##### 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 quarter ended
    June 30, 2008oro

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
    Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### Table of Contents



TABLE OF
    CONTENTS
   
 PagePART I  FINANCIAL
    INFORMATIONITEM 1



FINANCIAL STATEMENTSConsolidated Statements of Income (unaudited)

2Consolidated Statements of Comprehensive Income
    (unaudited)

4Consolidated Balance Sheets (unaudited)

5Consolidated Statement of Cash Flows
    (unaudited)

6Notes to Consolidated Financial Statements
    (unaudited)

7-26ITEM 2



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

26-51ITEM 3



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK

51-52ITEM 4



CONTROLS AND PROCEDURES

52PART II  OTHER INFORMATIONITEM 1



LEGAL PROCEEDINGS

53ITEM 1A  RISK FACTORS

53ITEM 2



UNREGISTERED SALES OF EQUITY SECURITIES AND USE
    OF PROCEEDS

53ITEM 4



SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS

53ITEM 6



EXHIBITS

54SIGNATURES

55EX-31.1EX-31.2EX-32.1EX-32.2  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, 2008


2007(Unaudited)(In thousands, except share data)RevenuesPremiums earnedGross

$
179,515


$
166,814Ceded


(36,462
)


(34,419
)Net earned premiums


143,053



132,395Net commissions and fees


21,663



22,294Net investment income


14,065



12,385Net realized (losses) gains


(177
)


14Total revenues


178,604



167,088ExpensesLosses and loss adjustment expenses


108,158



101,382Reinsurance recoveries


(26,955
)


(25,029
)Net losses and loss adjustment expenses


81,203



76,353Salaries and employee benefits


26,898



26,432Policy acquisition and other underwriting expenses


25,863



26,812Other administrative expenses


16,793



14,992Amortization expense


3,114



687Interest expense


2,565



3,154Total expenses


156,436



148,430Income before taxes and equity earnings


22,168



18,658Federal and state income tax expense


6,790



5,610Equity earnings of affiliates


117



61Net income

$
15,495


$
13,109Earnings Per ShareBasic

$
0.42


$
0.44Diluted

$
0.42


$
0.44Weighted average number of common sharesBasic


37,016,568



29,822,086Diluted


37,126,782



29,876,480Dividends paid per common share

$
0.04


$
    2




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
 CONSOLIDATED
    STATEMENTS OF INCOME

For the
    Three Months Ended June 30, 2008


2007(Unaudited)(In thousands, except share data)RevenuesPremiums earnedGross

$
95,544


$
85,263Ceded


(18,513
)


(18,072
)Net earned premiums


77,031



67,191Net commissions and fees


9,632



10,743Net investment income


6,917



6,229Net realized (losses) gains


(146
)


20Total revenues


93,434



84,183ExpensesLosses and loss adjustment expenses


59,419



51,380Reinsurance recoveries


(15,877
)


(11,673
)Net losses and loss adjustment expenses


43,542



39,707Salaries and employee benefits


14,143



12,900Policy acquisition and other underwriting expenses


12,716



13,169Other administrative expenses


7,961



7,598Amortization expense


1,563



543Interest expense


1,254



1,667Total expenses


81,179



75,584Income before taxes and equity earnings


12,255



8,599Federal and state income tax expense


3,879



2,461Equity earnings of affiliates


61



48Net income

$
8,437


$
6,186Earnings Per ShareBasic

$
0.23


$
0.20Diluted

$
0.23


$
0.20Weighted average number of common sharesBasic


37,021,032



30,294,628Diluted


37,126,911



30,350,553Dividends paid per common share

$
0.02


$
    3




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME
 For the
    Six Months Ended June 30,
  2008


2007(Unaudited)(In thousands)Net income

$
15,495


$
13,109Other comprehensive income, net of tax:Unrealized losses on securities


(4,446
)


(4,176
)Net deferred derivative (losses) gains  hedging
    activity


(115
)


113Less: reclassification adjustment for gains included in net
    income


174



21Other comprehensive losses, net of tax


(4,387
)


(4,042
)Comprehensive income

$
11,108


$
9,067   MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME
 For the
    Three Months Ended June 30,
  2008


2007(Unaudited)(In thousands)Net income

$
8,437


$
6,186Other comprehensive income, net of tax:Unrealized losses on securities


(6,235
)


