##### 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
    June 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
  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)

8-22ITEM 2



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

23-36ITEM 3



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK

37-38ITEM 4



CONTROLS AND PROCEDURES

38PART II  OTHER
    INFORMATIONITEM 1



LEGAL PROCEEDINGS

39ITEM 1A  RISK FACTORS

39ITEM 2



UNREGISTERED SALES OF EQUITY SECURITIES AND USE
    OF PROCEEDS

39ITEM 6



EXHIBITS

39SIGNATURES

40EX-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 June 30,
  2010


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

$
192,789


$
153,063Ceded


(30,029
)


(25,923
)Net earned premiums


162,760



127,140Net commissions and fees


7,135



8,396Net investment income


13,454



12,397Realized gains (losses):Total
    other-than-temporary
    impairments on securities


(106
)


(2,776
)Portion of loss recognized in other comprehensive income






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


(106
)


(1,042
)Net realized gains excluding
    other-than-temporary
    impairments on securities


398



84Net realized gains (losses)


292



(958
)Total revenues


183,641



146,975ExpensesLosses and loss adjustment expenses


119,576



92,171Reinsurance recoveries


(20,364
)


(16,712
)Net losses and loss adjustment expenses


99,212



75,459Policy acquisition and other underwriting expenses


57,370



43,092General selling & administrative expenses


5,321



7,594General corporate expenses


1,269



1,320Amortization expense


1,121



1,420Interest expense


2,411



2,659Total expenses


166,704



131,544Income before taxes and equity earnings


16,937



15,431Federal and state income tax expense


4,738



3,823Equity earnings of affiliates, net of tax


644



Equity earnings of unconsolidated subsidiaries, net of tax


18



37Net income

$
12,861


$
11,645Earnings Per ShareBasic

$
0.24


$
0.20Diluted

$
0.24


$
0.20Weighted average number of common sharesBasic


54,018,868



57,447,707Diluted


54,268,668



57,516,750Dividends paid per common share

$
0.03


$
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 Six Months Ended June 30,
  2010


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

$
372,402


$
308,077Ceded


(58,201
)


(51,899
)Net earned premiums


314,201



256,178Net commissions and fees


17,003



18,633Net investment income


26,483



24,739Realized gains (losses):Total
    other-than-temporary
    impairments on securities


(411
)


(4,827
)Portion of loss recognized in other comprehensive income






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


(411
)


(3,093
)Net realized gains excluding
    other-than-temporary
    impairments on securities


569



143Net realized gains (losses)


158



(2,950
)Total revenues


357,845



296,600ExpensesLosses and loss adjustment expenses


218,897



185,977Reinsurance recoveries


(32,205
)


(35,623
)Net losses and loss adjustment expenses


186,692



150,354Policy acquisition and other underwriting expenses


109,249



82,085General selling & administrative expenses


11,227



15,760General corporate expenses


3,246



3,242Amortization expense


2,522



2,928Interest expense


4,854



5,441Total expenses


317,790



259,810Income before taxes and equity earnings


40,055



36,790Federal and state income tax expense


12,396



11,692Equity earnings of affiliates, net of tax


1,166



Equity earnings of unconsolidated subsidiaries, net of tax


470



87Net income

$
29,295


$
25,185Earnings Per ShareBasic

$
0.54


$
0.44Diluted

$
0.53


$
0.44Weighted average number of common sharesBasic


54,642,127



57,420,255Diluted


54,887,561



57,481,241Dividends paid per common share

$
0.06


$
0.04    3




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##### Table of Contents



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


2009(Unaudited)(In thousands)Net income

$
12,861


$
11,645Other comprehensive income, net of tax:Unrealized gains on securities


13,469



6,371Unrealized gains in affiliates and unconsolidated subsidiaries


(7
)


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


1,092



(1,734
)Net deferred derivative gain (losses)  hedging
    activity


(447
)


1,417Less reclassification adjustment for investment (gains) losses
    included in net income


(216
)


980Other comprehensive gains, net of tax


13,891



7,034Comprehensive income

$
26,752


$
18,679   MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME
 For the
    Six Months Ended June 30,
  2010


