##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington D.C.
    20549
      Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 1-14094
  Meadowbrook Insurance Group,
    Inc.
 (Exact name of Registrant as
    specified in its charter)
   Michigan

38-2626206(State of
    Incorporation)

(IRS Employer
    Identification No.)   26255 American Drive,
 Southfield, Michigan 48034
 (Address, zip code of principal
    executive offices)
  (248) 358-1100
 (Registrants telephone
    number, including area code)
  þ o
  Regulation S-T o o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 



TABLE OF
    CONTENTS
   
 PagePART I  FINANCIAL
    INFORMATIONITEM 1



FINANCIAL STATEMENTSConsolidated Statements of Income (unaudited)

2-3Consolidated Statements of Comprehensive Income
    (unaudited)

4Consolidated Balance Sheets (unaudited)

5Consolidated Statement of Shareholders
    Equity (unaudited)

6Consolidated Statement of Cash Flows
    (unaudited)

7Notes to Consolidated Financial Statements
    (unaudited)

8-24ITEM 2



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

25-41ITEM 3



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK

42ITEM 4



CONTROLS AND PROCEDURES

43PART II  OTHER
    INFORMATIONITEM 1



LEGAL PROCEEDINGS

44ITEM 1A  RISK FACTORS

44ITEM 2



UNREGISTERED SALES OF EQUITY SECURITIES AND USE
    OF PROCEEDS

44ITEM 6



EXHIBITS

44SIGNATURES

45EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



PART 1 
    FINANCIAL INFORMATION  ITEM 1
    FINANCIAL
    STATEMENTS  MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF INCOME
 For
    the Three Months Ended September 30,
  2010


2009(Unaudited)(In thousands, except share data)RevenuesPremiums earnedGross

$
200,918


$
163,099Ceded


(29,054
)


(25,700
)Net earned premiums


171,864



137,399Net commissions and fees


9,869



10,753Net investment income


13,715



12,764Realized gains (losses):Total
    other-than-temporary
    impairments on securities


(25
)


(208
)Portion of loss recognized in other comprehensive income






Net
    other-than-temporary
    impairments on securities recognized in earnings


(25
)


(208
)Net realized gains excluding
    other-than-temporary
    impairments on securities


308



(534
)Net realized gains (losses)


283



(742
)Total revenues


195,731



160,174ExpensesLosses and loss adjustment expenses


122,044



107,607Reinsurance recoveries


(16,105
)


(19,005
)Net losses and loss adjustment expenses


105,939



88,602Policy acquisition and other underwriting expenses


59,013



43,087General, selling and administrative expenses


5,881



8,277General corporate expenses


1,163



1,053Amortization expense


1,235



1,422Interest expense


2,405



2,620Total expenses


175,636



145,061Income before taxes and equity earnings


20,095



15,113Federal and state income tax expense


5,500



4,156Equity earnings of affiliates, net of tax


425



Equity earnings of unconsolidated subsidiaries, net of tax


16



62Net income

$
15,036


$
11,019Earnings Per ShareBasic

$
0.28


$
0.19Diluted

$
0.28


$
0.19Weighted average number of common sharesBasic


53,418,314



57,444,471Diluted


53,698,954



57,563,263Dividends paid per common share

$
0.04


$
0.02    2




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##### Table of Contents



PART 1 
    FINANCIAL INFORMATION
  ITEM 1
    FINANCIAL
    STATEMENTS  MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED STATEMENTS OF INCOME
 For
    the Nine Months Ended September 30,
  2010


2009(Unaudited)(In thousands, except share data)RevenuesPremiums earnedGross

$
573,320


$
471,176Ceded


(87,255
)


(77,599
)Net earned premiums


486,065



393,577Net commissions and fees


26,872



29,386Net investment income


40,198



37,503Realized gains (losses):Total
    other-than-temporary
    impairments on securities


(437
)


(5,035
)Portion of loss recognized in other comprehensive income






1,734Net
    other-than-temporary
    impairments on securities recognized in earnings


(437
)


(3,301
)Net realized gains excluding
    other-than-temporary
    impairments on securities


878



(391
)Net realized gains (losses)


441



(3,692
)Total revenues


553,576



456,774ExpensesLosses and loss adjustment expenses


340,941



293,584Reinsurance recoveries


(48,310
)


(54,628
)Net losses and loss adjustment expenses


292,631



238,956Policy acquisition and other underwriting expenses


168,262



125,172General, selling and administrative expenses


17,108



24,037General corporate expenses


4,409



4,295Amortization expense


3,757



4,350Interest expense


7,259



8,061Total expenses


493,426



404,871Income before taxes and equity earnings


60,150



51,903Federal and state income tax expense


17,896



15,848Equity earnings of affiliates, net of tax


1,591



Equity earnings of unconsolidated subsidiaries, net of tax


486



149Net income

$
44,331


$
36,204Earnings Per ShareBasic

$
0.82


$
0.63Diluted

$
0.81


$
0.63Weighted average number of common sharesBasic


54,229,706



57,428,416Diluted


54,508,592



57,531,391Dividends paid per common share

$
0.10


$
0.06    3




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE INCOME
 For the Three Months Ended
    September 30,
  2010


