##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington D.C. 20549
      FORM 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarter ended
    June 30, 2006oro

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

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
  Rule 12b-2
 o þ 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)


4-5Consolidated
    Balance Sheets (unaudited)


6Consolidated
    Statements of Cash Flows (unaudited)


7Notes to
    Consolidated Financial Statements (unaudited)


8-21ITEM 2



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


22-38ITEM 3



QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


38-39ITEM 4



CONTROLS AND
    PROCEDURES


39-40PART II 
    OTHER INFORMATIONITEM 1



LEGAL
    PROCEEDINGS


40ITEM 1A



RISK
    FACTORS


40ITEM 2



UNREGISTERED SALES
    OF EQUITY SECURITIES AND USE OF PROCEEDS


40ITEM 4



SUBMISSION OF
    MATTERS TO A VOTE OF SECURITY HOLDERS


40ITEM 6



EXHIBITS


41SIGNATURES


42Executive Nonqualified Excess Plan, Trust AgreementCertification of Robert S. Cubbin, CEOCertification of Karem M. Spaun, Senior V.P. and CFOCertification pursuant to 18 U.S.C. Section 1350Certification pursuant to 18 U.S.C. Section 1350   1




---



##### 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 30,2006


2005(Unaudited)(In thousands,except share data)RevenuesPremiums earnedGross

$
163,394


$
161,550Ceded


(35,756
)


(37,399
)Net earned premiums


127,638



124,151Net commissions and fees


21,987



18,133Net investment income


10,619



8,568Net realized gains (losses)


18



(10
)Total revenues


160,262



150,842ExpensesLosses and loss adjustment expenses


107,819



117,864Reinsurance recoveries


(33,630
)


(43,002
)Net losses and loss adjustment
    expenses


74,189



74,862Salaries and employee benefits


27,214



26,253Policy acquisition and other
    underwriting expenses


24,604



21,793Other administrative expenses


15,234



13,831Interest expense


2,887



1,579Total expenses


144,128



138,318Income before taxes and equity
    earnings


16,134



12,524Federal and state income tax
    expense


5,159



4,202Equity earnings of affiliates


25



1Net income

$
11,000


$
8,323Earnings Per ShareBasic

$
0.38


$
0.29Diluted

$
0.37


$
0.28Weighted average number of common
    sharesBasic


28,842,427



29,101,484Diluted


29,579,217



29,419,606    2




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
    CONSOLIDATED STATEMENTS OF INCOME
 For the Three Months Ended June 30,2006


2005(Unaudited)(In thousands,except share data)RevenuesPremiums earnedGross

$
81,703


$
80,745Ceded


(17,189
)


(17,381
)Net earned premiums


64,514



63,364Net commissions and fees


10,698



8,034Net investment income


5,380



4,477Net realized gains


25



104Total revenues


80,617



75,979ExpensesLosses and loss adjustment expenses


57,935



61,522Reinsurance recoveries


(20,789
)


(23,794
)Net losses and loss adjustment
    expenses


37,146



37,728Salaries and employee benefits


13,846



13,648Policy acquisition and other
    underwriting expenses


13,180



10,971Other administrative expenses


7,275



6,046Interest expense


1,499



806Total expenses


72,946



69,199Income before taxes and equity
    earnings


7,671



6,780Federal and state income tax
    expense


2,312



2,250Equity earnings of affiliates


16



50Net income

$
5,375


$
4,580Earnings Per ShareBasic

$
0.19


$
0.16Diluted

$
0.18


$
0.16Weighted average number of common
    sharesBasic


28,820,862



29,130,033Diluted


29,571,925



29,443,933    3




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE
    INCOME
  For the Six Months Ended June 30,2006


2005(Unaudited)(In thousands)Net income

$
11,000


$
8,323Other comprehensive income, net of
    tax:Unrealized losses on securities


(4,814
)