(4,556
)Net deferred derivative gains  hedging activity


334



189Less: reclassification adjustment for gains included in net
    income


109



3Other comprehensive losses, net of tax


(5,792
)


(4,364
)Comprehensive income

$
2,645


$
1,822    4




---



##### Table of Contents



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


December 31,2008


2007(Unaudited)(In thousands, except share data)ASSETSInvestmentsDebt securities available for sale, at fair value (amortized
    cost of $564,740 and $604,829)

$
563,741


$
610,756Cash and cash equivalents


80,038



40,845Accrued investment income


6,331



6,473Premiums and agent balances receivable, net


94,242



87,341Reinsurance recoverable on:Paid losses


121



1,053Unpaid losses


200,783



198,461Prepaid reinsurance premiums


18,669



17,763Deferred policy acquisition costs


28,997



26,926Deferred federal income taxes


17,023



14,936Goodwill


60,371



43,497Other assets


67,890



65,915Total assets

$
1,138,206


$
1,113,966LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesLosses and loss adjustment expenses

$
558,864


$
540,002Unearned premiums


159,250



153,927Debentures


55,930



55,930Accounts payable and accrued expenses


21,073



22,604Reinsurance funds held and balances payable


16,043



16,416Payable to insurance companies


3,572



6,231Other liabilities


11,454



16,962Total liabilities


826,186



812,072Shareholders EquityCommon stock, $0.01 stated value; authorized
    75,000,000 shares; 37,021,032 and 36,996,287 shares
    issued and outstanding


370



370Additional paid-in capital


195,110



194,621Retained earnings


118,288



104,274Note receivable from officer


(860
)


(870
)Accumulated other comprehensive (loss) income


(888
)


3,499Total shareholders equity


312,020



301,894Total liabilities and shareholders equity

$
1,138,206


$
1,113,966    5




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 For the
    Six Months Ended June 30,
  2008


2007(Unaudited)(In thousands)Cash Flows From Operating ActivitiesNet income

$
15,495


$
13,109Adjustments to reconcile net income to net cash provided by
    operating activities:Amortization of other intangible assets


3,114



687Amortization of deferred debenture issuance costs


236



118Depreciation of furniture, equipment, and building


1,505



1,525Net accretion of discount and premiums on bonds


1,400



1,389Loss on sale of investments, net


268



32Gain on sale of fixed assets


(44
)


(44
)Stock-based employee compensation






2Incremental tax benefits from stock options exercised


(80
)


(623
)Long-term incentive plan expense


405



119Deferred income tax expense (benefit)


275



(595
)Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable


(6,901
)


(7,740
)Reinsurance recoverable on paid and unpaid losses


(1,390
)


(4,306
)Prepaid reinsurance premiums


(906
)


4,556Deferred policy acquisition costs


(2,071
)


232Other assets


(623
)


1,740Increase (decrease) in:Losses and loss adjustment expenses


18,862



22,181Unearned premiums


5,323



690Payable to insurance companies


(2,659
)


(528
)Reinsurance funds held and balances payable


(373
)


(5,379
)Other liabilities


(5,689
)


(4,928
)Total adjustments


10,652



9,128Net cash provided by operating activities


26,147



22,237Cash Flows From Investing ActivitiesPurchase of debt securities available for sale


(51,741
)


(125,019
)Proceeds from sales and maturities of debt securities available
    for sale


90,136



87,244Capital expenditures


(1,112
)


(1,710
)Purchase of books of business


(228
)


(75
)Acquisition of U.S. Specialty Underwriters, Inc.(1)


(20,971
)


(12,644
)Other investing activities


(424
)


(214
)Net cash provided by (used in) investing activities


15,660



(52,418
)Cash Flows From Financing ActivitiesProceeds from lines of credit






19,025Payment of lines of credit






(4,000
)Book overdrafts


(1,167
)


361Dividend paid on common stock


(1,481
)


Stock options exercised


4



(340
)Cash payment for payroll taxes associated with long-term
    incentive plan net stock issuance






(1,841
)Incremental tax benefits from stock options exercised


80



623Other financing activities


(50
)


(146
)Net cash (used in) provided by financing activities


(2,614
)


13,682Net increase (decrease) in cash and cash equivalents


39,193



(16,499
)Cash and cash equivalents, beginning of period


40,845



42,876Cash and cash equivalents, end of period

$
80,038


$
26,377Supplemental Disclosure of Non-Cash Investing and Financing
    Activities:Common stock portion of purchase price for acquisition of U.S.
    Specialty Underwriters, Inc.

