##### Table of Contents



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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarter ended
    March 31, 2007oro

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

38-2626206(State of
    Incorporation)

(IRS Employer Identification
    No.)    26255 American Drive, Southfield, Michigan 48034
 (Address, zip code of principal
    executive offices)
   (248) 358-1100
 (Registrants telephone
    number, including area
    code )
   þ o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ




---



##### 



TABLE OF
    CONTENTS
  
  PagePART I 
    FINANCIAL INFORMATIONITEM 1



FINANCIAL
    STATEMENTSConsolidated
    Statements of Income (unaudited)


2Consolidated
    Statements of Comprehensive Income (unaudited)


3Consolidated
    Balance Sheets (unaudited)


4Consolidated
    Statements of Cash Flows (unaudited)


5Notes to
    Consolidated Financial Statements (unaudited)


6-18ITEM 2



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


19-33ITEM 3



QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


33ITEM 4



CONTROLS AND
    PROCEDURES


34PART II 
    OTHER INFORMATIONITEM 1



LEGAL
    PROCEEDINGS


34ITEM 1A



RISK
    FACTORS


35ITEM 2



UNREGISTERED SALES
    OF EQUITY SECURITIES AND USE OF PROCEEDS


35ITEM 6



EXHIBITS


35SIGNATURES


36Section 302 Certification of Chief Executive OfficerSection 302 Certification of Chief Financial OfficerSection 906 Certification of Chief Executive OfficerSection 906 Certification of Chief Financial Officer   1




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##### Table of Contents



PART 1 
    FINANCIAL INFORMATION  ITEM 1
    Financial
    Statements  MEADOWBROOK
    INSURANCE GROUP, INC.
 CONSOLIDATED STATEMENTS OF INCOME   For the Three Months Ended March 31,2007


2006(Unaudited)(In thousands,except share data)RevenuesPremiums earnedGross

$
81,551


$
81,692Ceded


(16,347
)


(18,568
)Net earned premiums


65,204



63,124Net commissions and fees


11,551



11,289Net investment income


6,156



5,239Net realized losses


(6
)


(7
)Total revenues


82,905



79,645ExpensesLosses and loss adjustment expenses


50,002



49,884Reinsurance recoveries


(13,356
)


(12,841
)Net losses and loss adjustment
    expenses


36,646



37,043Salaries and employee benefits


13,532



13,368Policy acquisition and other
    underwriting expenses


13,643



11,424Other administrative expenses


7,537



7,959Interest expense


1,488



1,388Total expenses


72,846



71,182Income before taxes and equity
    earnings


10,059



8,463Federal and state income tax
    expense


3,149



2,847Equity earnings of affiliates


13



9Net income

$
6,923


$
5,625Earnings Per ShareBasic

$
0.23


$
0.20Diluted

$
0.23


$
0.19Weighted average number of common
    sharesBasic


29,344,293



28,757,603Diluted


29,465,807



29,452,693    2




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.



CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME  For the Three Months Ended March 31,2007


2006(Unaudited)(In thousands)Net income

$
6,923


$
5,625Other comprehensive income, net of
    tax:Unrealized gains (losses) on
    securities


380



(3,029
)Net deferred derivative (loss)
    gain  hedging activity


(76
)


252Less: reclassification adjustment
    for losses included in net income


18



19Other comprehensive income (loss),
    net of tax


322



(2,758
)Comprehensive income

$
7,245


$
2,867    3




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    BALANCE SHEETS
  March 31,


December 31,2007


2006(Unaudited)(In thousands,except share data)ASSETSDebt securities available for
    sale, at fair value (amortized cost of $512,376 and $486,213)

