##### 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 1934
 For the quarter ended March 31, 2009
 or
 o
    
    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.
  Michigan
    
    38-2626206(State of Incorporation)
    
    (IRS Employer Identification No.)
 26255 American Drive, Southfield, Michigan 48034
 (248) 358-1100  )
 þ o
 o o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONITEM 1  FINANCIAL STATEMENTSConsolidated Statements of Income (unaudited)
    
    
    3Consolidated Statements of Comprehensive Income (unaudited)
    
    
    4Consolidated Balance Sheets (unaudited)
    
    
    5Consolidated Statement of Cash Flows (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7-29ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    30-51ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    51-53ITEM 4  CONTROLS AND PROCEDURES
    
    
    53-54PART II  OTHER INFORMATIONITEM 1  LEGAL PROCEEDINGS
    
    
    55ITEM 1A  RISK FACTORS
    
    
    55ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    55ITEM 6  EXHIBITS
    
    
    55-56SIGNATURES
    
    
    57EX-31.1EX-31.2EX-32.1EX-32.2
  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 Three Months Ended March 31,
(Unaudited)
(in thousands, except share data)
 2009
    
    2008RevenuesPremiums earnedGross
    
    $
    155,014
    
    
    $
    83,971Ceded
    
    
    (25,976
    )
    
    
    (17,949
    )Net earned premiums
    
    
    129,038
    
    
    
    66,022Net commissions and fees
    
    
    10,237
    
    
    
    12,031Net investment income
    
    
    12,342
    
    
    
    7,148Net realized losses
    
    
    (1,992
    )
    
    
    (31
    )Total revenues
    
    
    149,625
    
    
    
    85,170ExpensesLosses and loss adjustment expenses
    
    
    88,698
    
    
    
    48,739Reinsurance recoveries
    
    
    (18,911
    )
    
    
    (11,078
    )Net losses and loss adjustment expenses
    
    
    69,787
    
    
    
    37,661Salaries and employee benefits
    
    
    19,827
    
    
    
    12,755Policy acquisition and other underwriting
expenses
    
    
    23,969
    
    
    
    13,147Other administrative expenses
    
    
    10,393
    
    
    
    8,832Amortization expense
    
    
    1,508
    
    
    
    1,551Interest expense
    
    
    2,782
    
    
    
    1,311Total expenses
    
    
    128,266
    
    
    
    75,257Income before taxes and equity earnings
    
    
    21,359
    
    
    
    9,913Federal and state income tax expense
    
    
    7,874
    
    
    
    2,911Equity earnings of affiliates
    
    
    55
    
    
    
    56Net income
    
    $
    13,540
    
    
    $
    7,058Earnings Per ShareBasic
    
    $
    0.24
    
    
    $
    0.19Diluted
    
    $
    0.24
    
    
    $
    0.19Weighted average number of common sharesBasic
    
    
    57,392,499
    
    
    
    37,012,104Diluted
    
    
    57,410,327
    
    
    
    37,103,270Dividends paid per common share
    
    $
    0.02
    
    
    $
    0.02
 The accompanying notes are an integral part of the Consolidated Financial Statements.
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MEADOWBROOK INSURANCE GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31,
(Unaudited)
(in thousands)
 2009
    
    2008Net income
    
    $
    13,540
    
    
    $
    7,058Other comprehensive income, net of tax:Unrealized gains on securities
    
    
    6,035
    
    
    
    1,789Net deferred derivative gain (losses)  hedging activity
    
    
    329
    
    
    
    (449
    )Less: reclassification adjustment for investment losses included in
net income
    
    
    2,014
    
    
    
    65Other comprehensive gains, net of tax
    
    
    8,378
    
    
    
    1,405Comprehensive income
    
    $
    21,918
    
    
    $
    8,463
 The accompanying notes are an integral part of the Consolidated Financial Statements.
 4




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MEADOWBROOK INSURANCE GROUP, INC.
 
 CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 March 31,2009
    
    December 31,(Unaudited)
    
    2008ASSETSInvestmentsDebt securities available for sale, at fair value (amortized cost of $1,003,650 and $977,613)
    
    $
    1,022,329
    
    
    $
    986,483Equity securities available for sale, at fair value (amortized cost of $27,293 and $27,660)
    
    
    20,486
    
    
    
    22,577Cash and cash equivalents
    
    
    73,208
    
    
    
    76,588Accrued investment income
    
    
    11,017
    
    
    
    10,441Premiums and agent balances receivable, net
    
    
    127,011
    
    
    
    117,675Reinsurance recoverable on:Paid losses
    
    
    9,686
    
    
    
    8,337Unpaid losses
    
    
    261,157
    
    
    
    260,366Prepaid reinsurance premiums
    
    
    32,385
    
    
    
    31,885Deferred policy acquisition costs
    
    
    57,265
    
    
    
    56,454Deferred federal income taxes
    
    
    16,630
    
    
    
    22,718Goodwill
    
    
    119,205
    
    
    
    119,028Other intangible assets
    
    
    45,544
    
    
    