$



$
10,000     (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.   6




---



##### 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,
  Segment
    Information Segment Information
  Revenue
    Recognition
     7




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                  Earnings
    Per Share
     8




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Recent
    Accounting Pronouncements
  , Fair Value
    Measurements
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115 instrument-by-instrument
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities Accounting for
    Derivative Instruments and Hedging Activities.
 9




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  FAS 142-3, Determination of the Useful Life of Intangible
    Assets. FAS 142-3 Goodwill and Other Intangible
    Assets.
  The Hierarchy of Generally Accepted Accounting
    Principles. The Meaning of Present Fairly in
    Conformity With Generally Accepted Accounting Principles.
  Accounting for Financial Guarantee Insurance
    Contracts-an interpretation of FASB Statement
    No. 60. Accounting and Reporting by Insurance
    Enterprises. Accounting for
    Contingencies.
  NOTE 2 
    Stock
    Options, Long Term Incentive Plan, and Deferred Compensation
    Plan  Stock
    Options
   10




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted-AverageExerciseOptions


PriceOutstanding as of December 31, 2007


132,052


$
14.51Exercised


(31,745
)

$
2.17Expired and/or forfeited


(35,557
)

$
22.75Outstanding as of June 30, 2008


64,750


$
16.03Exercisable as of June 30, 2008


64,250


$
16.11     Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageRemaining


Exercise





ExerciseRange of Exercise Prices

Options


Life (Years)


Price


Options


Price$6.48


1,500



1.4


$
6.48



1,000


$
6.48$10.91 to $24.6875


63,250



0.5


$
16.26



63,250


$
16.2664,750



0.6


$
16.03



64,250


$
16.11     Long
    Term Incentive Plan
    2004-2006 2007-2009 2004-2006
 11




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred
    Compensation Plan
    NOTE 3 
    Reinsurance  Accounting and Reporting for
    Reinsurance for Short-Duration and Long-Duration
    Contracts.
       12




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    rent-a-captive
      June 30, 2008


December 31, 2007Non Risk


Risk





Non Risk


RiskSharing(1)


Sharing(2)


Total


Sharing(1)


Sharing(2)


TotalGross exposure

$
815


$
6,948


$
7,763


$
4,959


$
7,150


$
12,109Collateral or other security






(2,803
)


(2,803
)


(1
)


(3,114
)


(3,115
)Allowance


(815
)


(3,229
)


(4,044
)


(4,873
)


(3,268
)


(8,141
)Net exposure

$



$
916


$
916


$
85


$
768


$
853     (1)
    
    Balances related to one unaffiliated insurance company, which is
    under regulatory liquidation or control, for which allowances
    have been established; all other admitted reinsurers have an
    A.M. Best rating of A- or better.(2)
    
    Balances related to risk-sharing partners, which have either
    captive or
    rent-a-captive
    quota-share reinsurance contracts with the Company.         13




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               14




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      NOTE 4 
    Debt
  Lines
    of Credit
          Senior
    Debentures
         15




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Junior
    Subordinated Debentures
                   16




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 5 
    Fair Value Measurements
  Accounting for Certain
    Investments in Debt and Equity Securities. Accounting for
    Derivative Instruments and Hedging Activities.
  The Fair
    Value Option of Financial Assets and Financial
    Liabilities,
  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; inputs derived from or corroborated
    by observable market data by correlation or other means.      
    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.   17




---



##### Table of Contents



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


Significantin Active


Other


SignificantMarkets for


Observable


UnobservableIdentical Assets


Inputs


InputsTotal


(Level 1)


(Level 2)


(Level 3)Available-for-Sale Securities

$
563,741


$



$
562,120


$
1,621Derivative  interest rate swaps

$
(367
)

$



$
(367
)

$
     Fair ValueMeasurementUsing SignificantUnobservableInputs - Level 3Balance as of March 31, 2008

$
1,645Total gains or losses (realized/unrealized):Included in earnings


Included in other comprehensive income


(24
)Purchases, issuances and settlements


Transfers in and out of Level 3


Balance as of June 30, 2008

$
1,621The amount of total gains or losses for the period included in
    earnings (or changes in net assets) attributable to the change
    in unrealized gains or losses relating to assets still held at
    the reporting date

