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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549



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FORM 10-Q

|                                                                     |  |                                                        
|-------------------------------------------------------------------- |  | -------------------------------------------------------
|[X]                                                                  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
|SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000
|                                                                    
|or                                                                  
|                                                                    
|[   ]                                                                |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF   
|SECURITIES EXCHANGE ACT OF 1934                                     

Commission File Number 1-14094

Meadowbrook Insurance Group, Inc.
(Exact name of registrant as specified in its charter)

|                         |  |                                  
|------------------------ |  | ---------------------------------
|Michigan                 |  | 38-2626206                       
|                        
|                        
|                        
|                        
|(State of Incorporation) |  | (IRS Employer Identification No.)

26600 Telegraph Road, Southfield, Michigan 48034
(Address, zip code of principal executive offices)

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



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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 __X__ No _____

The aggregate number of shares of the Registrants Common Stock, $.01 par value,
outstanding on May 11, 2000 was 8,511,655.

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1



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TABLE OF CONTENTS



|                                                                                             |                                         |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- | --------------------------------------- |  |  |  |  |  |  | 
|FORM 10-Q                                                                                   
|PART 1  FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS                                  
|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                  
|CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                              
|CONDENSED CONSOLIDATED BALANCE SHEET                                                        
|CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                              
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                  
|MANAGEMENT REPRESENTATION                                                                   
|ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II -OTHER INFORMATION                                                                  
|                                                                                             | ITEM 1. LEGAL PROCEEDINGS              
|                                                                                             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
|SIGNATURES                                                                                  



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TABLE OF CONTENTS

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|------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------ | ----- | -- | ---- |  |  |  |  |  |  | 
|                                                                                                                   |                                                                          |       |    | PAGE
|                                                                                                                   |                                                                          |       |    |     
|PART I  FINANCIAL INFORMATION                                                                                    
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|ITEM 1  FINANCIAL STATEMENTS                                                                                     
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Condensed Consolidated Statement of Income                               | 3     |   
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Consolidated Statement of Comprehensive Income                           | 4     |   
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Condensed Consolidated Balance Sheet                                     |       |    | 5    | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Condensed Consolidated Statement of Cash Flows                           | 6     |   
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Notes to Consolidated Financial Statements
and Management Representation | 7-10  |   
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF
          OPERATIONS |                                                                          | 11-13 |   
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|PART II  OTHER INFORMATION                                                                                       
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|ITEM 1  LEGAL PROCEEDINGS                                                                                         |                                                                          |       | 14 |     
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K                                                                          |                                                                          |       | 14 |     
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|SIGNATURES                                                                                                         |                                                                          |       | 15 |     

2



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##### Table of Contents






PART 1  FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS

MEADOWBROOK INSURANCE GROUP, INC.




CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Quarters Ended March 31,
(Unaudited)
(in thousands)

|                           |                                                                                                  |                          |      |         |        |      |        |         |        |   |  |  |  | 
|-------------------------- | ------------------------------------------------------------------------------------------------ | ------------------------ | ---- | ------- | ------ | ---- | ------ | ------- | ------ | - |  |  |  | 
|                           |                                                                                                  |                          |      | 2000    |        | 1999
|                           |                                                                                                  |                          |      |         |        |     
|Revenues:                 
|                          
|                          
|                          
|                          
|                           | Net premium earned                                                                               |                          | $    | 33,268  |        |      | $      | 26,159  |       
|                          
|                          
|                          
|                          
|                           | Net commissions and fees                                                                         |                          |      | 10,182  |        |      |        | 9,048   |       
|                          
|                          
|                          
|                          
|                           | Net investment income                                                                            |                          |      | 2,787   |        |      |        | 2,709   |       
|                           |                                                                                                  |                          |      |         |        |      |        |        
|                           |                                                                                                  | Total Revenues           |      |         | 46,237 |      |        |         | 37,916 |  
|                          
|                          
|                          
|                          
|                          
|Expenses:                 
|                          
|                          
|                          
|                          
|                           | Loss and loss adjustment expenses                                                                |                          |      | 53,472  |        |      |        | 42,691  |       
|                          
|                          
|                          
|                          
|                           | Reinsurance recoveries                                                                           |                          |      | (30,170 | )      |      |        | (21,900 | )     
|                           |                                                                                                  |                          |      |         |        |      |        |        
|                          
|                           | Net loss and loss adjustment expenses                                                            |                          |      | 23,302  |        |      |        | 20,791  |       
|                          
|                          
|                          
|                          
|                           | Other operating expenses                                                                         |                          |      | 10,629  |        |      |        | 8,822   |       
|                          
|                          
|                          
|                          
|                           | Salaries and employee benefits                                                                   |                          |      | 10,725  |        |      |        | 9,911   |       
|                          
|                          
|                          
|                          
|                           | Interest on notes payable                                                                        |                          |      | 1,240   |        |      |        | 840     |       
|                          
|                          
|                          
|                          
|                           | Amortization of intangible assets                                                                |                          |      | 480     |        |      |        | 345     |       
|                           |                                                                                                  |                          |      |         |        |      |        |        
|                           |                                                                                                  | Total Expenses           |      |         | 46,376 |      |        |         | 40,709 |  
|                          
|                          
|                          
|                          
|                          
|                           |                                                                                                  | Loss before income taxes |      |         | (139   | )    |        |         | (2,793 | )
|                          
|                          
|                          
|                          
|                          
|Federal income tax benefit |                                                                                                  |                          | (244 | )       |        |      | (1,355 | )      
|                          
|                          
|                          
|                          
|                          
|                           | Net income (loss) before cumulative
effect of accounting change                                  |                          |      | 105     |        |      |        | (1,438  | )     
|                           |                                                                                                  |                          |      |         |        |      |        |        
|                          
|                           | Cumulative effect of accounting for insurance
related assessments, net of deferred taxes of $879 |                          |      |        |        |      |        | (1,706  | )     
|                           |                                                                                                  |                          |      |         |        |      |        |        
|                          
|                           | Net Income (Loss)                                                                                |                          | $    | 105     |        |      | $      | (3,144  | )     
|                           |                                                                                                  |                          |      |         |        |      |        |        