2009(Unaudited)(In thousands)Net income

$
15,036


$
11,019Other comprehensive income, net of tax:Unrealized gains on securities


16,556



22,158Unrealized gains in affiliates and unconsolidated subsidiaries


105



Increase on non-credit
    other-than-temporary
    impairments on securities


333



1,073Net deferred derivative (losses)  hedging activity


(705
)


(408
)Less reclassification adjustment for investment (gains) losses
    included in net income


(314
)


849Other comprehensive gains, net of tax


15,975



23,672Comprehensive income

$
31,011


$
34,691   MEADOWBROOK
    INSURANCE GROUP, INC.
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    For the Nine Months Ended September 30,
  2010


2009(Unaudited)(In thousands)Net income

$
44,331


$
36,204Other comprehensive income, net of tax:Unrealized gains on securities


34,823



34,564Unrealized gains in affiliates and unconsolidated subsidiaries


245



Increase (decrease) on non-credit
    other-than-temporary
    impairments on securities


818



(661
)Net deferred derivative (losses) gains  hedging
    activity


(1,330
)


1,338Less reclassification adjustment for investment (gains) losses
    included in net income


(374
)


3,843Other comprehensive gains, net of tax


34,182



39,084Comprehensive income

$
78,513


$
75,288    4




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED BALANCE SHEETS
  September 30,


December 31,2010


2009(Unaudited)(In thousands, except share data)ASSETSInvestmentsDebt securities available for sale, at fair value (amortized
    cost of $1,144,833 and $1,045,454)

$
1,239,596


$
1,088,554Equity securities available for sale, at fair value (cost of
    $26,033 and $26,919)


29,342



28,342Cash and cash equivalents


76,395



86,319Accrued investment income


12,997



11,599Premiums and agent balances receivable, net


177,193



155,327Reinsurance recoverable on:Paid losses


8,543



7,724Unpaid losses


284,387



266,801Prepaid reinsurance premiums


29,815



35,298Deferred policy acquisition costs


78,704



68,787Deferred federal income taxes






5,645Goodwill


118,842



118,842Other intangible assets


37,692



41,301Other assets


81,673



81,205Total assets

$
2,175,179


$
1,995,744LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesLosses and loss adjustment expenses

$
1,043,763


$
949,177Unearned premiums


353,780



325,915Debt


41,000



49,875Debentures


80,930



80,930Accounts payable and accrued expenses


34,818



34,251Funds held and reinsurance balances payable


27,035



29,161Payable to insurance companies


2,801



3,314Deferred federal income taxes


9,571



Other liabilities


23,386



20,240Total liabilities


1,617,084



1,492,863Shareholders EquityCommon stock, $0.01 stated value; authorized
    75,000,000 shares; 53,236,542 and 55,519,970 shares
    issued and outstanding


532



555Additional paid-in capital


292,484



304,930Retained earnings


205,921



172,441Note receivable from officer


(804
)


(825
)Accumulated other comprehensive income


59,962



25,780Total shareholders equity


558,095



502,881Total liabilities and shareholders equity

$
2,175,179


$
1,995,744    5




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED STATEMENT OF SHAREHOLDERS
    EQUITY
  AccumulatedAdditional





Note


Other


TotalCommon


Paid-In


Retained


Receivable


Comprehensive


ShareholdersStock


Capital


Earnings


from Officer


(Loss) Income


Equity(Unaudited, In thousands)Balances December 31, 2009

$
555


$
304,930


$
172,441


$
(825
)

$
25,780


$
502,881Net income










44,331











44,331Dividends declared and paid










(4,878
)










(4,878
)Net unrealized appreciation on available for sale securities


















35,267



35,267Net deferred derivative gain  hedging activity


















(1,330
)


(1,330
)Stock award


2



422















424Long term incentive plan; stock award for
    2009-2011
    plan years






753















753Repurchase of 2,481,000 shares of common stock


(25
)


(13,621
)


(5,973
)










(19,619
)Change in investment of affiliates, net of tax


















178



178Change in investment of unconsolidated subsidiaries


















67



67Note receivable from officer














21







21Balances September 30, 2010

$
532


$
292,484


$
205,921


$
(804
)

$
59,962


$
558,095    6




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 For
    the Nine Months Ended September 30,
  2010


2009(Unaudited)(In thousands)Cash Flows From Operating ActivitiesNet income

$
44,331


$
36,204Adjustments to reconcile net income to net cash provided by
    operating activities:Amortization of other intangible assets


3,757



4,350Amortization of deferred debenture issuance costs


192



281Depreciation of furniture, equipment, and building


4,194



3,859Net amortization of discount and premiums on bonds


2,405



2,311(Gain) loss on sale of investments, net


(374
)


3,843Gain on sale of fixed assets


(66
)


(66
)Long-term incentive plan expense


753



613Stock award


458



Equity earnings of affiliates, net of taxes


(1,591
)