$
(24
)   Fair ValueMeasurementUsing SignificantUnobservableInputs - Level 3Balance as of December 31, 2007

$
Total gains or losses (realized/unrealized):Included in earnings


Included in other comprehensive income


(52
)Purchases, issuances and settlements


1,673Transfers in and out of Level 3


Balance as of June 30, 2008

$
1,621The amount of total gains or losses for the period included in
    earnings (or changes in net assets) attributable to the change
    in unrealized gains or losses relating to assets still held at
    the reporting date

$
(52
)  18




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 6 
    Derivative
    Instruments  Accounting for Derivative
    Instruments and Hedging Activities,
  non-amortizing,
  non-amortizing,
  non-amortizing,
  non-amortizing,
  non-amortizing,
   19




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      NOTE 7 
    Shareholders
    Equity          Regulatory Matters and Rating Issues
  NOTE 8 
    Regulatory
    Matters and Rating Issues   20




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          NOTE 9 
    Segment
    Information    Specialty
    Risk Management Operations
   21




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Agency
    Operations
      For the Six MonthsEnded June 30,2008


2007RevenuesNet earned premiums

$
143,053


$
132,395Management fees


10,206



10,287Claims fees


4,485



4,451Loss control fees


1,135



1,143Reinsurance placement


394



418Investment income


13,722



11,921Net realized (losses) gains


(177
)


14Specialty risk management


172,818



160,629Agency operations


6,009



6,745Miscellaneous income


343



464Intersegment revenue


(566
)


(750
)Consolidated revenue

$
178,604


$
167,088Pre-tax income:Specialty risk management

$
28,529


$
22,167Agency operations(1)


937



1,721Non-allocated expenses


(7,298
)


(5,230
)Consolidated pre-tax income

$
22,168


$
18,658   For the Three MonthsEnded June 30,2008


2007RevenuesNet earned premiums

$
77,031


$
67,191Management fees


4,174



5,412Claims fees


2,305



2,247Loss control fees


625



544Reinsurance placement


98



85Investment income


6,752



5,991Net realized (losses) gains


(146
)


20Specialty risk management


90,839



81,490Agency operations


2,681



2,860Miscellaneous income


165



238Intersegment revenue


(251
)


(405
)Consolidated revenue

$
93,434


$
84,183Pre-tax income:Specialty risk management

$
15,617


$
10,848Agency operations(1)


174



494Non-allocated expenses


(3,536
)


(2,743
)Consolidated pre-tax income

$
12,255


$
8,599  22




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (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, 2008 and 2007, the allocation of corporate
    overhead to the agency operations segment was $1.7 million
    and $1.4 million, respectively. For the three months ended
    June 30, 2008 and 2007, the allocation of corporate
    overhead to the agency operations segment was $900,000 and
    $608,000, respectively. These balances include an allocation to
    our Insurance & Benefit Consultants agency business
    that was previously allocated to specialty risk management
    operations. For the six months ended June 30, 2007, pre-tax
    income for agency operations was overstated and specialty risk
    management was understated by $147,000, respectively. For the
    three months ended June 30, 2007, pre-tax income for agency
    operations was overstated and specialty risk management was
    understated by $80,000, respectively.    For the Six MonthsEnded June 30,2008


2007Holding company expenses

$
(1,619
)

$
(1,389
)Amortization


(3,114
)


(687
)Interest expense


(2,565
)


(3,154
)$
(7,298
)

$
(5,230
)   For the Three MonthsEnded June 30,2008


2007Holding company expenses

$
(719
)

$
(533
)Amortization


(1,563
)


(543
)Interest expense


(1,254
)


(1,667
)$
(3,536
)

$
(2,743
)   NOTE 10 
    Income
    Taxes  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
       23




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 11 
    Commitments
    and Contingencies  Accounting for
    Contingencies,
  NOTE 12 
    Acquisitions          NOTE 13 
    Subsequent
    Events  ProCentury
    Merger
   24




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Form 10-Q
    30-day
    Credit
    Facilities
          Insurance
    Company Subsidiary Dividend Payment
   25




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Interest
    Rate Swaps
  Accounting for
    Derivative Instruments and Hedging Activities,
   26