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

3



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Quarters Ended March 31,
(Unaudited)
(in thousands)

|                         |                                       |                                  |                                                                     |   |      |      |   |  |  |  | 
|------------------------ | ------------------------------------- | -------------------------------- | ------------------------------------------------------------------- | - | ---- | ---- | - |  |  |  | 
|                         |                                       |                                  |                                                                     |   | 2000
|                         |                                       |                                  |                                                                     |   |     
|Net income               |                                       | $                                | 105                                                                 |  
|                        
|                        
|                        
|                        
|                         | Other comprehensive loss, net of tax:
|                        
|                        
|                        
|                        
|                         |                                       | Unrealized losses on securities:
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Unrealized holding losses arising during the period                 |   |      | (417 | )
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Less: reclassification adjustment for losses included in net income |   |      | 11   |  
|                         |                                       |                                  |                                                                     |  
|Other comprehensive loss |                                       |                                  | (406                                                                | )
|                         |                                       |                                  |                                                                     |  
|Comprehensive loss       |                                       | $                                | (301                                                                | )
|                         |                                       |                                  |                                                                     |  

|                         |                                       |                                  |                                                                  |   |      |        |   |  |  |  | 
|------------------------ | ------------------------------------- | -------------------------------- | ---------------------------------------------------------------- | - | ---- | ------ | - |  |  |  | 
|                         |                                       |                                  |                                                                  |   | 1999
|                         |                                       |                                  |                                                                  |   |     
|Net loss                 |                                       | $                                | (3,144                                                           | )
|                        
|                        
|                        
|                        
|                         | Other comprehensive loss, net of tax:
|                        
|                        
|                        
|                        
|                         |                                       | Unrealized losses on securities:
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Unrealized holding losses arising during the period              |   |      | (1,161 | )
|                        
|                        
|                        
|                        
|                         |                                       |                                  | Less: reclassification adjustment for gains included in net loss |   |      | (19    | )
|                         |                                       |                                  |                                                                  |  
|Other comprehensive loss |                                       |                                  | (1,180                                                           | )
|                         |                                       |                                  |                                                                  |  
|Comprehensive loss       |                                       | $                                | (4,324                                                           | )
|                         |                                       |                                  |                                                                  |  

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

4



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.




CONDENSED CONSOLIDATED BALANCE SHEET

ASSETS
(in thousands)