$
511,501


$
484,724Cash and cash equivalents


41,515



42,876Accrued investment income


6,046



5,884Premiums and agent balances
    receivable, net


95,119



85,578Reinsurance recoverable on:Paid losses


4,485



4,257Unpaid losses


201,879



198,422Prepaid reinsurance premiums


21,611



20,425Deferred policy acquisition costs


29,613



27,902Deferred federal income taxes


15,116



15,732Goodwill


31,502



31,502Other assets


50,965



51,698Total assets

$
1,009,352


$
969,000LIABILITIES AND
    SHAREHOLDERS EQUITYLosses and loss adjustment expenses

$
514,833


$
501,077Unearned premiums


152,528



144,575Debt


10,400



7,000Debentures


55,930



55,930Accounts payable and accrued
    expenses


35,299



25,384Reinsurance funds held and
    balances payable


19,062



15,124Payable to insurance companies


2,726



5,442Other liabilities


11,195



12,775Total liabilities


801,973



767,307Common stock, $0.01 stated
    value; authorized 50,000,000 shares; 29,539,236 and
    29,107,818 shares issued and outstanding


295



291Additional paid-in capital


125,265



126,828Retained earnings


83,205



76,282Note receivable from officer


(871
)


(871
)Accumulated other comprehensive
    loss


(515
)


(837
)Total shareholders equity


207,379



201,693Total liabilities and
    shareholders equity

$
1,009,352


$
969,000    4




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Three Months Ended March 31,2007


2006(Unaudited)(In thousands)Cash Flows From Operating
    ActivitiesNet income

$
6,923


$
5,625Adjustments to reconcile net income
    to net cash provided by (used in) operating activities:Amortization of other intangible
    assets


144



165Amortization of deferred debenture
    issuance costs


59



59Depreciation of furniture,
    equipment, and building


738



543Net accretion of discount and
    premiums on bonds


690



626Losses on sale of investments, net


28



30Gain on sale of fixed assets


(22
)


(22
)Stock-based employee compensation


2



98Excess tax benefits from stock
    options exercised


(131
)


(268
)Long term incentive plan expense


65



197Deferred income tax benefit


443



(514
)Changes in operating assets and
    liabilities:Decrease (increase) in:Premiums and agent balances
    receivable


(9,541
)


(17,845
)Reinsurance recoverable on paid and
    unpaid losses


(3,685
)


6,210Prepaid reinsurance premiums


(1,186
)


(1,061
)Deferred policy acquisition costs


(1,711
)


(878
)Other assets


753



60Increase (decrease) in:Losses and loss adjustment expenses


13,756



12,225Unearned premiums


7,953



7,319Payable to insurance companies


(2,715
)


(2,675
)Reinsurance funds held and balances
    payable


3,938



(1,463
)Other liabilities


651



4,641Total adjustments


10,229



7,447Net cash provided by operating
    activities


17,152



13,072Cash Flows From Investing
    ActivitiesPurchase of debt securities
    available for sale


(70,135
)


(52,763
)Proceeds from sales and maturities
    of debt securities available for sale


50,740



16,304Capital expenditures


(927
)


(1,643
)Purchase of books of business


(75
)


(82
)Other investing activities


(241
)


92Net cash used in investing
    activities


(20,638
)


(38,092
)Cash Flows From Financing
    ActivitiesProceeds from lines of credit


5,900



3,936Payment of lines of credit


(2,500
)


(2,624
)Book overdraft


423



(301
)Stock options exercised


85



150Cash payment for payroll taxes
    associated with long-term incentive plan net stock issuance


(1,841
)


Excess tax benefits from stock
    options exercised


131



268Other financing activities


(73
)


(69
)Net cash provided by financing
    activities


2,125



1,360Net decrease in cash and cash
    equivalents


(1,361
)


(23,660
)Cash and cash equivalents,
    beginning of period


42,876



58,038Cash and cash equivalents, end of
    period

$
41,515


$
34,378    5




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE 1 
    Summary of Significant Accounting Policies
  Basis
    of Presentation and Management Representation
        Form 10-K,
  Revenue
    Recognition
           6