2009(Unaudited)(In thousands)Net income

$
29,295


$
25,185Other comprehensive income, net of tax:Unrealized gains on securities


18,267



12,406Unrealized gains in affiliates and unconsolidated subsidiaries


140



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


485



(1,734
)Net deferred derivative gain (losses)  hedging
    activity


(625
)


1,746Less reclassification adjustment for investment (gains) losses
    included in net income


(60
)


2,994Other comprehensive gains, net of tax


18,207



15,412Comprehensive income

$
47,502


$
40,597    4




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##### Table of Contents



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


December 31,2010


2009(Unaudited)(In thousands, except share data)ASSETSInvestmentsDebt securities available for sale, at fair value (amortized
    cost of $1,112,064 and $1,045,454)

$
1,183,607


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


28,203



28,342Cash and cash equivalents


64,463



86,319Accrued investment income


12,691



11,599Premiums and agent balances receivable, net


180,508



155,327Reinsurance recoverable on:Paid losses


6,769



7,724Unpaid losses


279,223



266,801Prepaid reinsurance premiums


34,040



35,298Deferred policy acquisition costs


77,326



68,787Deferred federal income taxes






5,645Goodwill


118,842



118,842Other intangible assets


38,927



41,301Other assets


89,266



81,205Total assets

$
2,113,865


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

$
1,012,656


$
949,177Unearned premiums


350,507



325,915Debt


44,250



49,875Debentures


80,930



80,930Accounts payable and accrued expenses


37,806



34,251Funds held and reinsurance balances payable


29,379



29,161Payable to insurance companies


2,876



3,314Deferred federal income taxes


3,999



Other liabilities


20,362



20,240Total liabilities


1,582,765



1,492,863Shareholders EquityCommon stock, $0.01 stated value; authorized
    75,000,000 shares; 53,559,542 and 55,519,970 shares
    issued and outstanding


536



555Additional paid-in capital


293,932



304,930Retained earnings


193,456



172,441Note receivable from officer


(811
)


(825
)Accumulated other comprehensive income


43,987



25,780Total shareholders equity


531,100



502,881Total liabilities and shareholders equity

$
2,113,865


$
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(In thousands)Balances December 31, 2009

$
555


$
304,930


$
172,441


$
(825
)

$
25,780


$
502,881Net income










29,295











29,295Dividends declared and paid










(3,272
)










(3,272
)Net unrealized appreciation on available for sale securities


















18,692



18,692Net deferred derivative gain  hedging activity


















(625
)


(625
)Stock award


2



348















350Long term incentive plan; stock award for
    2009-2011
    plan years






501















501Repurchase of 2,158,000 shares of common stock


(21
)


(11,847
)


(5,008
)










(16,876
)Change in investment of affiliates, net of tax


















71



71Change in investment of unconsolidated subsidiaries


















69



69Note receivable from officer














14







14Balances June 30, 2010

$
536


$
293,932


$
193,456


$
(811
)

$
43,987


$
531,100    6




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##### Table of Contents



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


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

$
29,295


$
25,185Adjustments to reconcile net income to net cash provided by
    operating activities:Amortization of other intangible assets


2,522



2,928Amortization of deferred debenture issuance costs


132



215Depreciation of furniture, equipment, and building


2,793



2,543Net amortization of discount and premiums on bonds


1,759



1,578(Gain) loss on sale of investments, net


(60
)


2,994Gain on sale of fixed assets


(44
)


(44
)Long-term incentive plan expense


501



407Stock award


385



Equity earnings of affiliates, net of taxes


(1,166
)


Equity earnings of unconsolidated subsidiaries, net of tax


(470
)


Deferred income tax expense


(37
)


20Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable


(25,181
)


(18,538
)Reinsurance recoverable on paid and unpaid losses


(11,467
)


814Prepaid reinsurance premiums


1,258



3,056Deferred policy acquisition costs


(8,539
)


(2,573
)Other assets


(2,953
)


1,687Increase (decrease) in:Losses and loss adjustment expenses


63,479



16,709Unearned premiums


24,592



8,805Payable to insurance companies


(438
)


(2,413
)Funds held and reinsurance balances payable


218



(437
)Other liabilities


(3,687
)


1,057Total adjustments


43,597



18,808Net cash provided by operating activities


72,892



43,993Cash Flows From Investing ActivitiesPurchase of debt securities available for sale