|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |         |         |  |  |  |  |  | 
|----------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------ | ------- | ----------- | - | ------------ | ------- | ------- |  |  |  |  |  | 
|                                                            |                                                                                         |                                                 |                                      |         | (Unaudited)
|                                                            |                                                                                         |                                                 |                                      |         | March 31,   |   | December 31,
|                                                            |                                                                                         |                                                 |                                      |         | 2000        |   | 1999        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |             
|Investments:                                               
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Debt securities available for sale, at fair value
      (cost of $192,092 and $188,755) |                                                 | $                                    | 188,856 |             |   | $            | 185,241 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Equity securities available for sale, at fair value
      (cost of $17,080 and $17,087) |                                                 |                                      | 15,656  |             |   |              | 16,569  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Cash and cash equivalents                                   |                                                                                         |                                                 | 25,551                               |         |             |   | 23,713       |        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|                                                            |                                                                                         | Total investments and cash and cash equivalents |                                      |         | 230,063     |   |              |         | 225,523 | 
|                                                           
|                                                           
|                                                           
|                                                           
|Premiums and agent balances receivable                      |                                                                                         |                                                 | 79,124                               |         |             |   | 85,707       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Reinsurance recoverable on:                                
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Paid losses                                                                             |                                                 |                                      | 15,956  |             |   |              | 14,051  |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unpaid losses                                                                           |                                                 |                                      | 113,211 |             |   |              | 101,744 |        
|                                                           
|                                                           
|                                                           
|                                                           
|Deferred policy acquisition costs                           |                                                                                         |                                                 | 12,223                               |         |             |   | 10,030       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Prepaid reinsurance premiums                                |                                                                                         |                                                 | 43,886                               |         |             |   | 42,073       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Intangible assets                                           |                                                                                         |                                                 | 32,382                               |         |             |   | 33,859       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Other assets                                                |                                                                                         |                                                 | 42,103                               |         |             |   | 38,990       |        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|                                                            | Total assets                                                                            |                                                 | $                                    | 568,948 |             |   | $            | 551,977 |        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|                                                            |                                                                                         |                                                 | LIABILITIES AND SHAREHOLDERS EQUITY
|                                                           
|                                                           
|                                                           
|                                                           
|Liabilities:                                               
|                                                           
|                                                           
|                                                           
|                                                           
|Reserve for losses and loss adjustment expenses             |                                                                                         | $                                               | 244,915                              |         |             | $ | 229,244      |        
|                                                           
|                                                           
|                                                           
|                                                           
|Unearned premiums                                           |                                                                                         |                                                 | 98,035                               |         |             |   | 90,095       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Notes payable, bank                                         |                                                                                         |                                                 | 58,649                               |         |             |   | 58,463       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Other liabilities                                           |                                                                                         |                                                 | 67,502                               |         |             |   | 73,767       |        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|                                                            | Total liabilities                                                                       |                                                 |                                      | 469,101 |             |   |              | 451,569 |        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|Contingencies and commitments                              
|                                                           
|                                                           
|                                                           
|                                                           
|Shareholders Equity:                                      
|                                                           
|                                                           
|                                                           
|                                                           
|Common stock, $.01 par value; authorized 20,000,000 shares:
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | 8,511,655 shares issued and outstanding                                                 |                                                 |                                      | 85      |             |   |              | 85      |        
|                                                           
|                                                           
|                                                           
|                                                           
|Additional paid-in capital                                  |                                                                                         |                                                 | 67,912                               |         |             |   | 67,907       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Retained earnings                                           |                                                                                         |                                                 | 35,660                               |         |             |   | 35,809       |        
|                                                           
|                                                           
|                                                           
|                                                           
|Note receivable from officer                                |                                                                                         |                                                 | (720                                 | )       |             |   | (720         | )      
|                                                           
|                                                           
|                                                           
|                                                           
|Accumulated other comprehensive income                      |                                                                                         |                                                 | (3,090                               | )       |             |   | (2,673       | )      
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|                                                            | Total shareholders equity                                                              |                                                 |                                      | 99,847  |             |   |              | 100,408 |        
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        
|                                                            |                                                                                         | Total liabilities and shareholders equity      |                                      | $       | 568,948     |   |              | $       | 551,977 | 
|                                                            |                                                                                         |                                                 |                                      |         |             |   |              |        

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 STATEMENT OF CASH FLOWS

For the Three Months Ended March 31,
(Unaudited)
(in thousands)