---



##### Table of Contents



ITEM 2MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS
  For the
    Periods ended June 30, 2008 and 2007
  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; 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.
  Description
    of Business
    Critical
    Accounting Policies
  Form 10-K
  RESULTS
    OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND
    2007
  Executive
    Overview
   27




---



##### Table of Contents



Form 10-Q
  30-day
   28




---



##### Table of Contents



Results
    of Operations
      99-20, Recognition of Interest Income and Impairment on
    Purchased and Retained Beneficial Interests in Securitized
    Financial Assets, EITF 99-20
  EITF 99-20
 29




---



##### Table of Contents



Specialty
    Risk Management Operations
    For the Six MonthsEndedJune 30,2008


2007Revenue:Net earned premiums

$
143,053


$
132,395Management fees


10,206



10,287Claims fees


4,485



4,451Loss control fees


1,135



1,143Reinsurance placement


394



418Investment income


13,722



11,921Net realized (losses) gains


(177
)


14Total revenue

$
172,818


$
160,629Pre-tax income:Specialty risk management operations

$
28,529


$
22,167            30




---



##### Table of Contents



pre-tax
  Other
    Items ~ Reserves
    Agency
    Operations
    For the Six MonthsEndedJune 30,2008


2007Net commission

$
6,009


$
6,745Pre-tax income(1)

$
937


$
1,721     (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,
    2008 and 2007, the allocation of corporate overhead to the
    agency operations segment was $1.7 million and
    $1.4 million, respectively. These balances include an
    allocation to our Insurance & Benefit Consultants
    agency business that was previously allocated to specialty risk
    management operations. For the six months ended June 30,
    2007, pre-tax income for agency operations was overstated and
    specialty risk management was understated by $147,000,
    respectively.   31




---



##### Table of Contents



Other
    Items
  Reserves
    Minimum


MaximumReserve


Reserve


SelectedLine of Business

Range


Range


ReservesWorkers Compensation(1)

$
157,580


$
174,439


$
168,579Commercial Multiple Peril/General Liability


87,114



110,090



97,549Commercial Automobile


68,834



76,193



73,623Other


16,768



19,485



18,329Total Net Reserves

$
330,296


$
380,207


$
358,080     (1)
    
    Includes Residual Markets     32




---



##### Table of Contents



Reserves at


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior


Total


June 30,Line of Business

2007


Year


Years


Incurred


Year


Years


Paid


2008Workers Compensation

$
141,359


$
31,074


$
(4,188
)

$
26,886


$
946


$
23,143


$
24,089


$
144,156Residual Markets


25,428



3,959



(1,683
)


2,276



1,152



2,128



3,280



24,424Commercial Multiple Peril/General Liability


87,812



18,082



3,517



21,599



441



11,421



11,862



97,549Commercial Automobile


69,426



24,349



(1,404
)


22,945



3,841



14,907



18,748



73,623Other


17,516



9,313



(1,816
)


7,497



3,186



3,498



6,684



18,329Net Reserves


341,541


$
86,777


$
(5,574
)

$
81,203


$
9,566


$
55,097


$
64,663



358,081Reinsurance Recoverable


198,461



























200,783Consolidated

$
540,002


























$
558,864   Re-estimated


DevelopmentReserves at


as aReserves at


June 30,


Percentage ofDecember 31,


2008 on


Prior YearLine of Business

2007


Prior Years


ReservesWorkers Compensation

$
141,359


$
137,171



−3.0
%Commercial Multiple Peril/General Liability


87,812



91,329



4.0
%Commercial Automobile


69,426



68,022



−2.0
%Other


17,516



15,700



−10.4
%Sub-total


316,113



312,222



−1.2
%Residual Markets


25,428



23,745



−6.6
%Total Net Reserves

$
341,541


$
335,967



−1.6
%   Workers Compensation Excluding Residual
    Markets
  Commercial Multiple Peril and General
    Liability
  Commercial Automobile
 33




---



##### Table of Contents



Other
  Residual Markets
  Salaries
    and Employee Benefits and Other Administrative
    Expenses
        Amortization
    Expense
    Interest
    Expense
  Liquidity and Capital Resources
  3-month
 34




---



##### Table of Contents



Income
    Taxes
    Other
    Than Temporary Impairments
        June 30, 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

$
51


$



$



$



$
51


$
Obligations of states and political subdivisions


131,007



(1,569
)










131,007



(1,569
)Corporate securities


39,865



(1,148
)