(116,523
)


(105,185
)Proceeds from sales and maturities of debt securities available
    for sale


49,366



69,102Purchase of equity securities available for sale






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


420



Capital expenditures


(2,379
)


(1,589
)Acquisition of rights renewals


(148
)


Other investing activities


(286
)


247Net cash used in investing activities


(69,550
)


(37,659
)Cash Flows From Financing ActivitiesPayment of lines of credit


(5,625
)


(4,750
)Book overdrafts


933



896Dividends paid on common stock


(3,272
)


(2,299
)Cash payment for payroll taxes associated with long-term
    incentive plan net stock issuance


(35
)


(330
)Share repurchases


(17,130
)


Other financing activities


(69
)


(62
)Net cash used in financing activities


(25,198
)


(6,545
)Net decrease in cash and cash equivalents


(21,856
)


(211
)Cash and cash equivalents, beginning of period


86,319



76,588Cash and cash equivalents, end of period

$
64,463


$
76,377    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 June 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
87,176


$
4,995


$
92,171Reinsurance recoverables


(16,712
)






(16,712
)Net losses and loss adjustment expenses


70,464



4,995



75,459Salaries and employee benefits


19,945



(19,945
)


Policy acquisition and other underwriting expenses


27,139



15,953



43,092Other administrative expenses


9,917



(9,917
)


General selling and administrative expenses






7,594



7,594General corporate expenses






1,320



1,320Amortization expense


1,420







1,420Interest expense


2,659







2,659Total expenses

$
131,544


$



$
131,544   For the Six Months Ended June 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
175,874


$
10,103


$
185,977Reinsurance recoverables


(35,623
)






(35,623
)Net losses and loss adjustment expenses


140,251



10,103



150,354Salaries and employee benefits


39,772



(39,772
)


Policy acquisition and other underwriting expenses


51,108



30,977



82,085Other administrative expenses


20,310



(20,310
)


General selling and administrative expenses






15,760



15,760General corporate expenses






3,242



3,242Amortization expense


2,928







2,928Interest expense


5,441







5,441Total expenses

$
259,810


$



$
259,810     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
  NOTE 2 
    Restricted
    Stock Awards  Compensation  Stock
    Compensation
  NOTE 3 
    Debt  Credit
    Facilities
    Derivative
    Instruments
   11




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##### Table of Contents



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




Year


Year





June 30,


PrincipalIssuance


Description

Callable


Due


Interest Rate Terms


2010(1)


Amount2003


Junior subordinated debentures


2008



2033



Three-month LIBOR, plus 4.05
%


4.58
%

$
10,3102004


Senior debentures


2009



2034



Three-month LIBOR, plus 4.00
%


4.44
%


13,0002004


Senior debentures


2009



2034



Three-month LIBOR, plus 4.20
%


4.68
%


12,0002005


Junior subordinated debentures


2010



2035



Three-month LIBOR, plus 3.58
%


4.12
%


20,620Junior subordinated debentures(2)


2007



2032



Three-month LIBOR, plus 4.00
%


4.54
%


15,000Junior subordinated debentures(2)


2008



2033



Three-month LIBOR, plus 4.10
%


4.54
%


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    June 30, 2010Cost or


Gross UnrealizedAmortized








Non-Credit


EstimatedCost


Gains


Losses


OTTI


Fair ValueDebt Securities:U.S. Government and agencies

$
26,236


$
1,691


$



$



$
27,927Obligations of states and political subs


520,711



28,969



(86
)






549,594Corporate securities


319,631



23,533



(790
)


(37
)


342,337Redeemable preferred stocks


3,024



1,665











4,689Residential mortgage-backed securities


192,847



15,194







(366
)


207,675Commercial mortgage-backed securities


28,510



1,515



(303
)






29,722Other asset-backed securities


21,105



1,509



(141
)


(810
)


21,663Total debt securities available for sale


1,112,064



74,076



(1,320
)


(1,213
)


1,183,607Equity Securities:Perpetual preferred stock


11,766



1,426



(67
)






13,125Common stock


14,788



661



(371
)






15,078Total equity securities available for sale


26,554



2,087



(438
)






28,203Total securities available for sale

$
1,138,618


$
76,163


$
(1,758
)