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
    sub-producer
      Earnings
    Per Share
      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
  NOTE 2 
    Stock Options, Long Term Incentive Plan, and Deferred
    Compensation Plan
  Stock
    Options
  Share-Based Payment,
 7




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
  Accounting for Stock-Based
    Compensation  Transition and Disclosure 
    an amendment of FASB Statement No. 123.
          Weighted-AverageExerciseOptions


PriceOutstanding as of
    December 31, 2006


391,678


$
7.38Exercised


(49,071
)

$
2.94Forfeited


(13,922
)

$
21.44Outstanding as of March 31,
    2007


328,685


$
7.44Exercisable as of March 31,
    2007


302,815


$
7.26  8




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
    Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageRange of




Remaining


Exercise





ExerciseExercise Prices

Options


Life (Years)


Price


Options


Price$2.173 to $3.507


227,248



0.6


$
2.52



227,248


$
2.52$6.48


1,500



2.7


$
6.48



1,000


$
3.24$10.91 to $24.6875


99,937



1.2


$
18.66



74,567


$
23.49328,685



0.8


$
7.44



302,815


$
7.26     Long
    Term Incentive Plan
    2004-2006 2007-2009 2007-2009
  2004-2006 2004-2006
 9




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
    Deferred
    Compensation Plan
    NOTE 3 
    Reinsurance
  excess-of-loss Accounting and Reporting for Reinsurance for
    Short-Duration and Long-Duration Contracts.
     10




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
     March 31,


December 31,2007


2006Gross exposure

$
14,335


$
14,815Collateral or other security


(3,347
)


(3,623
)Allowance


(9,674
)


(9,731
)Net exposure

$
1,314


$
1,461     excess-of-loss excess-of-loss excess-of-loss
       11




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
              NOTE 4 
    Debt
  Lines
    of Credit
          Senior
    Debentures
   12




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
        Junior
    Subordinated Debentures
  time-to-time,
      time-to-time,
       13




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
       NOTE 5 
    Derivative Instruments
  Accounting for Derivative
    Instruments and Hedging Activities,
  non-amortizing,
  non-amortizing,
     14




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
   NOTE 6 
    Shareholders Equity
      2004-2006 Stock Options, Long Term
    Incentive Plan, and Deferred Compensation Plan
  NOTE 7 
    Regulatory Matters and Rating Agencies
       15




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
     NOTE 8 
    Segment Information
    Specialty
    Risk Management Operations
   16




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
   Agency
    Operations
      For the Three MonthsEnded March 31,2007


2006RevenuesNet earned premiums

$
65,204


$
63,124Management fees


4,875



4,531Claims fees


2,204



2,100Loss control fees


599



538Reinsurance placement


333



418Investment income


5,930



5,030Net realized losses


(6
)


(7
)Specialty risk management


79,139



75,734Agency operations


3,885



4,261Miscellaneous income(2)


226



209Intersegment revenue


(345
)


(559
)Consolidated revenue

$
82,905


$
79,645Pre-tax income:Specialty risk management

$
11,253


$
9,298Agency operations(1)


1,294



1,651Non-allocated expenses


(2,488
)


(2,486
)Consolidated pre-tax income

$
10,059


$
8,463     (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, 2007
    and 2006, the allocation of corporate overhead to the agency
    operations segment was $719,000 and $825,000, respectively.(2)
    
    The miscellaneous income included
    in the revenue relates to miscellaneous interest income within
    the holding company.    For the Three MonthsEnded March 31,2007


2006Holding company expenses

$
(856
)

$
(933
)Amortization


(144
)


(165
)Interest expense


(1,488
)


(1,388
)$
(2,488
)

$
(2,486
)   NOTE 9 
    Income Taxes
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
 17




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Unaudited)
          NOTE 10 
    Commitments and Contingencies
  Accounting for
    Contingencies,
  NOTE 11 
    Subsequent Events
       18




