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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington D.C. 20549


FORM 10-Q

| |  |                                                                                          
| |  | -----------------------------------------------------------------------------------------
| |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934 
| |  | For the quarter ended March 31, 2001                                                     
| |  | OR                                                                                       
| |  | 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.)

26600 Telegraph Road, Southfield, Michigan 48034



Registrants telephone number, including area code:
(248) 358-1100

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past
90 days.  Yes 

     No

The aggregate number of shares of
the Registrants Common Stock, $.01 par value, outstanding
on May 14, 2001 was 8,512,194.



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TABLE OF CONTENTS



|                                                |  |  |  |  |  |  |  | 
|----------------------------------------------- |  |  |  |  |  |  |  | 
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME    
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|CONDENSED CONSOLIDATED BALANCE SHEETS          
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|MANAGEMENT REPRESENTATION                      
|PART II -- OTHER INFORMATION                   
|Amendment No. 4 to Revolving Credit            
|Statement Re: Compation of Per Share Earnings  
|Awareness Letter                               



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##### Table of Contents



TABLE OF CONTENTS

|                                                                                                |                                                                                       |       |     
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----- | ----
|                                                                                                |                                                                                       | Page 
|                                                                                                |                                                                                       |      
|PART I  FINANCIAL INFORMATION                                                                  |                                                                                       |      
|ITEM 1  FINANCIAL STATEMENTS                                                                   |                                                                                       |      
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Report of Independent Accountants                                                     |       | 3   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Condensed Consolidated Statements of Income (unaudited)                               |       | 4   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Consolidated Statements of Comprehensive Income (unaudited)                           |       | 5   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Condensed Consolidated Balance Sheets (unaudited)                                     |       | 6   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Condensed Consolidated Statements of Cash Flows (unaudited)                           |       | 7   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Notes to Consolidated Financial Statements (unaudited) and
	Management Representation |       | 8-13
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                                                       | 14-19
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|PART II  OTHER INFORMATION                                                                     |                                                                                       |      
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|ITEM 1  LEGAL PROCEEDINGS                                                                      |                                                                                       | 18   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES
	ABOUT MARKET RISK                            |                                                                                       | 18   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K                                                       |                                                                                       | 18   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|SIGNATURES                                                                                      |                                                                                       | 19   

2



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##### Table of Contents






Report of Independent Accountants

To the Board of Directors and Shareholders



We have reviewed the accompanying condensed consolidated balance
sheet of Meadowbrook Insurance Group, Inc. and its subsidiaries
as of March 31, 2001, and the related condensed
consolidated statements of income and comprehensive income for
each of the three-month periods ended March 31, 2001 and
2000 and the condensed consolidate statement of cash flows for
the three month periods ended March 31, 2001 and 2000.
These financial statements are the responsibility of the
Companys management.

We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated interim financial statements for them to be in
conformity with accounting principles generally accepted in the
United States of America.

We previously audited in accordance with auditing standards
generally accepted in the United States of America, the
consolidated balance sheet as of December 31, 2000, and the
related consolidated statements of income, comprehensive income,
shareholders equity, and of cash flows for the year then
ended (not presented herein), and in our report dated
February 15, 2001 we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 2000, is fairly stated in
all material respects in relation to the consolidated balance
sheet from which it has been derived.

(SIG)







3



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##### Table of Contents



PART 1  FINANCIAL INFORMATION

ITEM 1


FINANCIAL STATEMENTS


MEADOWBROOK INSURANCE GROUP, INC.






CONDENSED CONSOLIDATED STATEMENTS OF INCOME


For the Quarters Ended March 31, 2001 and 2000


(Unaudited)


|                                                      |                                            |                                   |    |           |        |  |      |           |        |  
|----------------------------------------------------- | ------------------------------------------ | --------------------------------- | -- | --------- | ------ |  | ---- | --------- | ------ | -
|                                                      |                                            | 2001                              |    | 2000     
|                                                      |                                            |                                   |    |          
|                                                      |                                            |                                  
|                                                      |                                            | (in thousands,                   
|                                                      |                                            | except share data)               
|                                                     
|                                                     
|                                                     
|                                                     
|Revenues:                                             |                                            |                                   |    |           |        |  |      |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net premiums earned                        |                                   | $  | 41,173    |        |  | $    | 33,268    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net commissions and fees                   |                                   |    | 12,409    |        |  |      | 10,182    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net investment income                      |                                   |    | 3,508     |        |  |      | 2,798     |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net realized gains (losses) on investments |                                   |    | 146       |        |  |      | (11       | )     
|                                                      |                                            |                                   |    |           |        |  |      |          
|                                                      |                                            | Total revenues                    |    |           | 57,236 |  |      |           | 46,237 |  
|                                                      |                                            |                                   |    |           |        |  |      |          
|Expenses:                                             |                                            |                                   |    |           |        |  |      |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net loss and loss adjustment expenses      |                                   |    | 30,036    |        |  |      | 23,302    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Salaries and employee benefits             |                                   |    | 11,376    |        |  |      | 10,725    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other operating expenses                   |                                   |    | 14,324    |        |  |      | 11,109    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on debt                           |                                   |    | 1,319     |        |  |      | 1,240     |       
|                                                      |                                            |                                   |    |           |        |  |      |          
|                                                      |                                            | Total expenses                    |    |           | 57,055 |  |      |           | 46,376 |  
|                                                      |                                            |                                   |    |           |        |  |      |          
|                                                      |                                            | Income (loss) before income taxes |    |           | 181    |  |      |           | (139   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Federal income tax expense (benefit)                  |                                            |                                   | 28 |           |        |  | (244 | )        
|                                                      |                                            |                                   |    |           |        |  |      |          
|                                                      |                                            | Net income                        |    | $         | 153    |  |      | $         | 105    |  
|                                                      |                                            |                                   |    |           |        |  |      |          
|Earnings per share:                                   |                                            |                                   |    |           |        |  |      |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                                      |                                   | $  | 0.02      |        |  | $    | 0.01      |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Diluted                                    |                                   | $  | 0.02      |        |  | $    | 0.01      |       
|                                                     
|                                                     
|                                                     
|                                                     
|Weighted average number of common shares outstanding: |                                            |                                   |    |           |        |  |      |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                                      |                                   |    | 8,512,161 |        |  |      | 8,511,655 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Diluted                                    |                                   |    | 8,517,861 |        |  |      | 8,522,313 |       

The accompanying notes are an integral part of the consolidated
financial statements.