(1,211
)Net deferred derivative
    gain  hedging activity


431



Less: reclassification adjustment
    for losses included in net income


19



79Other comprehensive loss, net of
    tax


(4,364
)


(1,132
)Comprehensive income

$
6,636


$
7,191    4




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME
  For the Three Months Ended June 30,2006


2005(Unaudited)(In thousands)Net income

$
5,375


$
4,580Other comprehensive income, net of
    tax:Unrealized (losses) gains on
    securities


(2,037
)


3,252Net deferred derivative
    gain  hedging activity


179



Less: reclassification adjustment
    for losses included in net income






2Other comprehensive (loss) gain,
    net of tax


(1,858
)


3,254Comprehensive income

$
3,517


$
7,834    5




---



##### Table of Contents



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


December 31,2006


2005(Unaudited)(In thousands,except share data)ASSETSInvestmentsDebt securities available for
    sale, at fair value (amortized cost of $458,145 and $403,947)

$
448,352


$
402,195Cash and cash equivalents


22,470



58,038Accrued investment income


5,538



4,953Premiums and agent balances
    receivable, net


99,509



84,807Reinsurance recoverable on:Paid losses


13,232



15,327Unpaid losses


193,416



187,254Prepaid reinsurance premiums


23,518



24,588Deferred policy acquisition costs


25,877



26,371Deferred federal income taxes


19,531



16,630Goodwill


30,802



30,802Other assets


51,184



50,379Total assets

$
933,429


$
901,344LIABILITIES AND
    SHAREHOLDERS EQUITYLiabilitiesLosses and loss adjustment expenses

$
484,569


$
458,677Unearned premiums


140,868



140,990Debt


11,900



7,000Debentures


55,930



55,930Accounts payable and accrued
    expenses


26,279



26,667Reinsurance funds held and
    balances payable


15,212



15,240Payable to insurance companies


3,306



6,684Other liabilities


10,784



12,791Total liabilities


748,848



723,979Shareholders EquityCommon stock, $0.01 stated
    value; authorized 50,000,000 shares; 28,833,616 and
    28,672,009 shares issued and outstanding


288



287Additional paid-in capital


125,829



124,819Retained earnings


65,248



54,248Note receivable from officer


(859
)


(859
)Accumulated other comprehensive
    loss


(5,925
)


(1,130
)Total shareholders equity


184,581



177,365Total liabilities and
    shareholders equity

$
933,429


$
901,344    6




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Six Months Ended June 30,2006


2005(Unaudited)(In thousands)Cash Flows From Operating
    ActivitiesNet income

$
11,000


$
8,323Adjustments to reconcile net income
    to net cash provided by operating activities:Amortization of other intangible
    assets


307



185Amortization of deferred debenture
    issuance costs


118



75Depreciation of furniture,
    equipment, and building


1,122



1,248Net accretion of discount and
    premiums on bonds


1,266



1,180Loss on sale of investments, net


30



121Gain on sale of fixed assets


(44
)


(126
)Stock-based employee compensation


114



23Incremental tax benefits from stock
    options exercised


(301
)


Long-term incentive plan expense


393



390Deferred income tax (benefit)
    expense


(319
)


351Changes in operating assets and
    liabilities:Decrease (increase) in:Premiums and agent balances
    receivable


(14,702
)


(16,086
)Reinsurance recoverable on paid and
    unpaid losses


(4,066
)


(19,737
)Prepaid reinsurance premiums


1,070



725Deferred policy acquisition costs


494



(1,000
)Other assets


423



4,060Increase (decrease) in:Losses and loss adjustment expenses


25,892



39,912Unearned premiums


(122
)


5,401Payable to insurance companies


(3,378
)


(4,021
)Reinsurance funds held and balances
    payable


(28
)


1,454Other liabilities


(2,219
)


542Total adjustments


6,050



14,697Net cash provided by operating
    activities


17,050



23,020Cash Flows From Investing
    ActivitiesPurchase of debt securities
    available for sale