|                                                       |                                                            |                                       |        |        |        |      |        |         |         |   |  |  |  | 
|------------------------------------------------------ | ---------------------------------------------------------- | ------------------------------------- | ------ | ------ | ------ | ---- | ------ | ------- | ------- | - |  |  |  | 
|                                                       |                                                            |                                       |        | 2000   |        | 1999
|                                                       |                                                            |                                       |        |        |        |     
|Net cash provided by operating activities              |                                                            | $                                     | 7,069  |        |        | $    | 12,584 |        
|                                                       |                                                            |                                       |        |        |        |      |        |        
|Cash flows (used in) provided by investing activities:
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchase of debt securities available for sale             |                                       |        | (8,151 | )      |      |        | (29,260 | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchase of equity securities available for sale           |                                       |        | (149   | )      |      |        | (9,195  | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Proceeds from sale of debt securities available for sale   |                                       |        | 4,738  |        |      |        | 26,077  |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Proceeds from sale of equity securities available for sale |                                       |        | 148    |        |      |        | 107     |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other investing activities                                 |                                       |        | (1,154 | )      |      |        | (916    | )      
|                                                       |                                                            |                                       |        |        |        |      |        |        
|                                                       |                                                            | Net cash used in investing activities |        |        | (4,568 | )    |        |         | (13,187 | )
|                                                      
|                                                      
|                                                      
|                                                      
|Cash flows (used in) provided by financing activities:
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net (payments) proceeds of bank loan                       |                                       |        | 185    |        |      |        | (2,594  | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Dividends paid on common stock                             |                                       |        | (255   | )      |      |        | (260    | )      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other financing activities                                 |                                       |        | (593   | )      |      |        | (6      | )      
|                                                       |                                                            |                                       |        |        |        |      |        |        
|                                                       |                                                            | Net cash used in financing activities |        |        | (663   | )    |        |         | (2,860  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Increase (decrease) in cash and cash equivalents       |                                                            |                                       | 1,838  |        |        |      | (3,463 | )      
|                                                      
|                                                      
|                                                      
|                                                      
|Cash and cash equivalents, beginning of period         |                                                            |                                       | 23,713 |        |        |      | 20,510 |        
|                                                       |                                                            |                                       |        |        |        |      |        |        
|Cash and cash equivalents, end of period               |                                                            | $                                     | 25,551 |        |        | $    | 17,047 |        
|                                                       |                                                            |                                       |        |        |        |      |        |        

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

6



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##### Table of Contents






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  Earnings Per Share (EPS)

|                                                                   |  |                                      |           |      |  |   |           |   |  |  |  | 
|------------------------------------------------------------------ |  | ------------------------------------ | --------- | ---- |  | - | --------- | - |  |  |  | 
|                                                                   |  | For the Three Months Ended March 31,
|                                                                   |  |                                     
|                                                                   |  | (Unaudited)                         
|                                                                   |  | 2000                                 |           | 1999
|                                                                   |  |                                      |           |     
|Basic EPS                                                         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net income (loss) before
cumulative    effect of accounting change |  | $                                    | 0.01      |      |  | $ | (0.16     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cumulative effect of accounting change                             |  |                                      |           |      |  | $ | (0.20     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net income (loss)                                                  |  | $                                    | 0.01      |      |  | $ | (0.36     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Diluted EPS                                                       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net income (loss) before cumulative effect of
accounting change    |  | $                                    | 0.01      |      |  | $ | (0.16     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cumulative effect of accounting change                             |  |                                      |           |      |  | $ | (0.20     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net income (loss)                                                  |  | $                                    | 0.01      |      |  | $ | (0.36     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Weighted average of number of
   common shares outstanding:       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Basic                                                              |  |                                      | 8,511,655 |      |  |   | 8,663,434 |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Diluted                                                            |  |                                      | 8,522,313 |      |  |   | 8,831,696 |  

NOTE 2  Commitments & Contingencies

On June 26, 1995, two shareholders and an officer of a former agent (the
Primary Plaintiffs) of Star Insurance Company (Star), and a former spouse of
one shareholder and an employee of the former agent (the Individual
Plaintiffs) initiated legal proceedings against, among others, Star and
Meadowbrook, Inc. (Meadowbrook) in the District Court for Washoe County, Reno,
Nevada. All of the plaintiffs requested injunctive relief, compensatory damages,
punitive and exemplary damages, and attorneys fees in an unspecified amount.
The Nevada Insurance Department revoked the license of one of the Primary
Plaintiffs and one of the Individual Plaintiffs and denied further licensing of
the other Primary Plaintiffs.

7



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued

Meadowbrook and Star vigorously defended themselves and filed counterclaims
against the Primary and Individual Plaintiffs. On April 1, 1998, the Court
issued an Order dismissing all claims of the Primary Plaintiffs with prejudice.

On January 12, 1999, the remaining claims of the Individual Plaintiffs and the
counterclaims of Meadowbrook and Star against the Primary and Individual
Plaintiffs were tried. On February 2, 1999, the jury returned a verdict in favor
of Meadowbrook and Star against the Primary Plaintiffs and Individual
Plaintiffs. In addition, the jury found against the Individual Plaintiffs and in
favor of Meadowbrook and Star on their remaining claims. On April 21, 1999, the
Court found in favor of Meadowbrook and Star and against the Primary and
Individual Plaintiffs on all outstanding claims for equitable relief. It is not
expected that the outcome of this litigation will have a material impact on the
financial condition of the Company.