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##### Table of Contents



ITEM 2
    MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONSFor the Quarters ended March 31, 2007 and
    2006



Forward-Looking
    Statements



This quarterly report may provide information including
    certain statements which constitute forward-looking statements
    within the meaning of Section 27A of the Securities Act of
    1933, as amended, and Section 21E of the Securities
    Exchange Act of 1934, as amended. These include statements
    regarding the intent, belief, or current expectations of
    management, including, but not limited to, those statements that
    use the words believes, expects,
    anticipates, estimates, or similar
    expressions. You are cautioned that any such forward-looking
    statements are not guarantees of future performance and involve
    a number of risks and uncertainties, and results could differ
    materially from those indicated by such forward-looking
    statements. Among the important factors that could cause actual
    results to differ materially from those indicated by such
    forward-looking statements are: the frequency and severity of
    claims; uncertainties inherent in reserve estimates;
    catastrophic events; a change in the demand for, pricing of,
    availability or collectibility of reinsurance; increased rate
    pressure on premiums; obtainment of certain rate increases in
    current market conditions; investment rate of return; changes in
    and adherence to insurance regulation; actions taken by
    regulators, rating agencies or lenders; obtainment of certain
    processing efficiencies; changing rates of inflation; general
    economic conditions and other risks identified in our reports
    and registration statements filed with the Securities and
    Exchange Commission. We are not under any obligation to (and
    expressly disclaim any such obligation to) update or alter our
    forward-looking statements whether as a result of new
    information, future events or otherwise.



Description
    of Business



We are a publicly traded specialty risk management company, with
    an emphasis on alternative market insurance and risk management
    solutions for agents, professional and trade associations, and
    small to medium-sized insureds. The alternative market includes
    a wide range of approaches to financing and managing risk
    exposures, such as captives,
    rent-a-captives,
    risk retention and risk purchasing groups, governmental pools
    and trusts, and self-insurance plans. The alternative market
    developed as a result of the historical volatility in the cost
    and availability of traditional commercial insurance coverages,
    and usually involves some form of self-insurance or risk-sharing
    on the part of the client. We develop and manage alternative
    risk management programs for defined client groups and their
    members. We also operate as an insurance agency representing
    unaffiliated insurance companies in placing insurance coverages
    for policyholders. We define our business segments as specialty
    risk management operations and agency operations.



Critical
    Accounting Estimates



In certain circumstances, we are required to make estimates and
    assumptions that affect amounts reported in our consolidated
    financial statements and related footnotes. We evaluate these
    estimates and assumptions on an on-going basis based on a
    variety of factors. There can be no assurance, however, that
    actual results will not be materially different than our
    estimates and assumptions, and that reported results of
    operation will not be affected by accounting adjustments needed
    to reflect changes in these estimates and assumptions. The
    accounting estimates and related risks described in our annual
    report on
    Form 10-K
    as filed with the United States Securities and Exchange
    Commission on March 13, 2007, are those that we consider to
    be our critical accounting estimates. As of the three months
    ended March 31, 2007, there have been no material changes
    in regard to any of our critical accounting estimates.



RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND
    2006



Executive
    Overview



For the first quarter of 2007, we again experienced an
    improvement in our overall results in comparison to prior year.
    This improvement continues to reflect our selective growth, as
    well as our adherence to strict corporate

19




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##### Table of Contents



Results
    of Operations
    fee-for-service
 20




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##### Table of Contents



Specialty
    Risk Management Operations
    For the Three Months Ended March 31,2007


2006Revenue:Net earned premiums

$
65,204


$
63,124Management fees


4,875



4,531Claims fees


2,204



2,100Loss control fees


599



538Reinsurance placement


333



418Investment income


5,930



5,030Net realized losses


(6
)


(7
)Total revenue

$
79,139


$
75,734Pre-tax incomeSpecialty risk management
    operations

$
11,253


$
9,298              21




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##### Table of Contents



Other Items  Reserves
    Agency
    Operations
    For the Three Months Ended March 31,2007