$
(1,213
)

$
1,211,810   December 31, 2009Cost or


Gross UnrealizedAmortized








Non-Credit


EstimatedCost


Gains


Losses


OTTI(1)


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     (1)
    
    Includes unrealized gains (losses) related to securities with
    non-credit OTTI. 13




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     June 30,


December 31,2010


2009Unrealized gains

$
76,163


$
49,519Unrealized losses


(1,758
)


(3,298
)Non-credit OTTI(1)


(1,213
)


(1,698
)Net unrealized gains


73,192



44,523Deferred federal income tax expense


(25,617
)


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


750



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

$
48,325


$
29,634     (1)
    
    Includes unrealized gains (losses) related to securities with
    non-credit OTTI.    For the Three MonthsEnded June 30,


For the Six Months Ended June 30,2010


2009


2010


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

$
225


$
286


$
373


$
419Gross realized losses


(54
)


(994
)


(368
)


(2,824
)Total debt securities


171



(708
)


5



(2,405
)Equity Securities:Gross realized gains


106







116



Gross realized losses


(61
)


(272
)


(61
)


(589
)Total equity securities


45



(272
)


55



(589
)Net realized gains (losses)

$
216


$
(980
)

$
60


$
(2,994
)OTTI included in realized losses on securities above

$
106


$
1,042


$
411


$
3,093    14




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Available for SaleEstimated FairAmortized Cost


ValueDue in one year or less

$
41,297


$
43,280Due after one year through five years


199,530



209,602Due after five years through ten years


476,745



512,655Due after ten years


152,030



159,010Mortgage-backed securities, collateralized obligations and other
    asset-backed securities


242,462



259,060$
1,112,064


$
1,183,607     For the Three MonthsEnded June 30,


For the Six Months Ended June 30,2010


2009


2010


2009Net Investment Income Earned From:Debt securities

$
12,970


$
12,005


$
25,550


$
23,630Equity Securities


525



401



1,061



1,024Cash and cash equivalents


226



260



409



638Total gross investment income


13,721



12,666



27,020



25,292Less investment expenses


267



271



537



555Net investment income

$
13,454


$
12,395


$
26,483


$
24,737   Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
    other-than-temporary.
 15




---



##### 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.       16




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    June 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


8,856



(26
)


5,720



(60
)


14,576



(86
)Corporate securities


16,476



(813
)


87



(14
)


16,563



(827
)Redeemable preferred stocks






















Residential mortgage-backed securities










3,734



(366
)


3,734



(366
)Commercial mortgage-backed securities










298



(302
)


298



(302
)Other asset-backed securities


886



(16
)


2,488



(936
)


3,374



(952
)Total debt securities


26,218



(855
)


12,327



(1,678
)


38,545



(2,533
)Equity Securities:Perpetual preferred stock


1,062



(67
)










1,062



(67
)Common stock










5,097



(371
)


5,097



(371
)Total equity securities


1,062



(67
)


5,097



(371
)


6,159



(438
)Total securities

$
27,280


$
(922
)

$
17,424


$
(2,049
)

$
44,704


$
(2,971
)   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
)  17




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##### 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


Securities for which an impairment was not previously recognized


(298
)Reductions


Balance as of June 30, 2009

$
(344
)Balance as of January 1, 2010

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


(261
)Securities for which an impairment was not previously recognized


Reductions


Balance as of June 30, 2010

$
(808
)   NOTE 5 
    Fair Value Measurements
      
    Level 1  Observable unadjusted quoted prices in
    active markets for identical securities.      
    Level 2  Observable inputs other than quoted
    prices in active markets for identical securities, including:
    quoted prices in active markets for similar securities; quoted
    prices for identical or similar securities in markets that are
    not active; inputs other than quoted prices that are observable
    for the security (e.g., interest rates, yield curves observable
    at commonly quoted intervals, volatilities, prepayment speeds,
    credit risks, default rates); and inputs derived from or
    corroborated by observable market data by correlation or other
    means.     18




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  
    Level 3  Unobservable inputs, including the
    reporting entitys own data (e.g., cash flow estimates), as
    long as there are no contrary data indicating market
    participants would use different assumptions.        Fair Value Measurements UsingQuoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableJune 30, 2010