4



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.






CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


For the Quarters Ended March 31, 2001 and 2000


(Unaudited)


|           |                                                |                                                                              |                                               |      |       |       |     |  |      |      |  
|---------- | ---------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------- | ---- | ----- | ----- | --- |  | ---- | ---- | -
|           |                                                | 2001                                                                         |                                               | 2000
|           |                                                |                                                                              |                                               |     
|           |                                                |                                                                             
|           |                                                | (in thousands)                                                              
|          
|          
|          
|          
|Net income |                                                | $                                                                            | 153                                           |      |       | $     | 105 | 
|          
|          
|          
|          
|           | Other comprehensive income (loss), net of tax: |                                                                              |                                               |      |       |       |     |  |     
|          
|          
|          
|          
|           |                                                | Unrealized gains (losses) on securities                                      |                                               |      | 1,546 |       |     |  | (413 | )   
|          
|          
|          
|          
|           |                                                | Less: reclassification adjustment for (gains) losses
	included in net income |                                               |      | (96   | )     |     |  | 7    |     
|           |                                                |                                                                              |                                               |      |       |       |     | 
|           |                                                |                                                                              | Other comprehensive income (loss), net of tax |      |       | 1,450 |     |  |      | (406 | )
|           |                                                |                                                                              |                                               |      |       |       |     | 
|           |                                                |                                                                              | Comprehensive income (loss)                   |      | $     | 1,603 |     |  | $    | (301 | )
|           |                                                |                                                                              |                                               |      |       |       |     | 

The accompanying notes are an integral part of the consolidated
financial statements.

5



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.






CONDENSED CONSOLIDATED BALANCE SHEETS


|                                                            |                                                                                    |                                            |         |              |         |   |         |         |         | 
|----------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------ | ------- | - | ------- | ------- | ------- | 
|                                                            |                                                                                    | March 31,                                  |         |             
|                                                            |                                                                                    | 2001                                       |         | December 31,
|                                                            |                                                                                    | (Unaudited)                                |         | 2000        
|                                                            |                                                                                    |                                            |         |             
|                                                            |                                                                                    |                                           
|                                                            |                                                                                    | (in thousands,                            
|                                                            |                                                                                    | except share data)                        
|                                                           
|                                                           
|                                                           
|                                                           
|ASSETS                                                     
|                                                           
|                                                           
|                                                           
|                                                           
|Cash and invested assets:                                   |                                                                                    |                                            |         |              |         |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Debt securities available for sale, at fair value
	(cost of $187,247 and $164,685) |                                            | $       | 191,986      |         |   | $       | 166,790 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Equity securities available for sale, at fair value
	(cost of $15,634 and $16,445) |                                            |         | 15,231       |         |   |         | 16,455  |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cash and cash equivalents                                                          |                                            |         | 25,812       |         |   |         | 56,838  |        
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|                                                            |                                                                                    | Total cash and invested assets             |         |              | 233,029 |   |         |         | 240,083 | 
|                                                           
|                                                           
|                                                           
|                                                           
|Premiums and agent balances receivable                      |                                                                                    |                                            | 88,582  |              |         |   | 79,121  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Reinsurance recoverable on paid and unpaid losses           |                                                                                    |                                            | 201,061 |              |         |   | 185,387 |        
|                                                           
|                                                           
|                                                           
|                                                           
|Prepaid reinsurance premiums                                |                                                                                    |                                            | 53,590  |              |         |   | 55,854  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Deferred policy acquisition costs                           |                                                                                    |                                            | 10,016  |              |         |   | 6,624   |        
|                                                           
|                                                           
|                                                           
|                                                           
|Intangible assets                                           |                                                                                    |                                            | 35,397  |              |         |   | 35,946  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Other assets                                                |                                                                                    |                                            | 76,261  |              |         |   | 58,168  |        
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|                                                            |                                                                                    | Total assets                               |         | $            | 697,936 |   |         | $       | 661,183 | 
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|LIABILITIES AND SHAREHOLDERS EQUITY                       
|                                                           
|                                                           
|                                                           
|                                                           
|Liabilities:                                                |                                                                                    |                                            |         |              |         |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|Reserve for losses and loss adjustment expenses             |                                                                                    | $                                          | 359,467 |              |         | $ | 341,824 |        
|                                                           
|                                                           
|                                                           
|                                                           
|Unearned premiums                                           |                                                                                    |                                            | 104,091 |              |         |   | 94,142  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Debt                                                        |                                                                                    |                                            | 52,914  |              |         |   | 53,013  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Reinsurance funds held and balances payable                 |                                                                                    |                                            | 47,600  |              |         |   | 38,171  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Other liabilities                                           |                                                                                    |                                            | 46,549  |              |         |   | 48,058  |        
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|                                                            |                                                                                    | Total liabilities                          |         |              | 610,621 |   |         |         | 575,208 | 
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|Commitments and contingencies (note 7)                      |                                                                                    |                                            |         |              |         |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|Shareholders Equity:                                       |                                                                                    |                                            |         |              |         |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|Common stock, $.01 par value; authorized 30,000,000 shares: |                                                                                    |                                            |         |              |         |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | 8,512,194 and 8,512,008 shares issued and outstanding                              |                                            |         | 85           |         |   |         | 85      |        
|                                                           
|                                                           
|                                                           
|                                                           
|Additional paid-in capital                                  |                                                                                    |                                            | 67,933  |              |         |   | 67,928  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Retained earnings                                           |                                                                                    |                                            | 17,207  |              |         |   | 17,309  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Note receivable from officer                                |                                                                                    |                                            | (785    | )            |         |   | (772    | )      
|                                                           
|                                                           
|                                                           
|                                                           
|Accumulated other comprehensive income                      |                                                                                    |                                            | 2,875   |              |         |   | 1,425   |        
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|                                                            |                                                                                    | Total shareholders equity                 |         |              | 87,315  |   |         |         | 85,975  | 
|                                                            |                                                                                    |                                            |         |              |         |   |         |        
|                                                            |                                                                                    | Total liabilities and shareholders equity |         | $            | 697,936 |   |         | $       | 661,183 | 
|                                                            |                                                                                    |                                            |         |              |         |   |         |        