    46,951Other assets
    
    
    53,570
    
    
    
    54,413Total assets
    
    $
    1,849,493
    
    
    $
    1,813,916LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesLosses and loss adjustment expenses
    
    $
    897,690
    
    
    $
    885,697Unearned premiums
    
    
    287,064
    
    
    
    282,086Debt
    
    
    57,875
    
    
    
    60,250Debentures
    
    
    80,930
    
    
    
    80,930Accounts payable and accrued expenses
    
    
    26,329
    
    
    
    27,839Funds held and reinsurance balances payable
    
    
    25,134
    
    
    
    27,793Payable to insurance companies
    
    
    274
    
    
    
    3,221Other liabilities
    
    
    16,016
    
    
    
    7,930Total liabilities
    
    
    1,391,312
    
    
    
    1,375,746Shareholders EquityCommon stock, $0.01 stated value; authorized 75,000,000 shares; 57,447,707 and
57,341,989 shares issued and outstanding
    
    
    574
    
    
    
    573Additional paid-in capital
    
    
    313,876
    
    
    
    314,641Retained earnings
    
    
    139,548
    
    
    
    127,157Note receivable from officer
    
    
    (846
    )
    
    
    (852
    )Accumulated other comprehensive income (loss)
    
    
    5,029
    
    
    
    (3,349
    )Total shareholders equity
    
    
    458,181
    
    
    
    438,170Total liabilities and shareholders equity
    
    $
    1,849,493
    
    
    $
    1,813,916
 The accompanying notes are an integral part of the Consolidated Financial Statements.
 5




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MEADOWBROOK INSURANCE GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
(Unaudited)
(in thousands)
 2009
    
    2008Cash Flows From Operating ActivitiesNet income
    
    $
    13,540
    
    
    $
    7,058Adjustments to reconcile net income to net cash provided by operating activities:Amortization of other intangible assets
    
    
    1,508
    
    
    
    1,551Amortization of deferred debenture issuance costs
    
    
    121
    
    
    
    118Depreciation of furniture, equipment, and building
    
    
    1,221
    
    
    
    745Net accretion of discount and premiums on bonds
    
    
    815
    
    
    
    696Loss on sale of investments, net
    
    
    2,014
    
    
    
    100Gain on sale of fixed assets
    
    
    (22
    )
    
    
    (22
    )Incremental tax benefits from stock options exercised
    
    
    
    
    
    
    (80
    )Long-term incentive plan expense
    
    
    203
    
    
    
    209Deferred income tax expense (benefit)
    
    
    1,710
    
    
    
    (1,089
    )Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable
    
    
    (9,336
    )
    
    
    (7,270
    )Reinsurance recoverable on paid and unpaid losses
    
    
    (2,140
    )
    
    
    1,722Prepaid reinsurance premiums
    
    
    (500
    )
    
    
    (1,120
    )Deferred policy acquisition costs
    
    
    (811
    )
    
    
    (1,494
    )Other assets
    
    
    (216
    )
    
    
    (921
    )Increase (decrease) in:Losses and loss adjustment expenses
    
    
    11,993
    
    
    
    5,519Unearned premiums
    
    
    4,978
    
    
    
    6,497Payable to insurance companies
    
    
    (2,947
    )
    
    
    (332
    )Funds held and reinsurance balances payable
    
    
    (2,659
    )
    
    
    (554
    )Other liabilities
    
    
    756
    
    
    
    (2,490
    )Total adjustments
    
    
    6,688
    
    
    
    1,785Net cash provided by operating activities
    
    
    20,228
    
    
    
    8,843Cash Flows From Investing ActivitiesPurchase of debt securities available for sale
    
    
    (159,136
    )
    
    
    (22,037
    )Proceeds from sales and maturities of debt securities available for sale
    
    
    135,081
    
    
    
    44,797Purchase of equity securities available for sale
    
    
    (27,522
    )
    
    
    Proceeds from sales of equity securities available for sale
    
    
    27,324
    
    
    
    Capital expenditures
    
    
    (360
    )
    
    
    (664
    )Acquisition of U.S. Specialty Underwriters, Inc. (1)
    
    
    
    
    
    
    (20,971
    )Other investing activities
    
    
    4,178
    
    
    
    (453
    )Net cash (used in) provided by investing activities
    
    
    (20,435
    )
    
    
    673Cash Flows From Financing ActivitiesPayment of lines of credit
    
    
    (2,375
    )
    
    
    Book overdrafts
    
    
    712
    
    
    
    326Dividends paid on common stock
    
    
    (1,149
    )
    
    
    (740
    )Cash payment for payroll taxes associated with long-term incentive plan net stock issuance
    
    
    (330
    )
    
    
    Incremental tax benefits from stock options exercised
    
    
    
    
    
    
    80Other financing activities
    
    
    (31
    )
    
    
    (15
    )Net cash used in financing activities
    
    
    (3,173
    )
    
    
    (349
    )Net (decrease) increase in cash and cash equivalents
    
    
    (3,380
    )
    