(112,107
)


(152,612
)Proceeds from sales and maturities
    of debt securities available for sale


56,614



106,298Proceeds from sales of equity
    securities available for sale






8Capital expenditures


(2,980
)


(12,915
)Purchase of books of business


(120
)


(149
)Proceeds from sale of assets






633Other investing activities


288



399Net cash used in investing
    activities


(58,305
)


(58,338
)Cash Flows From Financing
    ActivitiesProceeds from lines of credit


10,078



2,654Payment of lines of credit


(5,178
)


(4,880
)Book overdraft


421



757Issuance of common stock


202



952Share repurchases of common stock






(1,094
)Incremental tax benefits from stock
    options exercised


301



Other financing activities


(137
)


(111
)Net cash provided by (used in)
    financing activities


5,687



(1,722
)Net decrease in cash and cash
    equivalents


(35,568
)


(37,040
)Cash and cash equivalents,
    beginning of period


58,038



69,875Cash and cash equivalents, end of
    period

$
22,470


$
32,835    7




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)

NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)

(Unaudited)  Note 1 
    Summary of Significant Accounting Policies
  Basis
    of Presentation and Management Representation
        Form 10-K,
    Revenue
    Recognition
           8




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
           Earnings
    Per Share
        Recent
    Accounting Pronouncements
  Accounting
    for Certain Hybrid Financial Instruments.
  Accounting for Servicing of Financial Assets. Accounting for Transfers and Servicing of Financial
    Assets and Extinguishments of Liabilities,
 9




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
    Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
  Note 2 
    Stock Options, Long Term Incentive Plan, and Deferred
    Compensation Plan
  Share-Based Payment, Accounting for Stock-Based Compensation 
    Transition and Disclosure  an amendment of FASB
    Statement No. 123.
         10




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
     Weighted-AverageExerciseOptions


PriceOutstanding as of
    December 31, 2005


1,605,901


$
5.42Granted






Exercised


(277,536
)

$
3.34Forfeited


(403,695
)

$
7.02Outstanding as of June 30,
    2006


924,670


$
5.35Exercisable as of June 30,
    2006


854,032


$
5.26     Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageRange of




Remaining


Exercise





ExerciseExercise Prices

Options


Life (Years)


Price


Options


Price$2.173 to $3.066


433,559



1.6


$
2.66



383,929


$
2.73$3.507


356,380



1.2


$
3.51



356,380


$
3.51$6.48


5,000



3.7


$
6.48



3,500


$
6.48$10.91 to $30.45


129,731



2.0


$
19.37



110,223


$
19.68924,670



1.7


$
5.35



854,032


$
5.26       For the SixMonths EndedJune 30, 2005Net income, as reported

$
8,323Add: Stock-based employee
    compensation expense included in reported income, net of related
    tax effects


15Deduct: Total stock-based employee
    compensation expense determined under
    fair-value-based
    methods for all awards, net of related tax effects


(121
)Pro forma net income

$
8,217Earnings per share:Basic  as reported

$
0.29Basic  pro forma

$
0.28Diluted  as reported

$
0.28Diluted  pro forma

$
0.28   11




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
  For the ThreeMonths EndedJune 30, 2005Net income, as reported

$
4,580Add: Stock-based employee
    compensation expense included in reported income, net of related
    tax effects


6Deduct: Total stock-based employee
    compensation expense determined under
    fair-value-based
    methods for all awards, net of related tax effects


(55
)Pro forma net income

$
4,531Earnings per share:Basic  as reported

$
0.16Basic  pro forma

$
0.16Diluted  as reported

$
0.16Diluted  pro forma

$
0.15       Note 3 
    Reinsurance
  excess-of-loss
 12




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
  Accounting and Reporting for Reinsurance for
    Short-Duration and Long-Duration Contracts.
        June 30,


December 31,2006


2005Gross exposure

$
14,134


$
14,046Collateral or other security


(2,898
)