The accompanying notes are an integral part of the consolidated
financial statements.

6



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Quarters Ended March 31, 2001 and 2000


(Unaudited)


|                                                       |                                                                        |                                                     |         |         |         |   |        |        |        |  
|------------------------------------------------------ | ---------------------------------------------------------------------- | --------------------------------------------------- | ------- | ------- | ------- | - | ------ | ------ | ------ | -
|                                                       |                                                                        | 2001                                                |         | 2000   
|                                                       |                                                                        |                                                     |         |        
|                                                       |                                                                        |                                                    
|                                                       |                                                                        | (in thousands)                                     
|                                                      
|                                                      
|                                                      
|                                                      
|Net cash (used in) provided by operating activities    |                                                                        | $                                                   | (2,430  | )       |         | $ | 7,069  |       
|                                                       |                                                                        |                                                     |         |         |         |   |        |       
|Cash flows provided by (used in) investing activities: |                                                                        |                                                     |         |         |         |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchase of debt securities available for sale                         |                                                     |         | (47,836 | )       |   |        | (8,151 | )     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchase of equity securities available for sale                       |                                                     |         | (425    | )       |   |        | (149   | )     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Proceeds from sale and maturity of debt securities available for
	sale |                                                     |         | 25,281  |         |   |        | 4,738  |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Proceeds from sale of equity securities available for sale             |                                                     |         | 1,175   |         |   |        | 148    |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other investing activities                                             |                                                     |         | (8,332  | )       |   |        | (1,154 | )     
|                                                       |                                                                        |                                                     |         |         |         |   |        |       
|                                                       |                                                                        | Net cash used in investing activities               |         |         | (30,137 | ) |        |        | (4,568 | )
|                                                      
|                                                      
|                                                      
|                                                      
|Cash flows provided by (used in) financing activities: |                                                                        |                                                     |         |         |         |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net (payments of) proceeds from bank loan                              |                                                     |         | (99     | )       |   |        | 185    |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Dividends paid on common stock                                         |                                                     |         | (255    | )       |   |        | (255   | )     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other financing activities                                             |                                                     |         | 1,895   |         |   |        | (593   | )     
|                                                       |                                                                        |                                                     |         |         |         |   |        |       
|                                                       |                                                                        | Net cash provided by (used in) financing activities |         |         | 1,541   |   |        |        | (663   | )
|                                                       |                                                                        |                                                     |         |         |         |   |        |       
|(Decrease) increase in cash and cash equivalents       |                                                                        |                                                     | (31,026 | )       |         |   | 1,838  |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cash and cash equivalents, beginning of period                         |                                                     |         | 56,838  |         |   |        | 23,713 |       
|                                                       |                                                                        |                                                     |         |         |         |   |        |       
|Cash and cash equivalents, end of period               |                                                                        | $                                                   | 25,812  |         |         | $ | 25,551 |       
|                                                       |                                                                        |                                                     |         |         |         |   |        |       

The accompanying notes are an integral part of the consolidated
financial statements.

7



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##### Table of Contents








NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)


NOTE 1  Basis of Presentation

These financial statements and the notes thereto should be read
in conjunction with the Companys audited financial
statements and accompanying notes included in its Annual Report
on Form 10-K for the year ended December 31, 2000.

The consolidated financial statements reflect all normal
recurring adjustments, which were, in the opinion of management,
necessary to present a fair statement of the results for the
interim quarters. The results of operations for the quarter
ended March 31, 2001, are not necessarily indicative of the
results expected for the full year.

NOTE 2  New Accounting Pronouncements

Effective January 1, 2001, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 133
Accounting for Derivative Instruments and Hedging
Activities (as amended by SFAS No. 137 and 138). As
the Company does not customarily use derivative instruments, the
impact of adoption was immaterial on the results of operations
or financial position of the Company.

NOTE 3  Reinsurance

The insurance company subsidiaries cede insurance to other
insurers under pro rata and excess-of-loss contracts. These
reinsurance arrangements diversify the Companys business
and minimize its losses arising from large risks or from hazards
of an unusual nature. The ceding of insurance does not discharge
the original insurer from its primary liability to its
policyholder; and in the event that all or any of the reinsuring
companies are unable to meet their obligations, the insurance
company subsidiaries would be liable for such defaulted amounts.
Therefore, the Company is subject to credit risk with respect to
the obligations of its reinsurers. In order to minimize its
exposure to significant losses from reinsurer insolvencies, the
Company evaluates the financial condition of its reinsurers and
monitors the economic characteristics of the reinsurers on an
ongoing basis. The Company also assumes insurance from other
insurers and reinsurers, both domestic and foreign, under pro
rata and excess-of-loss contracts.