    
    9,167Cash and cash equivalents, beginning of period
    
    
    76,588
    
    
    
    40,845Cash and cash equivalents, end of period
    
    $
    73,208
    
    
    $
    50,012Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 (1)
    
    Effective January 31, 2008, the Company exercised its option to purchase the remainder of the
economics related to the acquisition of the USSU business. The accompanying notes are an integral part of the Consolidated Financial Statements.
 6




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE
1  Summary of Significant Accounting Policies
 Basis of Presentation and Management Representation
  Note 2 ~ ProCentury Merger
   7




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   Revenue Recognition
      8




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Earnings Per Share
   Income Taxes
    Recent Accounting Pronouncements
 Recognition and Presentation of
Other-Than-Temporary-Impairments
 9




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions that are Not Orderly Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active. Fair Value Measurements
  Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of Financial Instruments
 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination that Arise from Contingencies Business Combinations,
 10




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  NOTE 2  ProCentury Merger
      Business Combinations,
 11




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  SubsequentAs Calculated
    
    Purchase
    
    As Adjusted atat December
    
    Accounting
    
    March 31,31, 2008
    
    Adjustments
    
    2009Cash consideration portion of purchase price
    
    $
    99,073
    
    
    $
    
    
    
    $
    99,073Value of equity issued for stock consideration portion of purchase price
    
    
    122,725
    
    
    
    
    
    
    
    122,725Transaction related costs of Meadowbrook
    
    
    5,949
    
    
    
    (71
    )
    
    
    5,878Purchase price
    
    $
    227,747
    
    
    $
    (71
    )
    
    $
    227,676
   12




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SubsequentAs Calculated
    
    Purchaseat December 31,
    
    Accounting
    
    As Adjusted at2008
    
    Adjustments
    
    March 31, 2009(in thousands)ASSETSCash
    
    $
    23,248
    
    
    $
    
    
    
    $
    23,248Investments
    
    
    412,542
    
    
    
    
    
    
    
    412,542Agent balances
    
    
    36,497
    
    
    
    
    
    
    
    36,497Deferred policy acquisition costs
    
    
    27,435
    
    
    
    
    
    
    
    27,435Federal income taxes recoverable
    
    
    7,386
    
    
    
    
    
    
    
    7,386Deferred taxes
    
    
    7,451
    
    
    
    
    
    
    
    7,451Reinsurance recoverables
    
    
    45,522
    
    
    
    
    
    
    
    45,522Prepaid insurance premiums
    
    
    17,695
    
    
    
    
    
    
    
    17,695Goodwill
    
    
    59,490
    
    
    
    177
    
    
    
    59,667Other intangible assets
    
    
    26,000
    
    
    
    
    
    
    
    26,000Other assets
    
    
    27,164
    
    
    
    (248
    )
    
    
    26,916Total Assets
    
    $
    690,430
    
    
    $
    (71
    )
    
    $
    690,359LIABILITIESLosses and loss adjustment expenses
    
    $
    289,533
    
    
    $
    
    
    
    $
    289,533Unearned premiums
    
    
    126,259
    
    
    
    
    
    
    
    126,259Reinsurance funds held and balances payable
    
    
    13,911
    
    
    
    
    
    
    
    13,911Debentures
    
    
    25,000
    
    
    
    
    
    
    
    25,000Other liabilities
    
    
    7,980
    
    
    
    
    
    
    
    7,980Total Liabilities
    
    
    462,683
    
    
    
    
    
    
    
    462,683Purchase price
    
    $
    227,747
    
    
    $
    (71
    )
    
    $
    227,676
  13




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 For the ThreeMonths EndedMarch 31,2008Revenues
    
    $
    138,471Expenses
    
    
    121,007Income before taxes and equity earnings
    
    
    17,464Income tax expense
    
    
    5,238Equity earnings of affiliates
    
    
    56Net income
    
    $
    12,282Net income per diluted share
    
    $
    0.21Weighted average number of common shares:Diluted
    
    
    58,224,227
 NOTE 3  Stock Options, Long Term Incentive Plan, and Deferred Compensation Plan
 Stock Options
  Long Term Incentive Plan
  14




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     15




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Deferred Compensation Plan
  NOTE 4  Reinsurance
 Accounting and Reporting for Reinsurance for
Short-Duration and Long-Duration Contracts.
   16




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
       17




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 NOTE
5  Debt
 Credit Facilities
  Derivative Instruments
  Debentures
  18




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 InterestRate atYear of
    
    
    
    Year
    
    
    
    
    
    
    
    
    March 31,
    
    
    PrincipalIssuance
    
    Description
    
    Callable
    
    
    Year Due
    
    
    Interest Rate Terms
    
    2009 (1)
    
    
    Amount2003
    
    Junior subordinated debentures
    
    
    2008
    
    
    
    2033
    
    
    Three-month LIBOR, plus 4.05%
    
    
    5.27
    %
    
    $
    10,3102004
    
    Senior debentures
    
    
    2009
    
    
    