(2,749
)Allowance


(9,508
)


(9,662
)Net exposure

$
1,728


$
1,635     excess-of-loss excess-of-loss excess-of-loss
 13




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
                  14




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
   Note 4 
    Debt
  Lines
    of Credit
            Senior
    Debentures
        Junior
    Subordinated Debentures
  time-to-time,
 15




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
        time-to-time,
            Note 5 
    Derivative Instruments
  Accounting for Derivative
    Instruments and Hedging Activities,
  non-amortizing,
 16




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
   non-amortizing,
      Note 6 
    Shareholders Equity
      Note 7 
    Regulatory Matters and Rating Agencies
   17




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
            Note 8 
    Segment Information
    Specialty
    Risk Management Operations
   18




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
   Agency
    Operations
      For the Six MonthsEnded June 30,2006


2005RevenuesNet earned premiums

$
127,638


$
124,151Management fees


9,621



8,296Claims fees


4,451



3,518Loss control fees


1,131



1,128Reinsurance placement


561



439Investment income


10,170



8,554Net realized gains (losses)


18



(92
)Specialty risk management


153,590



145,994Agency operations


7,139



5,942Miscellaneous income(2)


449



96Intersegment revenue


(916
)


(1,190
)Consolidated revenue

$
160,262


$
150,842Pre-tax income:Specialty risk management

$
18,632


$
13,983Agency operations(1)


2,265



1,982Non-allocated expenses


(4,763
)


(3,441
)Consolidated pre-tax income

$
16,134


$
12,524   19




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
  For the Three MonthsEnded June 30,2006


2005RevenuesNet earned premiums

$
64,514


$
63,364Management fees


5,090



4,100Claims fees


2,351



1,766Loss control fees


593



555Reinsurance placement


143



94Investment income


5,140



4,470Net realized gains


25



22Specialty risk management


77,856



74,371Agency operations


2,878



1,982Miscellaneous income(2)


240



89Intersegment revenue


(357
)


(463
)Consolidated revenue

$
80,617


$
75,979Pre-tax income:Specialty risk management

$
9,334


$
8,583Agency operations(1)


614



69Non-allocated expenses


(2,277
)


(1,872
)Consolidated pre-tax income

$
7,671


$
6,780     (1)
    
    The Companys agency
    operations include an allocation of corporate overhead, which
    includes expenses associated with accounting, information
    services, legal, and other corporate services. The corporate
    overhead allocation excludes those expenses specific to the
    holding company. For the six months ended June 30, 2006 and
    2005, the allocation of corporate overhead to the agency
    operations segment was $1.6 million and $1.7 million,
    respectively. For the three months ended June 30, 2006 and
    2005, the allocation of corporate overhead to the agency
    operations segment was $771,000 and $983,000, respectively.(2)
    
    The miscellaneous income included
    in the revenue relates to miscellaneous interest income within
    the holding company.    For the Six MonthsEnded June 30,2006


2005Holding company expenses

$
(1,569
)

$
(1,678
)Amortization


(307
)


(184
)Interest expense


(2,887
)


(1,579
)$
(4,763
)

$
(3,441
)   For the Three MonthsEnded June 30,2006


2005Holding company expenses

$
(636
)

$
(974
)Amortization


(142
)


(92
)Interest expense


(1,499
)


(806
)$
(2,277
)

$
(1,872
)  20




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
   Note 9 
    Commitments and Contingencies
  Accounting for
    Contingencies,
 21




---



##### Table of Contents



ITEM 2
    MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    For the Periods ended June 30, 2006 and 2005  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 collectibility of reinsurance; increased rate
    pressure on premiums; obtainment of certain 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; obtainment 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.
  Description
    of Business
  rent-a-captives,
  Critical
    Accounting Estimates
  Form 10-K
  RESULTS
    OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND
    2005
  Executive
    Overview
   22




---



##### Table of Contents



fee-for-service
    year-to-date
  Results
    of Operations
  fee-for-service
  fee-for-service
 23