Assets


Inputs


InputsTotal


(Level 1)


(Level 2)


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

$
27,926


$



$
27,926


$
Obligations of states and political subs


549,595







549,595



Corporate securities


342,336







341,092



1,244Redeemable preferred stocks


4,689



4,689







Residential mortgage-backed securities


207,675







207,675



Commercial mortgage-backed securities


29,722







28,676



1,046Other asset-backed securities


21,664







18,146



3,518Total debt securities available for sale


1,183,607



4,689



1,173,110



5,808Equity Securities:Perpetual preferred stock


13,125



13,125







Common stock


15,078



15,078







Total equity securities available for sale


28,203



28,203







Total securities available for sale

$
1,211,810


$
32,892


$
1,173,110


$
5,808Derivatives  interest rate swaps

$
6,889






$
6,889



  19




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fair ValueMeasurementUsing SignificantUnobservableInputs - Level 3Balance as of January 1, 2010

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


(37
)Included in other comprehensive income


275Purchases


1,897Issuances


Settlements


(65
)Transfers in and out of Level 3


(423
)Balance as of June 30, 2010

$
5,808       NOTE 6 
    Derivative
    Instruments      FixedAmount atExpiration





Fixed


June 30,Effective Date

Date

Debt Instrument

Counterparty Interest Rate Terms

Rate


201010/06/2005

09/16/2010

Junior subordinated debentures(1)

Three-month LIBOR, plus 3.58%


8.340
%

$
20,00004/23/2008

05/24/2011

Senior debentures

Three-month LIBOR, plus 4.20%


7.720
%


7,00004/23/2008

06/30/2013

Junior subordinated debentures

Three-month LIBOR, plus 4.05%


8.020
%


10,00004/29/2008

04/29/2013

Senior debentures

Three-month LIBOR, plus 4.00%


7.940
%


13,00007/31/2008

07/31/2013

Term loan(2)

Three-month LIBOR


3.950
%


44,25008/15/2008

08/15/2013

Junior subordinated debentures(3)

Three-month LIBOR


3.780
%


10,00009/04/2008

09/04/2013

Junior subordinated debentures(3)

Three-month LIBOR


3.790
%


15,000     (1)
    
    During the quarter ended June 30, 2010, the Company entered
    into two $10 million forward starting interest rate swaps.
    The swaps will replace the $20 million interest rate swap,
    which is scheduled to expire on September 16, 20




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  2010, on the $20 million junior subordinated debenture. The
    fixed rate on the current $20 million interest rate swap is
    8.34% and the blended fixed rate on the two $10 million
    forward starting interest rate swaps is approximately 6.17%.(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.        NOTE 7 
    Shareholders
    Equity         21




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  NOTE 8 
    Commitments
    and Contingencies    NOTE 9 
    Earnings
    Per Share      For the Three Months


For the Six MonthsEnded June 30,


Ended June 30,2010


2009


2010


2009Net income, as reported

$
12,861


$
11,645


$
29,295


$
25,185Common shares:BasicWeighted average shares outstanding


54,018,868



57,447,707



54,642,127



57,420,255DilutedWeighted average shares outstanding


54,018,868



57,447,707



54,642,127



57,420,255Dilutive effect of:Stock options






23







Share awards under long term incentive plan


249,800



69,020



245,434



60,986Total


54,268,668



57,516,750



54,887,561



57,481,241Net income per common shareBasic

$
0.24


$
0.20


$
0.54


$
0.44Diluted

$
0.24


$
0.20


$
0.53


$
0.44  22




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##### Table of Contents



ITEM 2  MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONSFor the Periods ended June 30, 2010 and
    2009