    2034
    
    
    Three-month LIBOR, plus 4.00%
    
    
    5.23
    %
    
    
    13,0002004
    
    Senior debentures
    
    
    2009
    
    
    
    2034
    
    
    Three-month LIBOR, plus 4.20%
    
    
    5.45
    %
    
    
    12,0002005
    
    Junior subordinated debentures
    
    
    2010
    
    
    
    2035
    
    
    Three-month LIBOR, plus 3.58%
    
    
    4.90
    %
    
    
    20,620Junior subordinated debentures (2)
    
    
    2007
    
    
    
    2032
    
    
    Three-month LIBOR, plus 4.00%
    
    
    5.27
    %
    
    
    15,000Junior subordinated debentures (2)
    
    
    2008
    
    
    
    2033
    
    
    Three-month LIBOR, plus 4.10%
    
    
    5.33
    %
    
    
    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 Merger.    19




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    NOTE 6  Fair Value Measurements
 
 , Accounting for Certain Investments in Debt and
Equity Securities. Accounting for Derivative
Instruments and Hedging Activities.
   
    
    Level 1  Observable unadjusted quoted prices in active markets for identical
securities.
 20




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 The fair value measurements of exchange-traded preferred and common equities, and mutual
funds were based on Level 1 inputs, or quoted market prices in active markets.The fair value measurements of a slight portion of the Companys fixed income securities,
comprising 2.1% of the fair value of the total fixed income portfolio, were based on Level
1 inputs.
    
    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.The fair value measurements of substantially all of the Companys fixed income securities,
comprising 96.8% of the fair value of the total fixed income portfolio, were based on Level
2 inputs.The fair values of the Companys interest rate swaps were based on Level 2 inputs.
    
    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.The fair value measurements for twenty-one securities, comprising 1.1% of the fair value of
the total fixed income portfolio, were based on Level 3 inputs, due to the limited
availability of corroborating market data. Inputs for valuation of these securities
included benchmark yields, broker quotes, and models based on cash flows and other inputs.
   21




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Fair Value Measurements UsingQuoted Pricesin Active
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available-forSale Securities
    
    $
    1,042,815
    
    
    $
    22,059
    
    
    $
    1,009,842
    
    
    $
    10,914Derivatives  interest rate swaps
    
    $
    (8,433
    )
    
    $
    
    
    
    $
    (8,433
    )
    
    $
    
  Fair ValueMeasurementUsing SignificantUnobservableInputs  Level 3Balance as of January 1, 2009
    
    $
    11,991Total gains or losses (realized/unrealized):Included in earnings
    
    
    53Included in other comprehensive income
    
    
    274Purchases, issuances and settlements
    
    
    (674
    )Transfers in and out of Level 3
    
    
    (730
    )Balance as of March 31, 2009
    
    $
    10,914Total gains or losses for the period included in
earnings attributable to the change in unrealized gains
or losses relating to assets still held at the reporting
date
    
    $
    
 Items Measured at Fair Value on a Nonrecurring Basis
  22




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Recent Accounting Pronouncements
 Summary of Significant
Accounting Policies
  NOTE 7  Derivative Instruments
 Accounting for Derivative Instruments and Hedging Activities,
  23




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 FixedAmount atExpiration
    
    
    
    
    
    
    
    
    
    March 31,Effective Date
    
    Date
    
    Debt Instrument
    
    Counterparty Interest Rate Terms
    
    Fixed Rate
    
    200910/06/2005
    
    05/24/2009
    
    Senior debentures
    
    Three-month LIBOR, plus 4.20%
    
    
    8.925
    %
    
    $
    5,00010/06/2005
    
    09/16/2010
    
    Junior subordinated debentures
    
    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 (1)
    
    Three-month LIBOR
    
    
    3.950
    %
    
    
    57,87508/15/2008
    
    08/15/2013
    
    Junior subordinated debentures (2)
    
    Three-month LIBOR
    
    
    3.780
    %
    
    
    10,00009/04/2008
    
    09/04/2013
    
    Junior subordinated debentures (2)
    
    Three-month LIBOR
    
    
    3.790
    %
    
    
    15,000
 
 (1)
    
    Relates to the Companys term loan, which has an effective date of July 31, 2008 and an
expiration date of July 31, 2013. 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, as of March 31, 2009.(2)
    
    Relates to the debentures acquired from the ProCentury merger. 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.    24




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  NOTE 8  Shareholders Equity
   ~
Stock Options, Long Term Incentive Plan, and Deferred Compensation Plan
   25




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 NOTE 9  Segment Information
  Specialty Insurance Operations
   Agency Operations
   26




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 For the ThreeMonthsEnded March 31,2009
    
    
    2008RevenuesNet earned premiums
    
    $
    129,038
    
    
    $
    66,022Management fees
    
    
    5,278
    
    
    
    6,032Claims fees
    
    
    1,966
    
    
    
    2,180Loss control fees
    
    
    489
    
    
    
    510Reinsurance placement
    
    
    65
    
    
    
    296Investment income
    
    
    12,212
    
    
    
    6,970Net realized losses
    
    
    (1,992
    )
    