---



##### Table of Contents



Specialty
    Risk Management Operations
    For the Six MonthsEnded June 30,2006


2005Revenue:Net earned premiums

$
127,638


$
124,151Management fees


9,621



8,296Claims fees


4,451



3,518Loss control fees


1,131



1,128Reinsurance placement


561



439Investment income


10,170



8,554Net realized gains (losses)


18



(92
)Total revenue

$
153,590


$
145,994Pre-tax incomeSpecialty risk management
    operations

$
18,632


$
13,983              24




---



##### Table of Contents



Other Items  Reserves
    Agency
    Operations
    For the SixMonthsEnded June 30,2006

2005Net commission

$
7,139


$
5,942Pre-tax income(1)

$
2,265


$
1,982     (1)
    
    Our agency operations include an
    allocation of corporate overhead, which includes expenses
    associated with accounting, information services, legal, and
    other corporate services. The corporate overhead allocation
    excludes those expenses specific to the holding company. For the
    six months ended June 30, 2006 and 2005, the allocation of
    corporate overhead to the agency operations segment was
    $1.6 million and $1.7 million, respectively.      Other
    Items
  Reserves
   25




---



##### Table of Contents



Minimum


MaximumReserve


Reserve


SelectedLine of Business

Range


Range


ReservesWorkers Compensation(1)

$
148,704


$
167,205


$
158,370Commercial Multiple Peril /
    General Liability


52,943



61,477



57,779Commercial Automobile


46,994



53,344



51,179Other


21,862



25,782



23,826Total Net Reserves

$
270,503


$
307,808


$
291,154     (1)
    
    Includes Residual Markets        Reserves at


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior





June 30,Line of Business

2005


Year


Years


Incurred


Year


Years


Total Paid


2006Workers Compensation

$
128,802


$
28,287


$
457


$
28,744


$
1,412


$
24,011


$
25,423


$
132,123Residual Markets


24,440



6,365



(72
)


6,293



821



3,666



4,487



26,246Commercial Multiple Peril/General
    Liability


52,506



11,479



(967
)


10,512



(173
)


5,412



5,239



57,779Commercial Automobile


44,382



19,453



773



20,226



2,437



10,992



13,429



51,179Other


21,293



9,318



(904
)


8,414



2,207



3,674



5,881



23,826Net Reserves


271,423


$
74,902


$
(713
)

$
74,189


$
6,704


$
47,755


$
54,459



291,153Reinsurance Recoverable


187,254



























193,416Consolidated

$
458,677


























$
484,569   26




---



##### Table of Contents



Re-estimated


DevelopmentReserves at


Reserves at


as a PercentageDecember 31,


June 30, 2006


of Prior YearLine of Business

2005


on Prior Years


ReservesWorkers Compensation

$
128,802


$
129,259



0.4
%Commercial Multiple Peril/General
    Liability


52,506



51,539



(1.8
)%Commercial Automobile


44,382



45,155



1.7
%Other


21,293



20,389



(4.2
)%Sub-total


246,983



246,342



(0.3
)%Residual Markets


24,440



24,368



(0.3
)%Total Net Reserves

$
271,423


$
270,710



(0.3
)%   Workers
    Compensation Excluding Residual Markets
    Commercial
    Multiple Peril/General Liability
    Commercial
    Automobile
    Other
   27




---



##### Table of Contents



Residual
    Markets
    Salary
    and Employee Benefits and Other Administrative
    Expenses
        Interest
    Expense
  Liquidity and Capital
    Resources
  Income
    Taxes
    Other
    than Temporary Impairments
   28




---



##### Table of Contents



June 30, 2006Less than 12 months


Greater than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments with


Unrealized


Investments with


Unrealized


Investments with


UnrealizedUnrealized Losses


Losses


Unrealized Losses


Losses


Unrealized Losses


LossesDebt Securities:Debt securities issued by
    U.S. government and agencies

$
12,832


$
(278
)