2006Net commission

$
3,885


$
4,261Pre-tax income(1)

$
1,294


$
1,651     (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, 2007 and 2006, the allocation
    of corporate overhead to the agency operations segment was
    $719,000 and $825,000, respectively.     22




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##### Table of Contents



Other
    Items
  Reserves
    Minimum


MaximumReserve


Reserve


SelectedLine of Business

Range


Range


ReservesWorkers Compensation(1)

$
154,090


$
170,364


$
163,590Commercial Multiple Peril/General
    Liability


62,837



76,526



69,032Commercial Automobile


56,122



63,564



59,983Other


17,992



22,506



20,349Total Net Reserves

$
291,041


$
332,960


$
312,954     (1)
    
    Includes Residual Markets     23




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##### Table of Contents



Reserves at


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior





March 31,Line of Business

2006


Year


Years


Incurred


Year


Years


Total Paid


2007Workers Compensation

$
137,113


$
14,200


$
(2,759
)

$
11,441


$
(655
)

$
11,162


$
10,507


$
138,047Residual Markets


26,098



2,693



(1,515
)


1,178



1,479



254



1,733



25,543Commercial Multiple
    Peril/General Liability


63,056



6,662



3,103



9,765



(217
)


4,006



3,789



69,032Commercial Automobile


54,642



11,312



954



12,266



722



6,203



6,925



59,983Other


21,746



4,009



(2,013
)


1,996



243



3,150



3,393



20,349Net Reserves


302,655


$
38,876


$
(2,230
)

$
36,646


$
1,572


$
24,775


$
26,347



312,954Reinsurance Recoverable


198,422



























201,879Consolidated

$
501,077


























$
514,833   Re-Estimated


DevelopmentReserves at


Reserves at


as a PercentageDecember 31,


March 31, 2007


of Prior YearLine of Business

2006


on Prior Years


ReservesWorkers Compensation

$
137,113


$
134,354



(2.0
)%Commercial Multiple Peril/General
    Liability


63,056



66,159



4.9
%Commercial Automobile


54,642



55,596



1.7
%Other


21,746



19,733



(9.3
)%Sub-total


276,557



275,842



(0.3
)%Residual Markets


26,098



24,583



(5.8
)%Total Net Reserves

$
302,655


$
300,425



(0.7
)%   Workers
    Compensation Excluding Residual Markets
    Commercial
    Multiple Peril and General Liability
   24




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##### Table of Contents



Commercial
    Automobile
    Other
    Residual
    Markets
    Salary
    and Employee Benefits and Other Administrative
    Expenses
        Interest
    Expense
  Liquidity and Capital Resources
 25




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##### Table of Contents



Income
    Taxes
    Other
    Than Temporary Impairments
        March 31, 2007Less than 12 months


Greater than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments with


Unrealized


Investments with


Unrealized


Investments with


UnrealizedUnrealized Losses


Losses


Unrealized Losses


Losses


Unrealized Losses


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

$
4,636


$



$
23,329


$
(340
)

$
27,965


$
(340
)Obligations of states and
    political subdivisions


55,131



(279
)


80,861



(1,247
)


135,992



(1,526
)Corporate securities


8,957



(63
)


51,781



(1,152
)


60,738



(1,215
)Mortgage and asset backed
    securities


19,133



(41
)


65,487



(1,230
)


84,620



(1,271
)Totals

$
87,857


$
(383
)

$
221,458


$
(3,969
)

$
309,315


$
(4,352
)   26




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##### Table of Contents



December 31, 2006Less than 12 months


Greater than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments with


Unrealized


Investments with


Unrealized


Investments with


UnrealizedUnrealized Losses


Losses


Unrealized Losses


Losses


Unrealized Losses


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

$
14,586


$
(61
)

$
27,076


$
(460
)

$
41,662


$
(521
)Obligations of states and
    political subdivisions


45,726



(210
)