    
    (31
    )Specialty insurance operations
    
    
    147,056
    
    
    
    81,979Agency operations
    
    
    2,794
    
    
    
    3,328Holding Company interest income earned
    
    
    130
    
    
    
    178Intersegment revenue
    
    
    (355
    )
    
    
    (315
    )Consolidated revenue
    
    $
    149,625
    
    
    $
    85,170Pre-tax income:Specialty insurance operations
    
    $
    27,411
    
    
    $
    12,912Agency operations (1)
    
    
    338
    
    
    
    763Non-allocated expenses
    
    
    (6,390
    )
    
    
    (3,762
    )Consolidated pre-tax income
    
    $
    21,359
    
    
    $
    9,913
 
 (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 three months ended March 31, 2009 and 2008, the allocation of corporate overhead
to the agency operations segment was $798,000 and $753,000, respectively.  For the ThreeMonthsEnded March 31,2009
    
    
    2008Holding company expenses
    
    $
    (2,100
    )
    
    $
    (900
    )Amortization
    
    
    (1,508
    )
    
    
    (1,551
    )Interest expense
    
    
    (2,782
    )
    
    
    (1,311
    )$
    (6,390
    )
    
    $
    (3,762
    )
 NOTE 10  Commitments and Contingencies
  27




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Accounting for Contingencies,
 NOTE 11  Earnings Per Share
   28




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 2009
    
    2008Net income, as reported
    
    $
    13,540
    
    
    $
    7,058Common shares:BasicWeighted average shares outstanding
    
    
    57,392,499
    
    
    
    37,012,104DilutedWeighted average shares outstanding
    
    
    57,392,499
    
    
    
    37,012,104Dilutive effect of:Stock options
    
    
    
    
    
    
    239Share awards under long term incentive plan
    
    
    17,828
    
    
    
    90,927Total
    
    
    57,410,327
    
    
    
    37,103,270Net income per common shareBasic
    
    $
    0.24
    
    
    $
    0.19Diluted
    
    $
    0.24
    
    
    $
    0.19
 29




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##### Table of Contents



ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Periods ended March 31, 2009 and 2008
 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
  30




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##### Table of Contents



Critical Accounting Policies
  31




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 Executive Overview
    32




---



##### Table of Contents



Results of Operations
      33




---



##### Table of Contents



Specialty Insurance Operations
  For the Three MonthsEnded March 31,2009
    
    
    2008Revenue:Net earned premiums
    
    $
    129,038
    
    
    $
    66,022Management fees
    
    
    5,278
    
    
    
    6,032Claims fees
    
    
    1,966
    
    
    
    2,180Loss control fees
    
    
    489
    
    
    
    510Reinsurance placement
    
    
    65
    
    
    
    296Investment income
    
    
    12,212
    
    
    
    6,970Net realized losses
    
    
    (1,992
    )
    
    
    (31
    )Total revenue
    
    $
    147,056
    
    
    $
    81,979Pre-tax incomeSpecialty insurance operations
    
    $
    27,411
    
    
    $
    12,912
     34




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##### Table of Contents



Other Items ~ Reserves
  35




---



##### Table of Contents



Agency Operations
  For the Three MonthsEnded March 31,2009
    
    2008Net commission
    
    $
    2,794
    
    
    $
    3,328Pre-tax income (1)
    
    $
    338
    
    
    $
    763
 
 (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 March 31, 2009 and 2008, the allocation of corporate overhead to the agency
operations segment was $798,000 and $753,000, respectively.   Other Items
 Reserves
  36




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##### Table of Contents



Minimum
    
    MaximumReserve
    
    Reserve
    
    SelectedLine of Business
    
    Range
    
    Range
    
    ReservesWorkers Compensation (1)
    
    $
    167,921
    
    
    $
    185,927
    
    
    $
    179,098Commercial Multiple Peril / General Liability
    
    
    283,807
    
    
    
    346,070
    
    
    
    320,830Commercial Automobile
    
    
    90,454
    
    
    
    101,572
    
    
    
    97,018Other
    
    
    36,743
    
    
    
    41,727
    
    
    
    39,587Total Net Reserves
    
    $
    578,925
    
    
    $
    675,296
    
    
    $
    636,533
 
 (1)
    
    Includes Residual Markets    37




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##### Table of Contents



Incurred Losses
    
    
    Paid LossesReserves at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reserves atDecember
    
    
    Current
    
    
    
    
    
    
    Total
    
    
    Current
    
    
    Prior
    
    
    
    
    
    
    March 31,Line of Business
    
    31, 2008
    
    
    Year
    
    
    Prior Years
    
    
    Incurred
    
    
    Year
    
    
    Years
    
    
    Total Paid
    
    
    2009Workers Compensation
    
    $
    147,813
    
    
    $
    22,218
    
    
    $
    (1,945
    )
    
    $
    20,273
    
    
    $
    (658
    )
    
    $
    12,633
    
    
    $
    11,975
    
    
    $
    156,111Residual Markets
    
    
    23,984
    
    
    