$
22,386


$
(711
)

$
35,218


$
(989
)Obligations of states and
    political subdivisions


125,017



(2,868
)


40,818



(1,638
)


165,835



(4,506
)Corporate securities


24,888



(968
)


38,669



(1,667
)


63,557



(2,635
)Mortgage and asset backed
    securities


60,654



(1,721
)


33,420



(1,592
)


94,074



(3,313
)Totals

$
223,391


$
(5,835
)

$
135,293


$
(5,608
)

$
358,684


$
(11,443
)   December 31, 2005Less than 12 months


Greater than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments with


Unrealized


Investments with


Unrealized


Investments with


UnrealizedUnrealized Losses


Losses


Unrealized Losses


Losses


Unrealized Losses


LossesDebt Securities:Debt securities issued by
    U.S. government and agencies

$
10,627


$
(155
)

$
24,328


$
(565
)

$
34,955


$
(720
)Obligations of states and
    political subdivisions


64,559



(877
)


24,818



(616
)


89,377



(1,493
)Corporate securities


33,820



(769
)


29,586



(953
)


63,406



(1,722
)Mortgage and asset backed
    securities


58,048



(953
)


20,667



(649
)


78,715



(1,602
)Totals

$
167,053


$
(2,754
)

$
99,399


$
(2,783
)

$
266,452


$
(5,537
)     RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND
    2005
  Results
    of Operations
   29




---



##### Table of Contents



fee-for-service
  fee-for-service
  Specialty
    Risk Management Operations
    For the Three Months Ended June 30,2006


2005Revenue:Net earned premiums

$
64,514


$
63,364Management fees


5,090



4,100Claims fees


2,351



1,766Loss control fees


593



555Reinsurance placement


143



94Investment income


5,140



4,470Net realized gains


25



22Total revenue

$
77,856


$
74,371Pre-tax incomeSpecialty risk management
    operations

$
9,334


$
8,583            30




---



##### Table of Contents



Agency
    Operations
    For the Three MonthsEnded June 30,2006

2005Net commission

$
2,878


$
1,982Pre-tax income(1)

$
614


$
69     (1)
    
    Our agency operations include an
    allocation of corporate overhead, which includes expenses
    associated with accounting, information services, legal, and
    other corporate services. The corporate overhead allocation
    excludes those expenses specific to the holding company. For the
    three months ended June 30, 2006 and 2005, the allocation
    of corporate overhead to the agency operations segment was
    $771,000 and $983,000, respectively.     31




---



##### Table of Contents



Other
    Items
  Reserves
    Salary
    and Employee Benefits and Other Administrative
    Expenses
        Interest
    Expense
  Liquidity and Capital Resources
  Income
    Taxes
   32




---



##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
    For the Six MonthsEnded June 30,2006


2005Net income

$
11,000


$
8,323Regulated Subsidiaries:Net income

$
9,535


$
6,370Adjustments to reconcile net
    income to net cash provided by operating activities


1,057



1,493Changes in operating assets and
    liabilities


8,696



18,482Total adjustments


9,753



19,975Net cash provided by operating
    activities

$
19,288


$
26,345Non-regulated Subsidiaries:Net income

$
1,465


$
1,953Depreciation and amortization


1,428



1,433Interest


2,887



1,579Net income, excluding interest,
    depreciation, and amortization


5,781



4,965Adjustments to reconcile net
    income to net cash used in operating activities


1,629



1,954Changes in operating assets and
    liabilities


(5,333
)


(7,232
)Total adjustments


(3,703
)


(5,278
)Depreciation and amortization


(1,428
)


(1,433
)Interest


(2,887
)


(1,579
)Net cash used in operating
    activities

$
(2,238
)