At March 31, 2001, the Company has reinsurance recoverables
for paid and unpaid losses of $201.1 million. The Company
customarily collateralizes reinsurance balances due from
non-admitted reinsurers through Funds Withheld Trusts or Letters
of Credit. The largest unsecured reinsurance recoverable is due
from an admitted reinsurer with an A++ A.M. Best
rating and accounts for 22.3% of the total recoverable for paid
and unpaid losses.

During the quarter ended March 31, 2001, the Company
recorded a provision of $750,000 related to balances due from
HIH America Compensation & Liability Company
(HIH), a California domiciled insurance company
which was recently seized by the California Department of
Insurance. This provision is based on managements
consultation with legal counsel and assessment of the
Companys ultimate risk of uncollectibility. The
recoverable emanates from a fronted program that was
discontinued in 1999, and represents the estimate of remaining
recoveries the Company would receive as losses are paid.

The Companys insurance subsidiaries maintain an excess
reinsurance program designed to protect against large or unusual
loss and loss adjustment expense activity. The Company
determines the appropriate amount of reinsurance based on the
Companys evaluation of the risks accepted and analysis
prepared by consultants and reinsurers and on market conditions
including the availability and pricing of reinsurance.

Under the workers compensation reinsurance program, the
Company reinsures each loss in excess of $100,000 up to a limit
of $20 million, under separate treaties. The first treaty
covers losses in excess of $100,000 up to $250,000, and the
second treaty reinsures losses in excess of $250,000 up to
$20 million. In addition, the Company purchases coverage in
excess of $20 million up to $140 million to protect
itself in the event of a catastrophe.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


(unaudited)


Under the liability reinsurance treaty, the reinsurers are
responsible for 100% of the amount of each loss in excess of
$250,000 up to $5.0 million per occurrence.

Under the property program, the reinsurers are responsible for
100% of the amount of each loss in excess of $250,000 up to
$1.0 million per occurrence. Additionally, the property
program provides coverage for losses in excess of
$1.0 million up to $1.75 million per occurrence, and
losses in excess of $1.75 million to $3.0 million per
occurrence. Additional capacity is available for property
coverages up to $5.0 million on an automatic facultative
basis.

In its risk-sharing programs, the Company is also subject to
credit risk with respect to the payment of claims by its
clients captive insurers, rent-a-captive, large deductible
programs, indemnification agreements and on the portion of risk
exposure either ceded to the captives or retained by the client.
The capitalization and credit worthiness of prospective
risk-sharing partners is one of the factors considered by the
Company in entering into and renewing risk-sharing programs. The
Company typically collateralizes balances due from its
risk-sharing partners through Funds Withheld Trusts or Letters
of Credit. To date, the Company has not experienced any material
difficulties in collecting balances from its risk-sharing
partners. No assurance can be given, however, regarding the
future ability of any of the Companys risk-sharing
partners to meet their obligations.

NOTE 4  Unsecured Line of Credit

The Company has an unsecured line of credit totaling
$48.0 million, of which $47.5 million was outstanding
at March 31, 2001. The Company drew on this line of credit
primarily to consummate the acquisitions made during 1997
through 1999. The Company also uses the line of credit
periodically to fund operating expenses of the non-regulated
subsidiaries.

At December 31, 2000, the Company was obligated to reduce
the credit line to $33 million by April 30, 2001. In
May 2001, the Company received a permanent waiver of this
obligation to reduce the credit line. Concurrent with the
permanent waiver, the Company and its banks agreed to waive all
prior covenant violations of the existing loan agreement and
establish new covenants related to statutory surplus, GAAP net
worth, fixed charge coverage, net and gross premium ratios and a
minimum A.M. Best rating. The Company was in compliance with
these new covenants at March 31, 2001. In addition, the
Company agreed to a revised pay down schedule and an interest
rate that increases one-quarter point every two months beginning
June 1, 2001 until the facility is paid down to
$33 million. Pursuant to the revised pay down schedule,
proceeds from capital raising efforts, including any sales of
non-regulated subsidiaries, must first be used to reduce the
loan commitment from $48 million to $33 million. Half of
any proceeds in excess of $15 million from sales of
non-regulated subsidiaries must be used to further reduce the
loan commitment. If there have been no required or voluntary
reductions in the loan facility prior to September 30,
2001, the Company is required to begin reducing the loan
commitment by $5 million per quarter until the facility is
paid in full, expires in August 2002, is renegotiated or
extended.

The Company generates operating cash flow from non-regulated
subsidiaries in the form of commission revenue, outside
management fees and intercompany management fees. These sources
of income are used to meet debt service, shareholders
dividends and other operating expenses of the holding company
and non-regulated subsidiaries. The Company presently has
sufficient cash to meet its current obligations to service the
debt but has insufficient cash in these non-regulated businesses
to meet the future scheduled reductions in the line of credit.
To meet short-term liquidity needs and to strengthen the surplus
of its regulated insurance company subsidiaries, the Company has
retained investment bankers to help evaluate strategic
alternatives, including raising additional capital and the sale
of selected operating assets. No assurance can be given that
these efforts will be successful.