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



We are a publicly traded specialty insurance underwriter and
    insurance administration services company. We market and
    underwrite specialty property and casualty insurance programs
    and products on both an admitted and non-admitted basis through
    a broad and diverse network of independent retail, wholesale
    program administrators and general agents, who value service,
    specialized knowledge, and focused expertise. Our primary focus
    is on niche or specialty products and program business and risk
    management solutions for our customers. The services and
    coverages we provide are tailored to meet specific requirements
    of defined client groups and their members, which may include
    specialty program underwriting; admitted and excess and surplus
    lines insurance products; alternative risk transfer solutions,
    and insurance administration services. Program business refers
    to an aggregation of individually underwritten risks that have
    some characteristic
    and/or are
    distributed through a select group of general agencies, retail
    agencies and program administrators. We provide various types of
    property and casualty insurance coverage, primarily to
    associations or similar groups of members and to the specified
    classes of business of our agents. With our specialty programs
    and products, we seek to combine profitable underwriting,
    investment returns and efficient capital management to deliver
    consistent long-term growth in shareholder value. We also earn
    commission revenue, which represents 1.6% of our total revenue,
    through the operation of its retail property and casualty
    insurance agencies, located in Michigan, California, and
    Florida. These agencies produce commercial, personal lines, life
    and accident and health insurance, with more than fifty
    unaffiliated insurance carriers. These agencies produce an
    immaterial amount of business for our affiliated Insurance
    Company Subsidiaries



Our programs are diversified geographically, by class and line
    of business, type of insured and distribution. In the
    workers compensation line of business, we have a regional
    focus in California, New England, Florida, and Nevada. Within
    the commercial automobile and commercial multiple peril line of
    business, we have a regional focus in the Southeast and
    California. In the general liability line of business, we have a
    focus in Texas. Our
    fee-for-service
    business is managed on a regional basis with an emphasis in the
    Midwest, New England, and Southeastern regions. Our corporate
    strategy emphasizes a regional focus and diverse sources of
    revenue between underwritten premiums, service fee revenue and
    commissions. This allows us to leverage our fixed costs over a
    larger revenue base and take advantage of new opportunities.


23




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##### Table of Contents



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


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
87,176


$
4,995


$
92,171Reinsurance recoverables


(16,712
)






(16,712
)Net losses and loss adjustment expenses


70,464



4,995



75,459Salaries and employee benefits


19,945



(19,945
)


Policy acquisition and other underwriting expenses


27,139



15,953



43,092Other administrative expenses


9,917



(9,917
)


General selling and administrative expenses






7,594



7,594General corporate expenses






1,320



1,320Amortization expense


1,420







1,420Interest expense


2,659







2,659Total expenses

$
131,544


$



$
131,544   24




---



##### Table of Contents



For the Six Months Ended June 30, 2009As Reported


Reclassification


ReclassifiedLosses and loss adjustment expenses

$
175,874


$
10,103


$
185,977Reinsurance recoverables


(35,623
)






(35,623
)Net losses and loss adjustment expenses


140,251



10,103



150,354Salaries and employee benefits


39,772



(39,772
)


Policy acquisition and other underwriting expenses


51,108



30,977



82,085Other administrative expenses


20,310



(20,310
)


General selling and administrative expenses






15,760



15,760General corporate expenses






3,242



3,242Amortization expense


2,928







2,928Interest expense


5,441







5,441Total expenses

$
259,810


$



$
259,810     RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND
    2009
  Executive
    Overview
      Results
    of Operations
   25




---



##### Table of Contents



Revenues
      For the Three MonthsEnded June 30,2010


2009Revenue:Net earned premiums

$
162,760


$
127,140Management administrative fees


2,829



3,833Claims fees


1,752



2,006Investment income


13,454



12,397Commission revenue


2,554



2,557Net realized gains (losses)


292



(958
)Total revenue

$
183,641


$
146,975             Expenses
   26




---



##### Table of Contents



Form 8-K
      For the Three MonthsEnded June 30,2010


2009Expense:Net losses and loss adjustment expenses

$
99,212


$
75,459Policy acquisition and other underwriting expenses


57,370



43,092General selling & administrative expenses


5,321



7,594General corporate expenses


1,269



1,320Amortization expense


1,121



1,420Interest expense


2,411



2,659Total expenses

$
166,704


$
131,544          27




---



##### Table of Contents



Liquidity and Capital Resources
    Other
    Items
  Equity
    earnings of affiliates, net of tax
    Reserves
    Other
    Than Temporary Impairments
      Investments
  RESULTS
    OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND
    2009
  Executive
    Overview
   28




---



##### Table of Contents



Results
    of Operations
    Revenues
      For the Six MonthsEnded June 30,2010