Equity earnings of unconsolidated subsidiaries, net of tax


(486
)


Deferred income tax expense


(1,213
)


3,257Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable


(21,866
)


(28,408
)Reinsurance recoverable on paid and unpaid losses


(18,405
)


(4,362
)Prepaid reinsurance premiums


5,483



(1,522
)Deferred policy acquisition costs


(9,917
)


(9,425
)Other assets


(3,935
)


(163
)Increase (decrease) in:Losses and loss adjustment expenses


94,586



38,529Unearned premiums


27,865



34,691Payable to insurance companies


(513
)


(2,423
)Funds held and reinsurance balances payable


(2,126
)


(950
)Other liabilities


4,515



(3,093
)Total adjustments


83,716



41,322Net cash provided by operating activities


128,047



77,526Cash Flows From Investing ActivitiesPurchase of debt securities available for sale


(185,759
)


(159,828
)Proceeds from sales and maturities of debt securities available
    for sale


84,207



106,398Purchase of equity securities available for sale






(234
)Proceeds from sales of equity securities available for sale


1,020



60Capital expenditures


(3,311
)


(2,958
)Equity investment in unaffiliated insurance holding limited
    liability company






(14,782
)Acquisition of rights renewals


(148
)


Other investing activities


(231
)


314Net cash used in investing activities


(104,222
)


(71,030
)Cash Flows From Financing ActivitiesPayment of lines of credit


(8,875
)


(7,563
)Book overdrafts


737



(227
)Dividends paid on common stock


(4,878
)


(3,447
)Cash payment for payroll taxes associated with long-term
    incentive plan net stock issuance


(35
)


(330
)Share repurchases(1)


(20,719
)


Other financing activities


21



(94
)Net cash used in financing activities


(33,749
)


(11,661
)Net decrease in cash and cash equivalents


(9,924
)


(5,165
)Cash and cash equivalents, beginning of period


86,319



76,588Cash and cash equivalents, end of period

$
76,395


$
71,423     (1)
    
    The Company repurchased 300,000 shares at the end of third
    quarter 2009. The cash settlement related to this share
    repurchase did not occur until October 2009, therefore there was
    no cash outflow as of September 30, 2009.   7




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE 1 
    Summary of Significant Accounting Policies
  Basis
    of Presentation and Management Representation
      Form 10-K,
    Revenue
    Recognition
        sub-producer
 8




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Earnings
    Per Share
      Income
    Taxes
      Reclassifications
    and redefining segment reporting:
   9




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    For the Three Months Ended September 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
102,557


$
5,050


$
107,607Reinsurance recoverables


(19,005
)






(19,005
)Net losses and loss adjustment expenses


83,552



5,050



88,602Salaries and employee benefits


19,630



(19,630
)


Policy acquisition and other underwriting expenses


28,824



14,263



43,087Other administrative expenses


9,013



(9,013
)


General selling and administrative expenses






8,277



8,277General corporate expenses






1,053



1,053Amortization expense


1,422







1,422Interest expense


2,620







2,620Total expenses

$
145,061


$



$
145,061   For the Nine Months Ended September 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
278,431


$
15,153


$
293,584Reinsurance recoverables


(54,628
)






(54,628
)Net losses and loss adjustment expenses


223,803



15,153



238,956Salaries and employee benefits


59,402



(59,402
)


Policy acquisition and other underwriting expenses


79,932



45,240



125,172Other administrative expenses


29,323



(29,323
)


General selling and administrative expenses






24,037



24,037General corporate expenses






4,295



4,295Amortization expense


4,350







4,350Interest expense


8,061







8,061Total expenses

$
404,871


$



$
404,871   re-evaluation,
  Recent
    Accounting Pronouncements
  Consolidation Amendments to FASB Interpretation
    No. 46(R)
 10




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2010-06, Fair Value Measurements and Disclosures ( ):
    Improving Disclosures about Fair Value Measurements. 2010-06 Fair Value Measurements
  2010-06
  2010-26, Financial Services  Insurance (Topic 944):
    Accounting for Costs Associated with Acquiring or Renewing
    Insurance Contracts. 2010-26 2010-26
  NOTE 2 
    Restricted
    Stock Awards  Compensation  Stock Compensation
  NOTE 3 
    Debt  Credit
    Facilities
     11




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Derivative Instruments
    Debentures
    InterestRate atYear of



Year

Year



September 30,

PrincipalIssuance

Description

Callable

Due

Interest Rate Terms

2010(1)

Amount2003

Junior subordinated debentures


2008



2033



Three-month LIBOR, plus 4.05%



4.34%


$
10,3102004

Senior debentures


2009



2034



Three-month LIBOR, plus 4.00%



4.38%



13,0002004

Senior debentures


2009



2034



Three-month LIBOR, plus 4.20%



4.53%



12,0002005

Junior subordinated debentures


2010



2035



Three-month LIBOR, plus 3.58%



3.87%



20,620Junior subordinated debentures(2)