9



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


(unaudited)


NOTE 5  Regulatory Matters and Rating Agencies

A significant portion of the Companys consolidated assets
represent assets of the Companys insurance subsidiaries
that cannot be transferred to the holding company in the form of
dividends, loans or advances. The restriction on the
transferability to the holding company from its insurance
subsidiaries is limited by Michigan regulatory guidelines, which
are as follows: The maximum discretionary dividend that may be
declared, based on data from the preceding calendar year, is the
greater of each insurance companys net income (excluding
realized capital gains) or ten percent of the insurance
companys policyholders surplus (excluding unrealized
gains). These dividends are further limited by a clause in the
Michigan law that prohibits an insurer from declaring dividends
except out of surplus earnings of the company. Earned surplus
balances are calculated on a quarterly basis. Since Star
Insurance Company (Star) is the parent insurance
company, its maximum dividend calculation represents the
combined insurance companies surplus. Based upon the 2000
statutory financial statements, Star may not pay any dividends
to the Company during 2001 without prior approval of the
Michigan Commissioner of Insurance. Stars earned surplus
position at December 31, 2000 was negative
$25.9 million. No statutory dividends were paid in 2000 and
1999.

In March 1998, the National Association of Insurance
Commissioners (NAIC) voted to adopt its Codification
of Statutory Accounting Principles project (referred to
hereafter as codification). Codification is a
modified form of statutory accounting principles that resulted
in a change to the NAIC Accounting Practices and Procedures
Manual previously applicable to insurance enterprises. The
Companys insurance subsidiaries adopted codification
effective January 1, 2001.

Insurance operations are subject to various leverage tests (e.g.
premium to statutory surplus ratios) which are evaluated by
regulators and rating agencies. The Companys target for
gross and net written premium to statutory surplus are 4 to 1
and 2 to 1, respectively. Due primarily to large net losses in
2000, statutory surplus has diminished to a level where the
premium leverage ratios as of March 31, 2001, on a
consolidated basis, were 5.4 to 1 and 2.6 to 1 on a gross and
net written premium basis, respectively. The Company has
submitted a plan to reduce its current leverage ratios and is
working closely with the regulatory agencies to monitor its
progress. A continued period of high leverage ratios with
insufficient progress towards the Companys goal may
ultimately result in actions by rating agencies or regulators.
Rating agencies could further downgrade the insurance
companies ratings and regulators could take many actions,
including, but not limited to, reductions in premium writings
and mandatory infusions of additional capital.

In February 2001, A.M. Best downgraded Star and its
insurance company subsidiaries from an A- to a
B++ rating. This change in the Companys rating
was the result of A.M. Bests concerns about the
Companys recent net operating losses and reduction in
statutory surplus. A.M. Best ratings are based upon factors of
concern to policyholders and are not directed toward the
protection of investors. No assurance can be given that, in the
future, A.M. Best will not further reduce or withdraw the
ratings of the Companys insurance company subsidiaries.
This downgrade may result in either a loss of clients or a
requirement to seek another insurance company with an A.M. Best
rating of A- or better as a fronting or
policy-issuing company. There are costs associated with
providing the Companys insureds with access to a fronting
company that likely cannot be recouped.

In May 2001, Standard & Poors downgraded Star and
its insurance company subsidiaries from an A to a
BB+ rating. This change in the Companys rating
was primarily the result of Standard & Poors concerns
that the Company might fall below accepted levels of regulatory
capital as measured by the NAICs risk based capital ratio.
At the Companys request, Standard & Poors
subsequently withdrew this rating.

NOTE 6  Subordinated Surplus Note

Effective December 31, 2000, Connecticut Surety Company
(CSC) executed a Subordinated Surplus Note with Star
in the principal sum of $3.8 million. Interest earns at 9%
per annum, payable quarterly beginning April 1, 2001. These
loan proceeds were deposited by CSC into a trust account
established for the

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


(unaudited)


benefit of Star in order to collateralize CSCs reinsurance
obligations under the various reinsurance agreements. This
Subordinated Surplus Note, along with the other notes ($195,000
Subordinated Surplus Note and $300,000 Promissory Notes), are
intended to be converted into Voting Convertible Preferred Stock
of CSC, or its parent, as a part of a recapitalization of CSC,
pursuant to a Letter of Intent dated December 31, 2000
between CSC, Star, and other investors. Upon obtainment of the
requisite regulatory approval, it is anticipated that Star would
own greater than 50% of CSC, or its parent company, if it has
fully exercised its conversion rights under the Voting
Convertible Preferred Stock. If, and when, Star obtains control,
it will consolidate CSCs financial position and results of
operations into the Companys financial statements.

As of December 31, 2000, without the effect of the
investment noted above, CSC had capital and surplus of negative
$900,000. Star, in conjunction with the Connecticut Insurance
Department and the other CSC shareholders, developed the
recapitalization plan described above that will allow CSC to
continue as a going concern, subject to regulatory approval. In
conjunction with its investment, Star will have seats on
CSCs board and appropriate management oversight of ongoing
operations.

No assurance can be given that the Company will receive
regulatory approval for the conversion of the subordinated
surplus note to voting convertible preferred stock or the trust
account established for the benefit of Star will adequately
cover CSCs reinsurance obligations in the event the
recapitalization of CSC is not consummated. During the quarter
ended March 31, 2001, the Company established a valuation
allowance of $250,000 related to this investment.

NOTE 7  Commitments and Contingencies

The Company is involved in litigation arising in the ordinary
course of operations. While the results of litigation cannot be
predicted with certainty, management is of the opinion, after
reviewing these matters with legal counsel, that the final
outcome of such litigation will not have a material effect upon
the Companys financial statements.

NOTE 8  Segment Information

The Company defines its operations as agency operations and
program business operations based upon differences in products
and services. The separate financial information of these
segments is consistent with the way results are regularly
evaluated by management in deciding how to allocate resources
and in assessing performance. Intersegment revenue is eliminated
in consolidation.