68,958



(1,250
)


114,684



(1,460
)Corporate securities


7,646



(61
)


55,520



(1,454
)


63,166



(1,515
)Mortgage and asset backed
    securities


20,462



(91
)


67,495



(1,535
)


87,957



(1,626
)Totals

$
88,420


$
(423
)

$
219,049


$
(4,699
)

$
307,469


$
(5,122
)    27




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##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
    For the Three MonthsEnded March 31,2007


2006Net income

$
6,923


$
5,625Regulated Subsidiaries:Net income, excluding interest,
    depreciation, and amortization

$
5,616


$
4,583Adjustments to reconcile net
    income to net cash provided by operating activities


441



334Changes in operating assets and
    liabilities


11,283



7,956Total adjustments


11,724



8,290Net cash provided by operating
    activities

$
17,340


$
12,873Non-regulated Subsidiaries:Net income

$
1,307


$
1,042Depreciation


737



543Amortization


144



165Interest


1,488



1,388Net income, excluding interest,
    depreciation, and amortization


3,676



3,138Adjustments to reconcile net
    income to net cash (used in) provided by operating activities


1,573



577Changes in operating assets and
    liabilities


(3,068
)


(1,420
)Total adjustments


(1,495
)


(843
)Depreciation


(737
)


(543
)Amortization


(144
)


(165
)Interest


(1,488
)


(1,388
)Net cash (used in) provided by
    operating activities

$
(188
)

$
199Consolidated total adjustments


10,229



7,447Consolidated net cash provided by
    operating activities

$
17,152


$
13,072    28




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##### Table of Contents



Other
    Items
  Long-term
    Debt
    InterestYear of




Year








Rate at


PrincipalIssuance


Description

Callable


Year Due


Interest Rate Terms


03/31/07


Amount2003


Junior subordinated debentures


2008



2033



Three-month LIBOR, plus 4.05
%


9.41
%

$
10,3102004


Senior debentures


2009



2034



Three-month LIBOR, plus 4.00
%


9.36
%


13,0002004


Senior debentures


2009



2034



Three-month LIBOR, plus 4.20
%


9.56
%


12,0002005


Junior subordinated debentures


2010



2035



Three-month LIBOR, plus 3.58
%


8.93
%


20,620Total


$
55,930         Interest
    Rate Swaps
  Accounting for
    Derivative Instruments and Hedging Activities,
 29




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##### Table of Contents



non-amortizing,
  non-amortizing,
    Revolving
    Line of Credit
          Shareholders
    Equity
     30




---



##### Table of Contents



2004-2006  Stock Options, Long Term Incentive Plan, and
    Deferred Compensation Plan
  Regulatory
    Contractual
    Obligations and Commitments
    Regulatory
    and Rating Issues
       31




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##### Table of Contents



Reinsurance
    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
  Subsequent
    Events
     32




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##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk          Rates Down


Rates


Rates Up100bps


Unchanged


100bpsMarket Value

$
532,449


$
511,501


$
490,170Yield to Maturity or Call


3.49
%


4.49
%


5.49
%Effective Duration


3.99



4.09



4.23    33




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##### 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
   PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Commitments and Contingencies Form 10-Q
 34




---



##### Table of Contents



Item 1A.
    Risk
    Factors  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Form 10-K
  Item 6.
    Exhibits    ExhibitNo.

Description31
.1

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

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

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

Certification pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002, signed by
    Karen M. Spaun, Senior Vice President and Chief Financial
    Officer of the Corporation.  35




---



##### Table of Contents



SIGNATURES    Meadowbrook Insurance
    Group, Inc.
  By:
    /s/  Karen
    M. Spaun  Senior Vice President and
 Chief Financial Officer
   36




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description31
.1

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

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

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

Certification pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002, signed by
    Karen M. Spaun, Senior Vice President and Chief Financial
    Officer of the Corporation.  37