due on May
26, 2001; the outstanding balance, together with all unpaid interest
is due on May 26, 2002.  Interest is at 9% per annum, with interest
payments to be made quarterly, subject to all terms and conditions of
the Note. In addition, Connecticut Surety Corporation executed Promissory Notes
in favor of the Company in the amounts of $30,000 and $270,000, due on May
26, 2003 and July 14, 2003, respectively.  Interest is at 9% per
annum, payable semi-annually beginning on December 31, 2000, subject
to the terms and conditions of the Notes.

In December, 1998, CSC entered into an agreement with Evergreen National
Indemnity Company to transfer the Contract Surety business that it wrote on
behalf of Star Insurance Company to Evergreen National Indemnity Company. The
agreement provides for the transfer of the underwriting risk on this class of
bonds from CSC to Evergreen National.

At September 30, 2000, the Company has approximately $2.5 million (included in
the $4.6 million referenced above) of unsecured reinsurance recoveries on
unpaid losses due from CSC. This amounts to less than 1.65% of its total
reinsurance recoveries. As stated above, there is a possibility that a certain amount may
not be collected, management currently believes that these amounts should be
fully collectible as and when claims are paid.

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##### Table of Contents






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
licenses of one of the Primary Plaintiffs and one of the Individual Plaintiffs
and denied further licensing of the other Primary Plaintiffs.

The Company vigorously defended itself and filed counter-claims against the
Primary and 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. A Final
Judgment has been entered with the Court. All plaintiffs have filed an appeal
with the Nevada Supreme Court.

It is not expected that the outcome of this litigation will have a material
impact on the financial condition of the Company.

The Company is involved in other litigation arising in the ordinary course of
operations. While the results of litigation cannot be predicted with
certainty, management is of the opinion, after reviewing these matters with
legal counsel, that the final outcome of such litigation will not have a
material effect upon the Companys financial statements.

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##### Table of Contents



PART II  OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8K

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

|        |  |                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|No.     |  | Description                                                                                                                             
|        |  |                                                                                                                                         
|3.3     |  | Amendment to the Articles of Incorporation                                                                                              
|       
|       
|       
|       
|10.11   |  | Amendment No. 3 to Revolving Credit Agreement between Meadowbrook Insurance Group, Inc.
and Comerica Bank dated as of September 30, 2000
|       
|       
|       
|       
|11      |  | Statement re computation of per share earnings                                                                                          
|       
|       
|       
|       
|27      |  | Financial Data Schedule                                                                                                                 

(B) Reports on Form 8-K

None.

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##### Table of Contents






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/ Robert S. Cubbin                                             
|                         |  |                                                                      
|                         |  | President, Chief Operating Officer
And Acting Chief Financial Officer
|                        
|                        
|                        
|                        
|Dated: November 10, 2000

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##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                          
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|No.     |  | Description                                                                                                                              
|        |  |                                                                                                                                          
|3.3     |  | Amendment to the Articles of Incorporation                                                                                               
|       
|       
|       
|       
|11      |  | Statement re computation of per share earnings                                                                                           
|       
|       
|       
|       
|       
|       
|       
|       
|10.11   |  | Amendment No. 3
to Revolving Credit Agreement between Meadowbrook Insurance Group,
Inc. and Comerica Bank dated as of September 30, 2000.
|27      |  | Financial Data Schedule