    1,722
    
    
    
    (1,704
    )
    
    
    18
    
    
    
    146
    
    
    
    869
    
    
    
    1,015
    
    
    
    22,987Commercial Multiple
Peril / General
Liability
    
    
    317,188
    
    
    
    26,313
    
    
    
    (3,740
    )
    
    
    22,573
    
    
    
    (1,334
    )
    
    
    20,265
    
    
    
    18,931
    
    
    
    320,830Commercial Automobile
    
    
    92,788
    
    
    
    15,536
    
    
    
    232
    
    
    
    15,768
    
    
    
    1,305
    
    
    
    10,233
    
    
    
    11,538
    
    
    
    97,018Other
    
    
    43,558
    
    
    
    12,346
    
    
    
    (1,191
    )
    
    
    11,155
    
    
    
    941
    
    
    
    14,185
    
    
    
    15,126
    
    
    
    39,587Net Reserves
    
    
    625,331
    
    
    $
    78,135
    
    
    $
    (8,348
    )
    
    $
    69,787
    
    
    $
    400
    
    
    $
    58,185
    
    
    $
    58,585
    
    
    
    636,533Reinsurance Recoverable
    
    
    260,366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261,157Consolidated
    
    $
    885,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    897,690
 DevelopmentRe-estimated
    
    as aReserves at
    
    PercentageReserves at
    
    March 31,
    
    of PriorDecember
    
    2009 on Prior
    
    YearLine of Business
    
    31, 2008
    
    Years
    
    ReservesWorkers Compensation
    
    $
    147,813
    
    
    $
    145,868
    
    
    
    -1.3
    %Commercial Multiple Peril
/ General Liability
    
    
    317,188
    
    
    
    313,448
    
    
    
    -1.2
    %Commercial Automobile
    
    
    92,788
    
    
    
    93,020
    
    
    
    0.3
    %Other
    
    
    43,558
    
    
    
    42,367
    
    
    
    -2.7
    %Sub-total
    
    
    601,347
    
    
    
    594,703
    
    
    
    -1.1
    %Residual Markets
    
    
    23,984
    
    
    
    22,280
    
    
    
    -7.1
    %Total Net Reserves
    
    $
    625,331
    
    
    $
    616,983
    
    
    
    -1.3
    %
 Workers Compensation Excluding Residual Markets
  Commercial Multiple Peril and General Liability
 38




---



##### Table of Contents



Commercial Automobile
  Other
  Residual Markets
  Salaries and Employee Benefits and Other Administrative Expenses
  39




---



##### Table of Contents



Amortization Expense
  Interest Expense
 Liquidity and Capital
Resources
 Income Taxes
  40




---



##### Table of Contents



Other Than Temporary Impairments
    41




---



##### Table of Contents



March 31, 2009Less than 12 months
    
    Greater than 12 months
    
    TotalFair Value of
    
    
    
    
    
    Fair Value of
    
    
    
    
    
    Fair Value ofInvestments
    
    
    
    
    
    Investments
    
    
    
    
    
    Investmentswith
    
    Gross
    
    with
    
    Gross
    
    with
    
    GrossUnrealized
    
    Unrealized
    
    Unrealized
    
    Unrealized
    
    Unrealized
    
    UnrealizedLosses
    
    Losses
    
    Losses
    
    Losses
    
    Losses
    
    LossesDebt Securities:Debt securities issued by U.S.
Government and agencies
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Obligations of states and political
subdivisions
    
    
    49,978
    
    
    
    (765
    )
    
    
    18,580
    
    
    
    (797
    )
    
    
    68,558
    
    
    
    (1,562
    )Corporate securities
    
    
    61,657
    
    
    
    (4,074
    )
    
    
    6,675
    
    
    
    (1,173
    )
    
    
    68,332
    
    
    
    (5,247
    )Mortgage and asset-backed securities
    
    
    18,833
    
    
    
    (3,988
    )
    
    
    15,639
    
    
    
    (2,656
    )
    
    
    34,472
    
    
    
    (6,644
    )Equity Securities:
    
    
    20,283
    
    
    
    (7,069
    )
    
    
    
    
    
    
    
    
    
    
    20,283
    
    
    
    (7,069
    )Totals
    
    $
    150,751
    
    
    $
    (15,896
    )
    
    $
    40,894
    
    
    $
    (4,626
    )
    
    $
    191,645
    
    
    $
    (20,522
    )
 December 31, 2008Less than 12 months
    
    Greater than 12 months
    
    TotalFair Value of
    
    
    
    
    
    Fair Value of
    
    
    
    
    
    Fair Value ofInvestments
    
    
    
    
    
    Investments
    
    
    
    
    
    Investmentswith
    
    Gross
    
    with
    
    Gross
    
    with
    
    GrossUnrealized
    
    Unrealized
    
    Unrealized
    
    Unrealized
    
    Unrealized
    
    UnrealizedLosses
    
    Losses
    
    Losses
    
    Losses
    
    Losses
    
    LossesDebt Securities:Debt securities issued by U.S.
Government and agencies
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Obligations of states and political
subdivisions
    