Agency Operations

The agency segment was formed in 1955 as Meadowbrooks
original business. The insurance agency primarily places
commercial insurance, as well as personal property, casualty,
life and accident and health insurance, with more than
50 insurance carriers from which it earns commission
income. The agency has grown to be one of the largest agencies
in Michigan and, with recent acquisitions, expanded into Florida
and California.

Program Business

The program business segment is engaged primarily in developing
and managing alternative market risk management programs for
defined client groups and their members. This includes providing
services, such as reinsurance brokering, risk management
consulting, claims handling, and administrative services, along
with various types of property and casualty insurance coverage,
including workers compensation, general liability and
commercial multiple peril. Insurance coverage is primarily
provided to associations or similar groups of members, commonly
referred to as programs. A program is a set of coverages and
services tailored to meet the specific requirements of a group
of clients.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


(unaudited)


The following table sets forth the segment results (in
thousands):

|          |                                                                   |                          |                      |        |        |        |   |        |        |        | 
|--------- | ----------------------------------------------------------------- | ------------------------ | -------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|          |                                                                   |                         
|          |                                                                   | Quarters ended          
|          |                                                                   | March 31,               
|          |                                                                   |                         
|          |                                                                   | 2001                     |                      | 2000  
|          |                                                                   |                          |                      |       
|Revenues: |                                                                   |                          |                      |        |        |        |   |       
|         
|         
|         
|         
|          | Net earned premiums                                               |                          | $                    | 41,173 |        |        | $ | 33,268 |       
|         
|         
|         
|         
|          | Management fees                                                   |                          |                      | 7,736  |        |        |   | 6,137  |       
|         
|         
|         
|         
|          | Investment income and net realized gains (losses) on
	investments |                          |                      | 3,654  |        |        |   | 2,787  |       
|          |                                                                   |                          |                      |        |        |        |   |       
|          |                                                                   | Program business segment |                      |        | 52,563 |        |   |        | 42,192 |       
|         
|         
|         
|         
|          | Agency operations                                                 |                          |                      | 4,886  |        |        |   | 4,275  |       
|         
|         
|         
|         
|          | Intersegment revenue                                              |                          |                      | (213   | )      |        |   | (230   | )     
|          |                                                                   |                          |                      |        |        |        |   |       
|          |                                                                   |                          | Consolidated revenue |        | $      | 57,236 |   |        | $      | 46,237 | 
|          |                                                                   |                          |                      |        |        |        |   |       

|                       |                   |                                    |   |        |     |  |   |        |      |  
|---------------------- | ----------------- | ---------------------------------- | - | ------ | --- |  | - | ------ | ---- | -
|                       |                   |                                   
|                       |                   | Quarter ended                     
|                       |                   | March 31,                         
|                       |                   |                                   
|                       |                   | 2001                               |   | 2000  
|                       |                   |                                    |   |       
|Pre-tax income (loss): |                   |                                    |   |        |     |  |   |       
|                      
|                      
|                      
|                      
|                       | Program business  |                                    | $ | 627    |     |  | $ | 533    |     
|                      
|                      
|                      
|                      
|                       | Agency operations |                                    |   | 1,570  |     |  |   | 1,116  |     
|                      
|                      
|                      
|                      
|                       | Reconciling items |                                    |   | (2,016 | )   |  |   | (1,788 | )   
|                       |                   |                                    |   |        |     |  |   |       
|                       |                   | Consolidated pre-tax income (loss) |   | $      | 181 |  |   | $      | (139 | )
|                       |                   |                                    |   |        |     |  |   |       

The pre-tax income reconciling items represent other expenses
relating to the holding company, amortization and interest
expense, which are not allocated among the segments.

NOTE 9  Reclassifications

Certain amounts in the 2000 notes to consolidated financial
statements have been reclassified to conform with the 2001
presentation.

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MANAGEMENT REPRESENTATION


In the opinion of management, the financial statements reflect
all adjustments of a normal recurring nature necessary for a
fair presentation of the interim periods. Preparation of
financial statements under GAAP requires management to make
estimates. Actual results could differ from those estimates.
Interim results are not necessarily indicative of results
expected for the entire year. These financial statements should
be read in conjunction with the Companys 2000 Annual
Report on Form 10-K, as filed with the Securities and
Exchange Commission.

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 the
Companys management. 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 rating agencies or banks; obtainment of certain
processing efficiencies; changing rates of inflation; general
economic conditions and other risks identified in the
Companys reports and registration statements filed with
the Securities and Exchange Commission. The Company is not under
any obligation to (and expressly disclaims any such obligation
to) update or alter its forward-looking statements whether as a
result of new information, future events or otherwise.

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##### Table of Contents



PART I  FINANCIAL INFORMATION

ITEM 2

MANAGEMENTS DISCUSSION AND ANALYSIS OF


FINANCIAL CONDITION AND RESULTS OF OPERATIONS


For the Quarters ended March 31, 2001 and 2000


Meadowbrook Insurance Group, Inc. (the Company) is a
program-oriented risk management company specializing in
alternative risk management solutions for agents, brokers,
professional/trade associations, and insureds of all sizes. The
Company provides a broad array of insurance products and
services through its subsidiaries. The Company owns insurance
carriers, which are essential elements of the risk management
process. Management defines its business segments as agency
operations and program business operations based upon
differences in products and services.

RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 2001
AND 2000

Overview

Net income for the quarter ended March 31, 2001 was
$153,000 compared to $105,000 for the quarter ended
March 31, 2000.