2007



2032



Three-month LIBOR, plus 4.00%



4.29%



15,000Junior subordinated debentures(2)


2008



2033



Three-month LIBOR, plus 4.10%



4.48%



10,000Total


$
80,930     (1)
    
    The underlying three-month LIBOR rate varies as a result of the
    interest rate reset dates used in determining the three-month
    LIBOR rate, which varies for each long-term debt item each
    quarter.(2)
    
    Represents the junior subordinated debentures acquired in
    conjunction with the ProCentury Merger on July 31, 2008.     12




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          NOTE 4 
    Investments    September 30, 2010Cost or


Gross UnrealizedAmortized








Non-Credit


EstimatedCost


Gains


Losses


OTTI


Fair ValueDebt Securities:U.S. Government and agencies

$
26,419


$
1,975


$



$



$
28,394Obligations of states and political subs


515,908



40,772



(57
)






556,623Corporate securities


361,263



34,503



(29
)


(35
)


395,702Redeemable preferred stocks


3,363



1,471











4,834Residential mortgage-backed securities


183,429



13,560



(1
)


(131
)


196,857Commercial mortgage-backed securities


35,546



2,168



(293
)






37,421Other asset-backed securities


18,905



1,702



(128
)


(714
)


19,765Total debt securities available for sale


1,144,833



96,151



(508
)


(880
)


1,239,596Equity Securities:Perpetual preferred stock


11,245



2,456



(1
)






13,700Common stock


14,788



1,150



(296
)






15,642Total equity securities available for sale


26,033



3,606



(297
)






29,342Total securities available for sale

$
1,170,866


$
99,757


$
(805
)

$
(880
)

$
1,268,938   13




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  December 31, 2009Cost or


Gross UnrealizedAmortized








Non-Credit


EstimatedCost


Gains


Losses


OTTI


Fair ValueDebt Securities:U.S. Government and agencies

$
26,177


$
1,037


$
(60
)

$



$
27,154Obligations of states and political subs


499,384



21,566



(816
)






520,134Corporate securities


257,187



10,872



(892
)


(22
)


267,145Redeemable preferred stocks


2,689



1,349



(38
)






4,000Residential mortgage-backed securities


214,562



11,379



(114
)


(615
)


225,212Commercial mortgage-backed securities


24,015



292



(579
)






23,728Other asset-backed securities


21,440



983



(181
)


(1,061
)


21,181Total debt securities available for sale


1,045,454



47,478



(2,680
)


(1,698
)


1,088,554Equity Securities:Perpetual preferred stock


12,131



1,350



(168
)






13,313Common stock


14,788



691



(450
)






15,029Total equity securities available for sale


26,919



2,041



(618
)






28,342Total securities available for sale

$
1,072,373


$
49,519


$
(3,298
)

$
(1,698
)

$
1,116,896     September 30,


December 31,2010


2009Unrealized gains

$
99,757


$
49,519Unrealized losses


(805
)


(3,298
)Non-credit OTTI


(880
)


(1,698
)Net unrealized gains


98,072



44,523Deferred federal income tax expense


(34,324
)


(15,583
)Valuation allowance adjustment on deferred income taxes


1,153



694Net unrealized gains on investments, net of deferred federal
    income taxes

$
64,901


$
29,634  14




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    For the Three Months


For the Nine MonthsEnded September 30,


Ended September 30,2010


2009


2010


2009Realized (losses) gains:Debt securities:Gross realized gains

$
257


$
118


$
630


$
406Gross realized losses


(22
)


(698
)


(390
)


(3,391
)Total debt securities


235



(580
)


240



(2,985
)Equity Securities:Gross realized gains


90







206



Gross realized losses


(11
)


(269
)


(72
)


(858
)Total equity securities


79



(269
)


134



(858
)Net realized gains (losses)

$
314


$
(849
)

$
374


$
(3,843
)OTTI included in realized losses on securities above

$
(25
)

$
(208
)

$
(437
)

$
(3,301
)       Available for SaleEstimated FairAmortized Cost


ValueDue in one year or less

$
36,140


$
37,767Due after one year through five years


220,202



233,705Due after five years through ten years


505,516



558,077Due after ten years


145,094



156,005Mortgage-backed securities, collateralized obligations and other
    asset-backed securities


237,881



254,042$
1,144,833


$
1,239,596  15




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    For the Three Months


For the Nine MonthsEnded September 30,


Ended September 30,2010


2009


2010


2009Net Investment Income Earned From:Debt securities

$
13,232


$
12,231


$
38,783


$
35,862Equity Securities


565



523



1,626



1,547Cash and cash equivalents


196



239



605



876Total gross investment income


13,993



12,993



41,014



38,285Less investment expenses


278



229



816



782Net investment income

$
13,715


$
12,764


$
40,198


$
37,503   Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
    other-than-temporary.
   16