2009Revenue:Net earned premiums

$
314,201


$
256,178Management administrative fees


7,784



9,077Claims fees


3,499



3,972Investment income


26,483



24,739Commission revenue


5,720



5,584Net realized losses


158



(2,950
)Total revenue

$
357,845


$
296,600        29




---



##### Table of Contents



Expenses
    Form 8-K
      For the Six MonthsEnded June 30,2010


2009Expense:Net losses and loss adjustment expenses

$
186,692


$
150,354Policy acquisition and other underwriting expenses


109,249



82,085General selling & administrative expenses


11,227



15,760General corporate expenses


3,246



3,242Amortization expense


2,522



2,928Interest expense


4,854



5,441Total expenses

$
317,790


$
259,810  30




---



##### Table of Contents



Liquidity and Capital Resources
    Other
    Items
  Equity
    earnings of affiliates, net of tax
   31




---



##### Table of Contents



Reserves
    Minimum


MaximumReserve


Reserve


SelectedLine of Business

Range


Range


ReservesWorkers Compensation(1)

$
232,349


$
257,124


$
247,749Commercial Multiple Peril/General Liability


297,590



367,028



339,084Commercial Automobile


102,996



115,424



109,985Other


34,067



38,543



36,615Total Net Reserves

$
667,002


$
778,119


$
733,433     (1)
    
    Includes Residual Markets  third-party
      Reserves at


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior


Total


June 30,Line of Business

2009


Year


Years


Incurred


Year


Years


Paid


2010Workers Compensation

$
185,729


$
80,582


$
2,956


$
83,538


$
8,116


$
33,020


$
41,136


$
228,131Residual Markets


21,907



1,919



(2,268
)


(349
)


677



1,263



1,940


$
19,618Commercial Multiple Peril/General Liability


333,688



51,565



(9,100
)


42,465



2,197



34,872



37,069


$
339,084Commercial Automobile


105,468



40,391



(4,836
)


35,555



10,385



20,653



31,038


$
109,985Other


35,584



28,704



(3,221
)


25,483



11,917



12,535



24,452


$
36,615Net Reserves


682,376


$
203,161


$
(16,469
)

$
186,692


$
33,292


$
102,343


$
135,635



733,433Reinsurance Recoverable


266,801



























279,223Consolidated

$
949,177


























$
1,012,656  32




---



##### Table of Contents



TotalRe-estimated


DevelopmentReserves at


as aReserves at


June 30,


Percentage ofDecember 31,


2010 on


Prior YearLine of Business

2009


Prior Years


ReservesWorkers Compensation

$
185,729


$
188,685



1.6
%Commercial Multiple Peril/General Liability


333,688



324,588



−2.7
%Commercial Automobile


105,468



100,632



−4.6
%Other


35,584



32,363



−9.1
%Sub-total


660,469



646,268



−2.2
%Residual Markets


21,907



19,639



−10.4
%Total Net Reserves

$
682,376


$
665,907



−2.4
%   Workers Compensation Excluding Residual
    Markets
  Commercial Multiple Peril/General
    Liability
  Commercial Automobile
  Other
  Residual Markets
 33




---



##### Table of Contents



Other
    Than Temporary Impairments
      Investments
  LIQUIDITY
    AND CAPITAL RESOURCES
           34




---



##### Table of Contents



Other
    Items
  Interest
    Rate Swaps
    Derivative Instruments
  Credit
    Facilities
      Debt
  Investment
    Portfolio
      Shareholders
    Equity
     35




---



##### Table of Contents



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
  2010-06
 36




---



##### Table of Contents



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

Rates

Rates Up100bps

Unchanged

100bpsFair Value

$
1,240,721


$
1,183,607


$
1,125,712Yield to Maturity or Call


2.16
%


3.10
%


4.11
%Effective Duration


4.64



4.80



5.03          37




---



##### 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
   38




---



##### 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 ProgramsApril 1  April 30, 2010


50,000


$
7.90







3,494,000May 1  May 31, 2010


301,700


$
8.30







3,192,300June 1  June 30, 2010


350,300


$
8.51







2,842,000Total


702,000


$
8.38



   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.  39




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##### Table of Contents



SIGNATURES    Meadowbrook Insurance Group, Inc.
  By:
    /s/  Karen
    M. Spaun      40




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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.  41