1,664



(361
)


41,529



(1,509
)Mortgage and asset-backed securities


64,703



(2,026
)


3,104



(100
)


67,807



(2,126
)Totals

$
235,626


$
(4,743
)

$
4,768


$
(461
)

$
240,394


$
(5,204
)   35




---



##### Table of Contents



December 31, 2007Less 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

$



$



$
5,963


$
(29
)

$
5,963


$
(29
)Obligations of states and political subdivisions


19,400



(68
)


45,177



(255
)


64,577



(323
)Corporate securities


15,564



(415
)


30,601



(513
)


46,165



(928
)Mortgage and asset-backed securities


9,116



(95
)


47,963



(520
)


57,079



(615
)Totals

$
44,080


$
(578
)

$
129,704


$
(1,317
)

$
173,784


$
(1,895
)     EITF 99-20, Recognition of Interest Income and Impairment on
    Purchased and Retained Beneficial Interests in Securitized
    Financial Assets, EITF 99-20
  EITF 99-20
  RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND
    2007
  Results
    of Operations
   36




---



##### Table of Contents



EITF 99-20, EITF 99-20
  EITF 99-20
 37




---



##### Table of Contents



Specialty
    Risk Management Operations
    For the Three MonthsEnded June 30,2008


2007Revenue:Net earned premiums

$
77,031


$
67,191Management fees


4,174



5,412Claims fees


2,305



2,247Loss control fees


625



544Reinsurance placement


98



85Investment income


6,752



5,991Net realized (losses) gains


(146
)


20Total revenue

$
90,839


$
81,490Pre-tax income:Specialty risk management operations

$
15,617


$
10,848            38




---



##### Table of Contents



Agency
    Operations
    For the Three Months Ended June 30,2008

2007Net commission

$
2,681


$
2,860Pre-tax income(1)

$
174


$
494     (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,
    2008 and 2007, the allocation of corporate overhead to the
    agency operations segment was $900,000 and $608,000,
    respectively. These balances include an allocation to our
    Insurance & Benefit Consultants agency business that
    was previously allocated to specialty risk management
    operations. For the three months ended June 30, 2007,
    pre-tax income for agency operations was overstated and
    specialty risk management was understated by $80,000,
    respectively.     39




---



##### Table of Contents



Other
    Items
  Reserves
    Salary
    and Employee Benefits and Other Administrative
    Expenses
        Amortization
    Expense
    Interest
    Expense
  Liquidity and Capital Resources
  3-month
  Income
    Taxes
   40




---



##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
    For the Six Months Ended June 30,


For the Three Months Ended June 30,2008


2007


2008


2007Net income

$
15,495


$
13,109


$
8,437


$
6,186Insurance Company Subsidiaries:Net income

$
16,931


$
11,071


$
9,643


$
5,455Adjustments to reconcile net income to net cash provided by
    operating activities


2,877



158



2,480



(283
)Changes in operating assets and liabilities


7,121



9,732



5,848



(1,551
)Total adjustments


9,998



9,890



8,328



(1,834
)Net cash provided by operating activities

$
26,929


$
20,961


$
17,971


$
3,621Fee-based Subsidiaries:Net income

$
(1,436
)

$
2,038


$
(1,206
)

$
731Depreciation


1,505



1,525



760



788Amortization


3,114



687



1,563



543Interest


2,565



3,154



1,254



1,667Net income, excluding interest, depreciation, and amortization


5,748



7,404



2,371



3,729Adjustments to reconcile net income to net cash provided by
    operating activities


4,202



2,452



2,371



879Changes in operating assets and liabilities


(3,548
)


(3,214
)


(1,832
)


(146
)Total adjustments


654



(762
)


539



733Depreciation


(1,505
)


(1,525
)


(760
)


(788
)Amortization


(3,114
)


(687
)


(1,563
)


(543
)Interest


(2,565
)


(3,154
)


(1,254
)


(1,667
)Net cash (used in) provided by operating activities

$
(782
)

$
1,276


$
(667
)

$
1,464Consolidated total adjustments


10,652



9,128



8,867



(1,101
)Consolidated net cash provided by operating activities

$
26,147


$
22,237


$
17,304


$
5,085  41




---



##### Table of Contents



Other
    Items
  Long-term
    Debt
    InterestYear


Year





Rate at


PrincipalDescription

Callable


Due


Interest Rate Terms


06/30/08(1)