Revenues for the quarter ended March 31, 2001 increased
$11.0 million, or 23.8%, to $57.2 million from
$46.2 million for the comparable period in 2000. Revenues
from program business increased $10.4 million, or 24.6%, to
$52.6 million for the quarter ended March 31, 2001 from
$42.2 million for the comparable period in 2000. Agency
revenues increased $600,000, or 14.0%, to $4.9 million for
the quarter ended March 31, 2001 from $4.3 million for
the comparable period in 2000.

Program Business

The following table sets forth the revenues and results from
operations for program business (in thousands):

|               |                                                                  |                |     |        |        |   |     |        |        | 
|-------------- | ---------------------------------------------------------------- | -------------- | --- | ------ | ------ | - | --- | ------ | ------ | 
|               |                                                                  |               
|               |                                                                  | Quarters Ended
|               |                                                                  | March 31,     
|               |                                                                  |               
|               |                                                                  | 2001           |     | 2000  
|               |                                                                  |                |     |       
|Revenue:       |                                                                  |                |     |        |        |   |     |       
|              
|              
|              
|              
|               | Net earned premiums                                              |                | $   | 41,173 |        |   | $   | 33,268 |       
|              
|              
|              
|              
|               | Management fees                                                  |                |     | 7,736  |        |   |     | 6,137  |       
|              
|              
|              
|              
|               | Investment income and net realized gains (losses) on investments |                |     | 3,654  |        |   |     | 2,787  |       
|               |                                                                  |                |     |        |        |   |     |       
|               |                                                                  | Total revenue  |     | $      | 52,563 |   |     | $      | 42,192 | 
|               |                                                                  |                |     |        |        |   |     |       
|Pre-tax income |                                                                  | $              | 627 |        |        | $ | 533 |       
|               |                                                                  |                |     |        |        |   |     |       

Revenues from program business increased $10.4 million, or
24.6%, to $52.6 million for the quarter ended March 31,
2001 from $42.2 million for the comparable period in 2000.
This increase reflects 23.8% growth in net earned premiums to
$41.2 million in the quarter ended March 31, 2001 from
$33.3 million in the comparable period in 2000, and is the
result of growth in new and existing programs. These increases
were partially offset by the impact of the purchase of a large
quota share reinsurance treaty for several workers
compensation programs. Management fees grew $1.6 million,
or 26.1%, to $7.7 million from $6.1 million. This
increase resulted from a profit sharing fee of $1.6 million
relating to the good experience achieved on a loss portfolio
transfer. The remaining increase in total revenue reflects a
$705,000, or 25.2%, increase in investment income. This increase
reflects both increases in average invested assets of 3.8% and
an increase in pre-tax yields to 6.10% from 5.45%.

Program business generated pre-tax income of $627,000 for the
quarter ended March 31, 2001 compared to $533,000 for the
comparable period in 2000. The growth in program business
revenues was fully offset by an

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The Companys expense ratio was 35.3% for the quarter ended
March 31, 2001 compared to 34.3% for the comparable period
in 2000. This increase reflects the reduction in programs in
which the Company retains limited risk, and where the Company
was receiving a ceding commission in excess of the actual
expenses. This margin had the effect of reducing the expense
ratio.

Agency Operations

The following table sets forth the revenues and results from
operations for agency operations (in thousands):

|                               |  |                |       |      |  |   |       | 
|------------------------------ |  | -------------- | ----- | ---- |  | - | ----- | 
|                               |  |               
|                               |  | Quarters Ended
|                               |  | March 31,     
|                               |  |               
|                               |  | 2001           |       | 2000
|                               |  |                |       |     
|Revenue from agency operations |  | $              | 4,886 |      |  | $ | 4,275 | 
|                              
|                              
|                              
|                              
|Pre-tax income                 |  | $              | 1,570 |      |  | $ | 1,116 | 

Revenue from agency operations, which consists primarily of
agency commission revenue, increased $611,000, or 14.3%, to
$4.9 million for the quarter ended March 31, 2001 from
$4.3 million for the comparable period in 2000. Agency
operations generated pre-tax income of $1.6 million for the
quarter ended March 31, 2001 compared to $1.1 million
for the comparable period in 2000. The increase in pre-tax
income was primarily attributable to an increase in agency
commission revenue.

Other Items

Interest Expense

Interest expense for the quarter ended March 31, 2001
increased by 6.4% to $1.3 million from $1.2 million
for the comparable period in 2000. Interest expense is primarily
attributable to the Companys line of credit.

Taxes

Federal income tax expense for the quarter ended March 31,
2001 was $28,000, or 15.5% of income before taxes. For the same
quarter last year, the Company reflected a federal income tax
benefit of $244,000 on a loss before taxes of $139,000.

Liquidity and Capital Resources

The principal sources of funds for the Company and its
subsidiaries are insurance premiums, investment income, proceeds
from the maturity and sale of invested assets, risk management
fees, agency commissions, and management fees from the
Companys insurance subsidiaries. Funds are primarily used
for the payment of claims, commissions, salaries and employee
benefits, other operating expenses, shareholder dividends, and
debt service. The Company generates operating cash flow from
non-regulated subsidiaries in the form of commission revenue,
outside management fees, and intercompany management fees. These
sources of income

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##### Table of Contents





Cash flows used in operating activities for the quarter ended
March 31, 2001 were $2.4 million, which compares to
$7.1 million of cash flows provided by operating activities
for the comparable period in 2000. The decrease in cash from
operations reflects an increase in paid claims and
underwriting-related expenses. In addition, as noted previously,
the Company purchased a large quota share reinsurance treaty for
several workers compensation programs. These decreases
were partially offset by an increase in premiums collected. Cash
flows used in investing activities for the quarter ended
March 31, 2001 were $30.1 million compared to
$4.6 million for the comparable period in 2000. This
increase in cash used in investing activities reflects the
reinvestment of cash from sales of debt securities that occurred
at the end of 2000.