    
    130,948
    
    
    
    (3,516
    )
    
    
    4,778
    
    
    
    (360
    )
    
    
    135,726
    
    
    
    (3,876
    )Corporate securities
    
    
    72,962
    
    
    
    (4,021
    )
    
    
    8,141
    
    
    
    (928
    )
    
    
    81,103
    
    
    
    (4,949
    )Mortgage and asset-backed securities
    
    
    43,891
    
    
    
    (5,701
    )
    
    
    11,600
    
    
    
    (2,392
    )
    
    
    55,491
    
    
    
    (8,093
    )Equity Securities:
    
    
    21,166
    
    
    
    (5,141
    )
    
    
    
    
    
    
    
    
    
    
    21,166
    
    
    
    (5,141
    )Totals
    
    $
    268,967
    
    
    $
    (18,379
    )
    
    $
    24,519
    
    
    $
    (3,680
    )
    
    $
    293,486
    
    
    $
    (22,059
    )
  LIQUIDITY AND CAPITAL RESOURCES
  42




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##### Table of Contents



Other Items
 Debentures
  43




---



##### Table of Contents



InterestRate atYear of
    
    
    
    Year
    
    
    
    
    
    
    
    
    March 31,
    
    
    PrincipalIssuance
    
    Description
    
    Callable
    
    
    Year Due
    
    
    Interest Rate Terms
    
    2009 (1)
    
    
    Amount2003
    
    Junior subordinated debentures
    
    
    2008
    
    
    
    2033
    
    
    Three-month LIBOR, plus 4.05%
    
    
    5.27
    %
    
    $
    10,3102004
    
    Senior debentures
    
    
    2009
    
    
    
    2034
    
    
    Three-month LIBOR, plus 4.00%
    
    
    5.23
    %
    
    
    13,0002004
    
    Senior debentures
    
    
    2009
    
    
    
    2034
    
    
    Three-month LIBOR, plus 4.20%
    
    
    5.45
    %
    
    
    12,0002005
    
    Junior subordinated debentures
    
    
    2010
    
    
    
    2035
    
    
    Three-month LIBOR, plus 3.58%
    
    
    4.90
    %
    
    
    20,620Junior subordinated debentures (2)
    
    
    2007
    
    
    
    2032
    
    
    Three-month LIBOR, plus 4.00%
    
    
    5.27
    %
    
    
    15,000Junior subordinated debentures (2)
    
    
    2008
    
    
    
    2033
    
    
    Three-month LIBOR, plus 4.10%
    
    
    5.33
    %
    
    
    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 Merger.    44




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##### Table of Contents



Interest Rate Swaps
 Accounting for Derivative Instruments and Hedging Activities,
  FixedAmount atExpiration
    
    
    
    
    
    
    
    
    
    March 31,Effective Date
    
    Date
    
    Debt Instrument
    
    Counterparty Interest Rate Terms
    
    Fixed Rate
    
    200910/06/2005
    
    05/24/2009
    
    Senior debentures
    
    Three-month LIBOR, plus 4.20%
    
    
    8.925
    %
    
    $
    5,00010/06/2005
    
    09/16/2010
    
    Junior subordinated debentures
    
    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 (1)
    
    Three-month LIBOR
    
    
    3.950
    %
    
    
    57,87508/15/2008
    
    08/15/2013
    
    Junior subordinated debentures (2)
    
    Three-month LIBOR
    
    
    3.780
    %
    
    
    10,00009/04/2008
    
    09/04/2013
    
    Junior subordinated debentures (2)
    
    Three-month LIBOR
    
    
    3.790
    %
    
    
    15,000
 
 (1)
    
    Relates to our term loan, which has an effective date of July 31, 2008 and an expiration date
of July 31, 2013. We are required to make fixed rate interest payments on the current balance of
the term loan, amortizing in accordance with the term loan amortization schedule. We 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, as of March
31, 2009.(2)
    
    Relates to the debentures acquired from the ProCentury merger. We 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. 45




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##### Table of Contents



Credit Facilities
    Investment Portfolio
 46




---



##### Table of Contents



Shareholders Equity
   ~ Stock Options, Long Term Incentive
Plan, and Deferred Compensation Plan
   Procentury Merger
 47




---



##### Table of Contents



Adjusted Expense Ratio
  48




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##### Table of Contents



For the Three MonthsEnded March 31,2009
    
    2008Net earned premiums
    
    $
    129,038
    
    
    $
    66,022Less: Consolidated net loss and LAE
    
    
    69,787
    
    
    
    37,661Intercompany claim fees
    
    
    5,108
    
    
    
    3,106Unconsolidated net loss and LAE
    
    
    74,895
    
    
    
    40,767Consolidated policy acquisition and other underwriting expenses
    
    
    23,969
    
    
    
    13,147Intercompany administrative and other underwriting fees
    
    
    14,366
    
    
    
    8,088Unconsolidated policy acquisition and other underwriting expenses
    
    
    38,335
    
    
    