AmountJunior subordinated debentures


2008



2033



Three-month LIBOR, plus 4.05
%


6.85
%

$
10,310Senior debentures


2009



2034



Three-month LIBOR, plus 4.00
%


6.68
%


13,000Senior debentures


2009



2034



Three-month LIBOR, plus 4.20
%


6.84
%


12,000Junior subordinated debentures


2010



2035



Three-month LIBOR, plus 3.58
%


6.36
%


20,620Total


$
55,930     (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.         42




---



##### Table of Contents



Interest
    Rate Swaps
  Accounting for Derivative
    Instruments and Hedging Activities,
  non-amortizing,
  non-amortizing,
  non-amortizing,
  non-amortizing,
  non-amortizing,
      Revolving
    Line of Credit
   43




---



##### Table of Contents



Investment
    Portfolio
    EITF 99-20
  EITF 99-20, EITF 99-20
  Shareholders
    Equity
     44




---



##### Table of Contents



USSU
    Acquisition
     45




---



##### Table of Contents



Adjusted
    Expense Ratio
    For the Six Months


For the Three MonthsEnded June 30,


Ended June 30,2008


2007


2008


2007Net earned premiums

$
143,053


$
132,395


$
77,031


$
67,191Less: Consolidated net loss and LAE


81,203



76,353



43,542



39,707Intercompany claim fees


6,735



6,648



3,629



3,353Unconsolidated net loss and LAE


87,938



83,001



47,171



43,060Consolidated policy acquisition and other underwriting expenses


25,863



26,812



12,716



13,169Intercompany administrative and other underwriting fees


17,920



18,330



9,832



9,178Unconsolidated policy acquisition and other underwriting expenses


43,783



45,142



22,548



22,347Underwriting income

$
11,332


$
4,252


$
7,312


$
1,784GAAP combined ratio as reported


92.1
%


96.8
%


90.5
%


97.4
%Specialty risk management operations pre-tax income

$
28,529


$
22,167


$
15,617


$
10,848Less: Underwriting income


11,332



4,252



7,312



1,784Net investment income and capital gains


13,888



12,399



6,771



6,249Fee-based operations pre-tax income


3,309



5,516



1,534



2,815Agency operations pre-tax income


937



1,721



174



494Total fee-for-service pre-tax income

$
4,246


$
7,237


$
1,708


$
3,309GAAP expense ratio as reported


30.6
%


34.1
%


29.3
%


33.3
%Adjustment to include pre-tax income from total
    fee-for-service
    income(1)


3.0
%


5.5
%


2.2
%


4.9
%GAAP expense ratio as adjusted


27.6
%


28.6
%


27.1
%


28.3
%GAAP loss and LAE ratio as reported


61.5
%


62.7
%


61.2
%


64.1
%GAAP combined ratio as adjusted


89.1
%


91.3
%


88.3
%


92.4
%Reconciliation of consolidated pre-tax income:Specialty risk management operations pre-tax income:Fee-based operations pre-tax income

$
3,309


$
5,516


$
1,534


$
2,815Underwriting income


11,332



4,252



7,312



1,784Net investment income and capital gains


13,888



12,399



6,771



6,249Total specialty risk management operations pre-tax income


28,529



22,167



15,617



10,848Agency operations pre-tax income


937



1,721



174



494Less: Holding company expenses


1,619



1,389



719



533Interest expense


2,565



3,154



1,254



1,667Amortization expense


3,114



687



1,563



543Consolidated pre-tax income

$
22,168


$
18,658


$
12,255


$
8,599     (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. 46




---



##### Table of Contents



Regulatory
    Contractual
    Obligations and Commitments
      Regulatory
    and Rating Issues
        Reinsurance
   47




---



##### Table of Contents



Convertible
    Note
    Recent
    Accounting Pronouncements
  , Fair Value
    Measurements.
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115. instrument-by-instrument
  Business Combinations.
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51
 48




---



##### Table of Contents



Disclosures about Derivative Instruments and Hedging
    Activities.
  FAS 142-3, Determination of the Useful Life of Intangible
    Assets. FAS 142-3 Goodwill and Other Intangible
    Assets.
  The Hierarchy of Generally Accepted Accounting
    Principles. The Meaning of Present Fairly in
    Conformity With
  Accounting for Financial Guarantee Insurance
    Contracts-an interpretation of FASB Statement
    No. 60. Accounting for Contingencies.
  Subsequent
    Events
  ProCentury
    Merger
  Form 10-Q
 49