$
(3,325
)Consolidated total adjustments


6,050



14,697Consolidated net cash provided by
    operating activities

$
17,050


$
23,020   33




---



##### Table of Contents



For the Three MonthsEnded June 30,2006


2005Net income

$
5,375


$
4,580Regulated Subsidiaries:Net income

$
4,952


$
3,752Adjustments to reconcile net
    income to net cash provided by operating activities


723



786Changes in operating assets and
    liabilities


740



6,469Total adjustments


1,463



7,255Net cash provided by operating
    activities

$
6,415


$
11,007Non-regulated Subsidiaries:Net income

$
423


$
828Depreciation and amortization


720



756Interest


1,499



806Net income, excluding interest,
    depreciation, and amortization


2,642



2,390Adjustments to reconcile net
    income to net cash used in operating activities


1,052



1,109Changes in operating assets and
    liabilities


(3,913
)


(4,093
)Total adjustments


(2,861
)


(2,984
)Depreciation and amortization


(720
)


(756
)Interest


(1,499
)


(806
)Net cash used in operating
    activities

$
(2,438
)

$
(2,156
)Consolidated total adjustments


(1,398
)


4,271Consolidated net cash provided by
    operating activities

$
3,977


$
8,851           Other
    Items
   34




---



##### Table of Contents



Accounting for Derivative Instruments and Hedging
    Activities,
  non-amortizing,
  non-amortizing,
   35




---



##### Table of Contents



36




---



##### Table of Contents



Contractual
    Obligations and Commitments
    Regulatory
    and Rating Issues
        Reinsurance
    Convertible
    Note
   37




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Accounting for Certain Hybrid Financial
    Instruments.
  Accounting for Servicing of Financial Assets. Accounting for Transfers and Servicing of Financial
    Assets and Extinguishments of Liabilities,
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk         38




---



##### Table of Contents



Rates Down


Rates


Rates Up100bps


Unchanged


100bpsMarket Value

$
466,349


$
448,351


$
430,642Yield to Maturity or Call


3.95
%


4.95
%


5.95
%Effective Duration


3.85



3.94



3.92       Accounting for Derivative
    Instruments and Hedging Activities,
    Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures.
  Rule 13a-15(e) Form 10-Q,
   39




---



##### Table of Contents



Changes
    in Internal Control over Financial Reporting
   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    Form 10-K
  Item 4.
    Submission
    of Matters to a Vote of Security Holders           40




---



##### Table of Contents



Item 6.
    Exhibits    ExhibitNo.

Description10
.1

Executive Nonqualified Excess
    Plan, Plan Document, effective May 1, 2006 (incorporated by
    reference to Exhibit 10.1 from Current Report on
    Form 8-K
    filed on May 31, 2006).10
.2

Executive Nonqualified Excess Plan
    Adoption Agreement (incorporated by reference to
    Exhibit 10.2 from Current Report on
    Form 8-K
    filed on May 31, 2006).10
.3

Executive Nonqualified Excess
    Plan, Rabbi Trust Agreement, between Meadowbrook, Inc. and
    Delaware Charter Guarantee & Trust Company, conducting
    business as Principal Trust Company, dated March 30, 2006.31
.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




---



##### Table of Contents



SIGNATURES    Meadowbrook Insurance
    Group, Inc.
  By:
    /s/  Karen
    M. Spaun  Senior Vice President and
  Chief Financial Officer
   42




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description10
.1

Executive Nonqualified Excess
    Plan, Plan Document, effective May 1, 2006 (incorporated by
    reference to Exhibit 10.1 from Current Report on
    Form 8-K
    filed on May 31, 2006).10
.2

Executive Nonqualified Excess Plan
    Adoption Agreement (incorporated by reference to
    Exhibit 10.2 from Current Report on
    Form 8-K
    filed on May 31, 2006).10
.3

Executive Nonqualified Excess
    Plan, Rabbi Trust Agreement, between Meadowbrook, Inc. and
    Delaware Charter Guarantee & Trust Company, conducting
    business as Principal Trust Company, dated March 30, 2006.31
.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.  43