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    
    Historical and implied volatility of the security;
    Length of time and extent to which the fair value has been less
    than amortized cost;
    Conditions specifically related to the security such as default
    rates, loss severities, loan to value ratios, current levels of
    subordination, third party guarantees, and vintage;
    Specific conditions in an industry or geographic area;
    Any changes to the rating of the security by a rating agency;
    Failure, if any, of the issuer of the security to make scheduled
    payments; and
    Recoveries or additional declines in fair value subsequent to
    the balance sheet date.       17




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    September 30, 2010Less Than 12 months


Greater Than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments


Unrealized


Investments


Unrealized


Investments


Unrealizedwith


Losses and


with


Losses and


with


Losses andUnrealized


Non-Credit


Unrealized


Non-Credit


Unrealized


Non-CreditLosses


OTTI


Losses


OTTI


Losses


OTTIDebt Securities:U.S. Government and agencies

$



$



$



$



$



$
Obligations of states and political subs


2,370



(48
)


845



(10
)


3,215



(58
)Corporate securities


2,537



(39
)


76



(25
)


2,613



(64
)Redeemable preferred stocks






















Residential mortgage-backed securities


5,111



(1
)


3,917



(131
)


9,028



(132
)Commercial mortgage-backed securities










310



(293
)


310



(293
)Other asset-backed securities


225



(8
)


2,612



(833
)


2,837



(841
)Total debt securities


10,243



(96
)


7,760



(1,292
)


18,003



(1,388
)Equity Securities:Perpetual preferred stock


4



(1
)










4



(1
)Common stock










5,173



(296
)


5,173



(296
)Total equity securities


4



(1
)


5,173



(296
)


5,177



(297
)Total securities

$
10,247


$
(97
)

$
12,933


$
(1,588
)

$
23,180


$
(1,685
)   December 31, 2009Less Than 12 months


Greater Than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments


Unrealized


Investments


Unrealized


Investments


Unrealizedwith


Losses and


with


Losses and


with


Losses andUnrealized


Non-Credit


Unrealized


Non-Credit


Unrealized


Non-CreditLosses


OTTI


Losses


OTTI


Losses


OTTIDebt Securities:U.S. Government and agencies

$
3,546


$
(60
)

$



$



$
3,546


$
(60
)Obligations of states and political subs


53,577



(640
)


7,115



(176
)


60,692



(816
)Corporate securities


55,276



(912
)


199



(2
)


55,475



(914
)Redeemable preferred stocks










721



(38
)


721



(38
)Residential mortgage-backed securities


5,971



(79
)


4,596



(650
)


10,567



(729
)Commercial mortgage-backed securities


3,286



(20
)


8,109



(559
)


11,395



(579
)Other asset-backed securities


3,177



(972
)


1,354



(270
)


4,531



(1,242
)Total debt securities


124,833



(2,683
)


22,094



(1,695
)


146,927



(4,378
)Equity Securities:Perpetual preferred stock


103



(24
)


2,862



(144
)


2,965



(168
)Common stock










5,074



(450
)


5,074



(450
)Total equity securities


103



(24
)


7,936



(594
)


8,039



(618
)Total securities

$
124,936


$
(2,707
)

$
30,030


$
(2,289
)

$
154,966


$
(4,996
)  18




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Balance as of April 1, 2009

$
(46
)Additional credit impairments on:Previously impaired securities


(414
)Securities for which an impairment was not previously recognized


Reductions


Balance as of September 30, 2009

$
(460
)   Balance as of January 1, 2010

$
(547
)Additional credit impairments on:Previously impaired securities


(264
)Securities for which an impairment was not previously recognized


Reductions


Balance as of September 30, 2010

$
(811
)   NOTE 5 
    Fair
    Value Measurements         19




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    and/or and/or
         20




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fair Value Measurements UsingQuoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableSeptember 30, 2010


Assets


Inputs


InputsTotal


(Level 1)


(Level 2)


(Level 3)Debt Securities:U.S. Government and agencies

$
28,395


$



$
28,395


$
Obligations of states and political subs


556,624







556,624



Corporate securities


395,701







394,795



906Redeemable preferred stocks


4,834



4,834







Residential mortgage-backed securities


196,857







196,857



Commercial mortgage-backed securities


37,421







37,421



Other asset-backed securities


19,764







16,616



3,148Total debt securities available for sale


1,239,596



4,834



1,230,708



4,054Equity Securities:Perpetual preferred stock


13,701



12,150



1,551



Common stock


15,641



15,641







Total equity securities available for sale


29,342



27,791



1,551



Total securities available for sale

$
1,268,938


$
32,625


$
1,232,259


$
4,054Derivatives  interest rate swaps

$
(7,974
)

$



$
(7,974
)

$
     Fair ValueMeasurementUsing SignificantUnobservableInputs - Level 3Balance as of January 1, 2010

$
4,161Total gains or losses (realized/unrealized):Included in earnings


(19
)Included in other comprehensive income


447Purchases


1,897Issuances


Settlements


(93
)Transfers in and out of Level 3


(2,339
)Balance as of September 30, 2010

$
4,054      21




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    NOTE 6 
    Derivative
    Instruments      FixedAmount atExpiration