---



##### Table of Contents



30-day
    Credit
    Facilities
          Insurance
    Company Subsidiary Dividend Payment
    Interest
    Rate Swaps
  Accounting for Derivative
    Instruments and Hedging Activities,
 50




---



##### Table of Contents



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


Rates


Rates Up100bps


Unchanged


100bpsFair Value

$
592,593


$
563,670


$
534,240Yield to Maturity or Call


3.45
%


4.45
%


5.45
%Effective Duration


4.32



4.61



4.79      51




---



##### Table of Contents



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,
    Changes
    in Internal Control over Financial Reporting
   52




---



##### 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    Form 10-K
    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS           53




---



##### Table of Contents



ITEM 6.
    EXHIBITS    ExhibitNo.

Description10
.1

Credit Agreement, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc., as the Borrower, Bank of America, N.A.,
    as Administrative Agent and L/C Issuer, KeyBank National
    Association, JPMorgan Chase Bank, N.A. and RBS Citizens N.A., as
    Co-Syndication Agents, the other lenders party hereto, and Banc
    of America Securities LLC, as Sole Lead Arranger and Sole Book
    Manager (incorporated by reference from Current Report on
    Form 8-K
    filed on July 31, 2008).10
.2

Revolving Credit Note, dated July 31, 2008, between
    Meadowbrook Insurance Group, Inc. and RBS Citizens,
    National Association, D/B/A Charter One (incorporated by
    reference from Current Report on
    Form 8-K
    filed on July 31, 2008).10
.3

Term Note, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc. and RBS Citizens, National Association,
    D/B/A Charter One (incorporated by reference from Current Report
    on
    Form 8-K
    filed on July 31, 2008).10
.4

Revolving Credit Note, dated July 31, 2008, between
    Meadowbrook Insurance Group, Inc. and The PrivateBank and
    Trust Company (incorporated by reference from Current
    Report on
    Form 8-K
    filed on July 31, 2008).10
.5

Term Note, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc. and The PrivateBank and Trust Company
    (incorporated by reference from Current Report on
    Form 8-K
    filed on July 31, 2008).10
.6

Amended and Restated Executive Employment Agreement, dated
    July 31, 2008, by and between ProCentury Corporation and
    Christopher J. Timm (incorporated by reference from Current
    Report on
    Form 8-K
    filed on July 31, 2008, by ProCentury Corporation).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.  54




---



##### Table of Contents



SIGNATURES    Meadowbrook Insurance Group, Inc.
  By:
    /s/  Karen
    M. Spaun      55




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description10
.1

Credit Agreement, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc., as the Borrower, Bank of America, N.A.,
    as Administrative Agent and L/C Issuer, KeyBank National
    Association, JPMorgan Chase Bank, N.A. and RBS Citizens N.A., as
    Co-Syndication Agents, the other lenders party hereto, and Banc
    of America Securities LLC, as Sole Lead Arranger and Sole Book
    Manager (incorporated by reference from Current Report on
    Form 8-K
    filed on July 31, 2008).10
.2

Revolving Credit Note, dated July 31, 2008, between
    Meadowbrook Insurance Group, Inc. and RBS Citizens,
    National Association, D/B/A Charter One (incorporated by
    reference from Current Report on
    Form 8-K
    filed on July 31, 2008).10
.3

Term Note, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc. and RBS Citizens, National Association,
    D/B/A Charter One (incorporated by reference from Current Report
    on
    Form 8-K
    filed on July 31, 2008).10
.4

Revolving Credit Note, dated July 31, 2008, between
    Meadowbrook Insurance Group, Inc. and The PrivateBank and
    Trust Company (incorporated by reference from Current
    Report on
    Form 8-K
    filed on July 31, 2008).10
.5

Term Note, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc. and The PrivateBank and Trust Company
    (incorporated by reference from Current Report on
    Form 8-K
    filed on July 31, 2008).10
.6

Amended and Restated Executive Employment Agreement, dated
    July 31, 2008, by and between ProCentury Corporation and
    Christopher J. Timm (incorporated by reference from Current
    Report on
    Form 8-K
    filed on July 31, 2008, by ProCentury Corporation).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