The Company has an unsecured line of credit totaling
$48.0 million, of which $47.5 million was outstanding
at March 31, 2001. The Company drew on this line of credit
primarily to consummate the acquisitions made during 1997
through 1999. The Company also uses the line of credit
periodically to fund operating expenses of the non-regulated
subsidiaries.

At December 31, 2000, the Company was obligated to reduce
the credit line to $33 million by April 30, 2001. In
May 2001, the Company received a permanent waiver of this
obligation to reduce the credit line. Concurrent with the
permanent waiver, the Company and its banks agreed to waive all
prior covenant violations of the existing loan agreement and
establish new covenants related to statutory surplus, GAAP net
worth, fixed charge coverage, net and gross premium ratios and a
minimum A.M. Best rating. The Company was in compliance with
these new covenants at March 31, 2001. In addition, the
Company agreed to a revised pay down schedule and an interest
rate that increases one-quarter point every two months beginning
June 1, 2001 until the facility is paid down to
$33 million. Pursuant to the revised pay down schedule,
proceeds from capital raising efforts, including any sales of
non-regulated subsidiaries, must first be used to reduce the
loan commitment from $48 million to $33 million. Half of
any proceeds in excess of $15 million from sales of
non-regulated subsidiaries must be used to further reduce the
loan commitment. If there have been no required or voluntary
reductions in the loan facility prior to September 30,
2001, the Company is required to begin reducing the loan
commitment by $5 million per quarter until the facility is
paid in full, expires in August 2002, is renegotiated or
extended.

The Company generates operating cash flow from non-regulated
subsidiaries in the form of commission revenue, outside
management fees and intercompany management fees. These sources
of income are used to meet debt service, shareholders
dividends and other operating expenses of the holding company
and non-regulated subsidiaries. The Company presently has
sufficient cash to meet its current obligations to service the
debt but has insufficient cash in these non-regulated businesses
to meet the future scheduled reductions in the line of credit.
To meet short-term liquidity needs and to strengthen the surplus
of its regulated insurance company subsidiaries, the Company has
retained investment bankers to help evaluate strategic
alternatives, including raising additional capital and the sale
of selected operating assets. No assurance can be given that
these efforts will be successful.

Shareholders equity was $87.3 million, or $10.26 per
common share, at March 31, 2001 compared to
$86.0 million, or $10.10 per common share, at
December 31, 2000. The increase in shareholders
equity during the quarter ended March 31, 2001 reflects the
Companys net income, net of shareholders dividends,
and unrealized appreciation on available for sale securities.
Changes in shareholders equity related to the unrealized
values of underlying portfolio investments have been and will
continue to be volatile as market prices of debt securities
fluctuate with changes in the interest rate environment.

A significant portion of the Companys consolidated assets
represent assets of the Companys insurance subsidiaries
that cannot be transferred to the holding company in the form of
dividends, loans or advances. The restriction on the
transferability to the holding company from its insurance
subsidiaries is limited by Michigan regulatory guidelines, which
are as follows: The maximum discretionary dividend that may be
declared, based on data from the preceding calendar year, is the
greater of each insurance companys net

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Dependence on Key Programs

The Company provides alternative risk management products and
services to certain large client groups and associations and
then markets them to their individual members. For the quarter
ended March 31, 2001, the Companys top four programs
accounted for 32.2% of the Companys total net earned
premium. The loss or cancellation of any of the Companys
significant programs by the relevant client groups, or the
general availability of commercial market coverage to members of
such groups on more favorable terms than provided under the
Companys programs, could have a material adverse effect on
the Companys results of operations. Some of the
Companys clients require its insurance companies to retain
an A- or better A.M. Best rating. As noted above,
the Company was recently downgraded to B++ by A.M.
Best. This downgrade may result in either a loss of clients or a
requirement to seek another insurance company with an A.M. Best
rating of A- or better as a fronting or
policy-issuing company. There are costs associated with
providing the Companys insureds with access to a fronting
company that likely cannot be recouped.

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PART II  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

The information required by this item is included under
Note 7 of the Companys Form 10Q for
the quarter ended March 31, 2001, which is hereby
incorporated by reference.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

No material changes since December 31, 2000 Annual Report
on Form 10-K.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8K



| |     |                                                          
| | --- | ---------------------------------------------------------
| | (A) | The following documents are filed as part of this Report:

|        |       |             |  |                                                                                                                                                 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.22 |             |  | Amendment No. 4 to Revolving Credit Agreement and Waiver
	between Meadowbrook Insurance Group, Inc. and Comerica Bank
	dated as of May 15, 2001.
|        | 11    |             |  | Statement re computation of per share earnings                                                                                                  
|        | 23    |             |  | Awareness Letter                                                                                                                                



| |     |                    
| | --- | -------------------
| | (B) | Reports on Form 8-K

Form 8-K, dated February 22, 2001,
Item 5  Other Events

18



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.



| |                                  
| | ---------------------------------
| | Meadowbrook Insurance Group, Inc.



| |     |                      
| | --- | ---------------------
| | By: | /s/ JEFFREY H. KOENIG

| |                             
| | ----------------------------
| |                             
| | Executive Vice President and
| | Chief Financial Officer     

Dated: May 15, 2001

19



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##### Table of Contents



EXHIBIT INDEX

|        |       |             |  |                                                                                                                                                 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.22 |             |  | Amendment No. 4 to Revolving Credit Agreement and Waiver
	between Meadowbrook Insurance Group, Inc. and Comerica Bank
	dated as of May 15, 2001.
|        | 11    |             |  | Statement re computation of per share earnings                                                                                                  
|        | 23    |             |  | Awareness Letter