Fixed

September 30,Effective Date

Date

Debt Instrument

Counterparty Interest Rate Terms

Rate

20104/23/2008



5/24/2011


Senior debentures(1)

Three-month LIBOR, plus 4.20%


7.720%



7,0004/23/2008



6/30/2013


Junior subordinated debentures

Three-month LIBOR, plus 4.05%


8.020%



10,0004/29/2008



4/29/2013


Senior debentures

Three-month LIBOR, plus 4.00%


7.940%



13,0007/31/2008



7/31/2013


Term loan(2)

Three-month LIBOR


3.950%



41,0008/15/2008



8/15/2013


Junior subordinated debentures(3)

Three-month LIBOR


3.780%



10,0009/04/2008



9/04/2013


Junior subordinated debentures(3)

Three-month LIBOR


3.790%



15,0009/08/2010



5/24/2016


Senior debentures

Three-month LIBOR, plus 4.20%


6.248%



5,0009/16/2010



9/15/2015


Junior subordinated debentures

Three-month LIBOR, plus 3.58%


6.160%



10,0009/16/2010



9/15/2015


Junior subordinated debentures

Three-month LIBOR, plus 3.58%


6.190%



10,000     (1)
    
    During the quarter ended September 30, 2010, the Company
    entered into a forward starting interest rate swap effective
    May 24, 2011. The swap will replace the $7 million
    interest rate swap, which is scheduled to expire on May 24,
    2011, on the $7 million senior debenture. The fixed rate on
    the current $7 million interest rate swap is 7.72% and will
    be replaced with a fixed rate of 6.472% on May 24, 2011.(2)
    
    The Company is required to make fixed rate interest payments on
    the current balance of the term loan, amortizing in accordance
    with the term loan amortization schedule. The Company fixed only
    the variable interest portion of the loan. The actual interest
    payments associated with the term loan also include an
    additional rate of 2.00% in accordance with the credit agreement.(3)
    
    The Company fixed only the variable interest portion of the
    debt. The actual interest payments associated with the
    debentures also include an additional rate of 4.10% and 4.00% on
    the $10.0 million and $15.0 million debentures,
    respectively.     22




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    NOTE 7 
    Shareholders
    Equity          NOTE 8 
    Commitments
    and Contingencies   23




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   NOTE 9 
    Earnings
    Per Share      For the Three Months


For the Nine MonthsEnded September 30,


Ended September 30,2010


2009


2010


2009Net income, as reported

$
15,036


$
11,019


$
44,331


$
36,204Common shares:BasicWeighted average shares outstanding


53,418,314



57,444,471



54,229,706



57,428,416DilutedWeighted average shares outstanding


53,418,314



57,444,471



54,229,706



57,428,416Dilutive effect of:Share awards under long term incentive plan


280,640



118,792



278,886



102,975Total


53,698,954



57,563,263



54,508,592



57,531,391Net income per common shareBasic

$
0.28


$
0.19


$
0.82


$
0.63Diluted

$
0.28


$
0.19


$
0.81


$
0.63  24




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##### Table of Contents



ITEM 2  MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS
  Forward-Looking
    Statements
  This quarterly report may provide information including
    certain statements which constitute forward-looking statements
    within the meaning of Section 27A of the Securities Act of
    1933, as amended, and Section 21E of the Securities
    Exchange Act of 1934, as amended. These include statements
    regarding the intent, belief, or current expectations of
    management, including, but not limited to, those statements that
    use the words believes, expects,
    anticipates, estimates, or similar
    expressions. You are cautioned that any such forward-looking
    statements are not guarantees of future performance and involve
    a number of risks and uncertainties, and results could differ
    materially from those indicated by such forward-looking
    statements. Among the important factors that could cause actual
    results to differ materially from those indicated by such
    forward-looking statements are: 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; ability to obtain rate increases in
    current market conditions; investment rate of return; changes in
    and adherence to insurance regulation; actions taken by
    regulators, rating agencies or lenders; attainment of certain
    processing efficiencies; changing rates of inflation; general
    economic conditions and other risks identified in our reports
    and registration statements filed with the Securities and
    Exchange Commission. We are not under any obligation to (and
    expressly disclaim any such obligation to) update or alter our
    forward-looking statements whether as a result of new
    information, future events or otherwise.
  Business
    Overview
  and/or
  fee-for-service
 25




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##### Table of Contents



Critical
    Accounting Policies
  Form 10-K
  Reclassifications
    and redefining segment reporting
      For the Three Months Ended September 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
102,557


$
5,050


$
107,607Reinsurance recoverables


(19,005
)






(19,005
)Net losses and loss adjustment expenses


83,552



5,050



88,602Salaries and employee benefits


19,630



(19,630
)


Policy acquisition and other underwriting expenses


28,824



14,263



43,087Other administrative expenses


9,013



(9,013
)


General selling and administrative expenses






8,277



8,277General corporate expenses






1,053



1,053Amortization expense


1,422







1,422Interest expense


2,620







2,620Total expenses

$
145,061


$



$
145,061   26




---



##### Table of Contents



For the Nine Months Ended September 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
278,431