    21,235Underwriting income
    
    $
    15,808
    
    
    $
    4,020GAAP combined ratio as reported
    
    
    87.7
    %
    
    
    93.9
    %Specialty insurance operations pre-tax income
    
    $
    27,411
    
    
    $
    12,912Less: Underwriting income
    
    
    15,808
    
    
    
    4,020Net
investment income and realized losses
    
    
    10,350
    
    
    
    7,117Fee-based operations pre-tax income
    
    
    1,253
    
    
    
    1,775Agency operations pre-tax income
    
    
    338
    
    
    
    763Total fee-for-service pre-tax income
    
    $
    1,591
    
    
    $
    2,538GAAP expense ratio as reported
    
    
    29.7
    %
    
    
    32.2
    %Adjustment to include pre-tax income from total fee-for-service income (1)
    
    
    1.2
    %
    
    
    3.8
    %GAAP expense ratio as adjusted
    
    
    28.5
    %
    
    
    28.4
    %GAAP loss and LAE ratio as reported
    
    
    58.0
    %
    
    
    61.7
    %GAAP combined ratio as adjusted
    
    
    86.5
    %
    
    
    90.1
    %Reconciliation of consolidated pre-tax income:Specialty insurance operations pre-tax income:Fee-based operations pre-tax income
    
    $
    1,253
    
    
    $
    1,775Underwriting income
    
    
    15,808
    
    
    
    4,020Net investment income and realized losses
    
    
    10,350
    
    
    
    7,117Total specialty insurance operations pre-tax income
    
    
    27,411
    
    
    
    12,912Agency operations pre-tax income
    
    
    338
    
    
    
    763Less: Holding company expenses
    
    
    2,100
    
    
    
    900Interest expense
    
    
    2,782
    
    
    
    1,311Amortization expense
    
    
    1,508
    
    
    
    1,551Consolidated pre-tax income
    
    $
    21,359
    
    
    $
    9,913
 
 (1)
    
    Adjustment to include pre-tax income from total fee-for-service income is calculated by
dividing total fee-for-service income by net earned premiums. 49




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##### Table of Contents



Contractual Obligations and Commitments
  Convertible Note
  Recent Accounting Pronouncements
 Recognition and Presentation of
Other-Than-Temporary-Impairments
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions that are Not Orderly Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active.
 50




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##### Table of Contents



Fair Value Measurements
  Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of Financial Instruments
 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination that Arise from Contingencies Business Combinations,
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  51




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##### Table of Contents



Rates Down
    
    Rates
    
    Rates Up100bps
    
    Unchanged
    
    100bpsFair Value
    
    $
    1,058,544
    
    
    $
    1,020,266
    
    
    $
    963,095Yield to Maturity or Call
    
    
    4.28
    %
    
    
    5.32
    %
    
    
    6.61
    %Effective Duration
    
    
    4.41
    
    
    
    4.57
    
    
    
    4.98
  52




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##### Table of Contents



Accounting for Derivative Instruments and Hedging Activities, Derivative Instrument
  
 ITEM 4. CONTROLS AND PROCEDURES
   53




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##### Table of Contents



54




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM
1. LEGAL PROCEEDINGS
 Commitments and
Contingencies
 
 ITEM 1A. RISK FACTORS
  
 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 ProgramsJanuary 1 - January 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,200,000February 1 - February 28, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,200,000March 1 - March 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,200,000Total
    
    
    
    
    
    $
    
    
    
    
    
 
 ITEM
6. EXHIBITS
  ExhibitNo.
    
    Description10.1
    
    Employment Agreement between the Company and Robert S. Cubbin, dated January 1, 2009
(incorporated by reference to Exhibit 10.1 from Current Report on Form 8-K filed on January
7, 2009).
 55




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##### Table of Contents



ExhibitNo.
    
    Description10.2
    
    Employment Agreement between the Company and Michael G. Costello, dated January 1, 2009
(incorporated by reference to Exhibit 10.2 from Current Report on Form 8-K filed on January
7, 2009).10.3
    
    Form of senior executive Employment Agreement between the Company and senior executive,
effective January 1, 2009 (incorporated by reference to Exhibit 10.3 from Current Report on
Form 8-K filed on January 7, 2009).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.
 56




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##### Table of Contents



SIGNATURES
  Meadowbrook Insurance Group, Inc.By:
    /s/           Karen M. SpaunSenior Vice President andChief Financial Officer  57




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description10.1
    
    Employment Agreement between the Company and Robert S. Cubbin, dated January 1, 2009
(incorporated by reference to Exhibit 10.1 from Current Report on Form 8-K filed on January
7, 2009).10.2
    
    Employment Agreement between the Company and Michael G. Costello, dated January 1, 2009
(incorporated by reference to Exhibit 10.2 from Current Report on Form 8-K filed on January
7, 2009).10.3
    
    Form of senior executive Employment Agreement between the Company and senior executive,
effective January 1, 2009 (incorporated by reference to Exhibit 10.3 from Current Report on
Form 8-K filed on January 7, 2009).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.
 58