$
15,153


$
293,584Reinsurance recoverables


(54,628
)






(54,628
)Net losses and loss adjustment expenses


223,803



15,153



238,956Salaries and employee benefits


59,402



(59,402
)


Policy acquisition and other underwriting expenses


79,932



45,240



125,172Other administrative expenses


29,323



(29,323
)


General selling and administrative expenses






24,037



24,037General corporate expenses






4,295



4,295Amortization expense


4,350







4,350Interest expense


8,061







8,061Total expenses

$
404,871


$



$
404,871     RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND
    2009
  Executive
    Overview
      Results
    of Operations
   27




---



##### Table of Contents



For the Three MonthsEnded September 30,2010


2009(In thousands, except share and per share data)Operating income, net of tax

$
14,605


$
11,688Net realized gains (losses), net of tax


431



(669
)Net income

$
15,036


$
11,019Diluted earnings per common share:Net operating income

$
0.27


$
0.20Net income

$
0.28


$
0.19Diluted weighted average common shares outstanding


53,968,954



57,563,263     Revenues
      For the Three MonthsEnded September 30,2010


2009Revenue:Net earned premiums

$
171,864


$
137,399Management administrative fees


5,744



6,497Claims fees


1,677



1,803Investment income


13,715



12,764Commission revenue


2,448



2,453Net realized gains (losses)


283



(742
)Total revenue

$
195,731


$
160,174    28




---



##### Table of Contents



Expenses
    Form 8-K
   29




---



##### Table of Contents



For the Three MonthsEnded September 30,2010


2009Expense:Net losses and loss adjustment expenses

$
105,939


$
88,602Policy acquisition and other underwriting expenses


59,013



43,087General selling & administrative expenses


5,881



8,277General corporate expenses


1,163



1,053Amortization expense


1,235



1,422Interest expense


2,405



2,620Total expenses

$
175,636


$
145,061       For the Three Months EndedSeptember 30,2010


2009Accident year loss ratio


65.9
%


69.0
%Favorable development on prior years


−4.3
%


−4.5
%Net loss & LAE ratio


61.6
%


64.5
%        30




---



##### Table of Contents



Liquidity and Capital Resources
    Other
    Items
  Equity
    earnings of affiliates, net of tax
    Reserves
    Other
    Than Temporary Impairments
      Investments
 31




---



##### Table of Contents



RESULTS
    OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
    2009
  Executive
    Overview
      Results
    of Operations
      For the Nine Months Ended September 30,2010


2009(In thousands, except share and per share data)Operating income, net of tax

$
44,048


$
39,957Net realized gains (losses), net of tax


283



(3,753
)Net income

$
44,331


$
36,204Diluted earnings per common share:Net operating income

$
0.81


$
0.69Net income

$
0.81


$
0.63Diluted weighted average common shares outstanding


54,508,592



57,531,391    32




---



##### Table of Contents



Revenues
      For the Nine MonthsEnded September 30,2010


2009Revenue:Net earned premiums

$
486,065


$
393,577Management administrative fees


13,570



15,653Claims fees


5,174



5,774Investment income


40,198



37,503Commission revenue


8,128



7,959Net realized gains (losses)


441



(3,692
)Total revenue

$
553,576


$
456,774            33




---



##### Table of Contents



Expenses
    Form 8-K
      For the Nine MonthsEnded September 30,2010


2009Expense:Net losses and loss adjustment expenses

$
292,631


$
238,956Policy acquisition and other underwriting expenses


168,262



125,172General selling & administrative expenses


17,108



24,037General corporate expenses


4,409



4,295Amortization expense


3,757



4,350Interest expense


7,259



8,061Total expenses

$
493,426


$
404,871      34




---



##### Table of Contents



For the Nine Months EndedSeptember 30,2010


2009Accident year loss ratio


65.1
%


66.0
%Favorable development on prior years


−4.9
%


−5.3
%Net loss & LAE ratio


60.2
%


60.7
%           Liquidity and Capital Resources
     35




---



##### Table of Contents



Other
    Items
  Equity
    earnings of affiliates, net of tax
    Reserves
    Minimum


MaximumReserve


Reserve


SelectedLine of Business

Range


Range


ReservesWorkers Compensation(1)

$
256,239


$
283,557


$
273,181Commercial Multiple Peril/General Liability


297,221



366,887



338,726Commercial Automobile


104,557



117,202



111,659Other


33,289



37,705



35,810Total Net Reserves

$
691,306


$
805,351


$
759,376     (1)
    
    Includes Residual Markets       36




---



##### Table of Contents



Reserves at


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior


Total


SeptemberLine of Business

2009


Year


Years


Incurred


Year


Years


Paid


30, 2010Workers Compensation

$
185,729


$
129,870


$
4,893


$
134,763


$
19,229


$
47,590


$
66,819


$
253,673Residual Markets


21,907



3,292



(2,627
)


665



1,065



1,999



3,064



19,508Commercial Multiple Peril/General Liability


333,688



76,653



(14,218
)


62,435



4,697



52,700



57,397



338,726Commercial Automobile


105,468



61,743



(8,697
)


53,046



19,718



27,137



46,855



111,659Other


35,584



44,805



(3,083
)


41,722



25,398



16,098



41,496



35,810Net Reserves


682,376


$
316,363


$
(23,732
)

$
292,631


$
70,107


$
145,524


$
215,631



759,376Reinsurance Recoverable


266,801



























284,387Consolidated

$
949,177


























$
1,043,763   TotalRe-estimated


DevelopmentReserves at


as aReserves at


September 30,


Percentage ofDecember 31,


2010 on


Prior YearLine of Business

2009


Prior Years


ReservesWorkers Compensation

$
185,729


$
190,622



2.6
%Commercial Multiple Peril/General Liability


333,688



319,470



−4.3
%Commercial Automobile


105,468



96,771



−8.2
%Other


35,584



32,501



−8.7
%Sub-total


660,469



639,364



−3.2
%Residual Markets


21,907



19,280



−12.0
%Total Net Reserves

$
682,376


$
658,644



−3.5
%   Workers Compensation Excluding Residual
    Markets
  Commercial Multiple Peril/General
    Liability
  Commercial Automobile
 37




---



##### Table of Contents



Other
  Residual Markets
  Other
    Than Temporary Impairments
      Investments
  LIQUIDITY
    AND CAPITAL RESOURCES
     38




---



##### Table of Contents



Other
    Items
  Interest
    Rate Swaps
    Derivative Instruments
  Credit
    Facilities
    Debt
 39




---



##### Table of Contents



Investment
    Portfolio
      Shareholders
    Equity
          Contractual
    Obligations and Commitments
    Recent
    Accounting Pronouncements
  Consolidation Amendments to FASB Interpretation
    No. 46(R)
  2010-06, Fair Value Measurements and Disclosures ( ):
    Improving Disclosures about Fair Value Measurements. 2010-06 Fair Value Measurements
 40




---



##### Table of Contents



2010-06
  2010-26, Financial Services  Insurance (Topic 944):
    Accounting for Costs Associated with Acquiring or Renewing
    Insurance Contracts. 2010-26 2010-26
 41




---



##### Table of Contents



ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            Rates Down


Rates


Rates Up100bps


Unchanged


100bpsFair Value

$
1,298,157


$
1,239,596


$
1,179,130Yield to Maturity or Call


1.80
%


2.68
%


3.69
%Effective Duration


4.50



4.83



5.03        42




---



##### Table of Contents



Derivative Instrument
    ITEM 4.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures.
  Rule 13a-15(e) Form 10-Q,
    Changes
    in Internal Control over Financial Reporting
   43




---



##### Table of Contents



PART II 
    OTHER INFORMATION ITEM 1.
    LEGAL
    PROCEEDINGS  Commitments and Contingencies Form 10-Q
  ITEM 1A.
    RISK
    FACTORS  Form 10-K
  ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS      Total Number


Maximumof Shares


Number ofPurchased as


Shares that mayPart of Publicly


yet beTotal


Average


Announced


RepurchasedNumber of


Price Paid


Plans or


Under the PlansPeriod

Shares


Per Share


Programs


or ProgramsJuly 1  July 31, 2010





$








2,842,000August 1  August 31, 2010


323,000


$
8.46







2,519,000September 1  September 30, 2010





$








2,519,000Total


323,000


$
8.46



   ITEM 6.
    EXHIBITS    ExhibitNo.

Description31
.1

Certification of Robert S. Cubbin, Chief Executive Officer of
    the Corporation, pursuant to Securities Exchange Act
    Rule 13a-14(a).31
.2

Certification of Karen M. Spaun, Senior Vice President and Chief
    Financial Officer of the Corporation, pursuant to Securities
    Exchange Act
    Rule 13a-14(a).32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the
    Sarbanes-Oxley
    Act of 2002, signed by Robert S. Cubbin, Chief Executive Officer
    of the Corporation.32
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the
    Sarbanes-Oxley
    Act of 2002, signed by Karen M. Spaun, Senior Vice President and
    Chief Financial Officer of the Corporation.  44




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##### Table of Contents



SIGNATURES    Meadowbrook Insurance Group, Inc.
  By:
    /s/  Karen
    M. Spaun      45




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##### Table of Contents



EXHIBITS INDEX
  ExhibitNo.

Description31
.1

Certification of Robert S. Cubbin, Chief Executive Officer of
    the Corporation, pursuant to Securities Exchange Act
    Rule 13a-14(a).31
.2

Certification of Karen M. Spaun, Senior Vice President and Chief
    Financial Officer of the Corporation, pursuant to Securities
    Exchange Act
    Rule 13a-14(a).32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the
    Sarbanes-Oxley
    Act of 2002, signed by Robert S. Cubbin, Chief Executive Officer
    of the Corporation.32
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the
    Sarbanes-Oxley
    Act of 2002, signed by Karen M. Spaun, Senior Vice President and
    Chief Financial Officer of the Corporation.  46