A Final Judgment has been entered with the Court, which is subject to an appeal.

NOTE 3  Cumulative Effect of Accounting Change

As described in our 1998 Annual Report, the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants issued
Statement of Position 97-3, Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund and
other insurance-related assessments, how to measure that liability, and when an
asset may be recognized for the recovery of such assessments through premium tax
offsets or policy surcharges. As required, the Company adopted SOP 97-3 in the
quarter ended March 31, 1999. The adoption of SOP 97-3 resulted in a non-cash
after-tax $1.7 million (net of tax of $879,064), or $0.20 per share, cumulative
effect accounting change.

NOTE 4  Reclassifications

Certain amounts in the 1999 notes to consolidated financial statements have been
reclassified to conform with the 2000 presentation.

NOTE 5  Segment Information

Agency Operations

The agency segment was formed in 1955 as Meadowbrooks original business. The
insurance agency places principally 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.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 continued.

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.

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

|                       |                           |  |                              |        |      |  |   |        |   |  |  |  | 
|---------------------- | ------------------------- |  | ---------------------------- | ------ | ---- |  | - | ------ | - |  |  |  | 
|                       |                           |  | Three Months Ended March 31,
|                       |                           |  |                             
|                       |                           |  | 2000                         |        | 1999
|                       |                           |  |                              |        |     
|Revenues:             
|                      
|                      
|                      
|                      
|                       | Net earned premiums       |  | $                            | 33,268 |      |  | $ | 26,159 |  
|                      
|                      
|                      
|                      
|                       | Management fees           |  |                              | 6,137  |      |  |   | 4,952  |  
|                      
|                      
|                      
|                      
|                       | Investment income         |  |                              | 2,787  |      |  |   | 2,709  |  
|                       |                           |  |                              |        |      |  |   |       
|                       | Program business segment  |  |                              | 42,192 |      |  |   | 33,820 |  
|                      
|                      
|                      
|                      
|                       | Agency operations         |  |                              | 4,275  |      |  |   | 4,357  |  
|                      
|                      
|                      
|                      
|                       | Intersegment revenue      |  |                              | (230   | )    |  |   | (261   | )
|                       |                           |  |                              |        |      |  |   |       
|                       | Consolidated revenue      |  | $                            | 46,237 |      |  | $ | 37,916 |  
|                       |                           |  |                              |        |      |  |   |       
|Pre-tax income (loss):
|                      
|                      
|                      
|                      
|                       | Program business          |  | $                            | 533    |      |  | $ | (2,659 | )
|                      
|                      
|                      
|                      
|                       | Agency operations         |  |                              | 1,116  |      |  |   | 1,227  |  
|                      
|                      
|                      
|                      
|                       | Reconciling items         |  |                              | (1,788 | )    |  |   | (1,361 | )
|                       |                           |  |                              |        |      |  |   |       
|                       | Consolidated pre-tax loss |  | $                            | (139   | )    |  | $ | (2,793 | )
|                       |                           |  |                              |        |      |  |   |       

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.

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##### Table of Contents






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 1999
Form 10-K, as filed with the Securities and Exchange Commission.

Certain statements made by the Company in this document may constitute
forward-looking statements. Actual results could differ materially from those
projected in forward-looking statements. These forward-looking statements
involve risk and uncertainties including, but not limited to the following: the
frequency and severity of claims; uncertainties inherent in reserve estimates;
catastrophic events; a change in the demand for, pricing of, or supply of
reinsurance or insurance; increased competitive pressure; changing rates of
inflation; and general economic conditions.

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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 Periods ended March 31, 2000 and 1999

Meadowbrook Insurance Group, Inc. (the Company) is a program-oriented risk
management company specializing in alternative risk management solutions for
agents, brokers, profession/trade associations, and insureds of all sizes. 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 PERIODS ENDED MARCH 31, 2000 AND 1999

Overview

2000 compared to 1999:

Results from operations, excluding the cumulative effect of an accounting
change, increased $1.5 million, or 107.3% from a loss of $1.4 million in 1999 to
net income of $105,000 in 2000.

Revenues for the quarter increased $8.3 million, or 22%, to $46.2 million in
2000 from $37.9 million in 1999. Revenues from program business increased $8.4
million, or 24.9%, to $42.2 million in 2000 from $33.8 million in 1999. Agency
revenues decreased $82,000, or 1.9%, to $4.3 million in 2000 from $4.4 million
in 1999.

Program Business

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

|                       |                     |  |                              |        |      |  |   |        |   |  |  |  | 
|---------------------- | ------------------- |  | ---------------------------- | ------ | ---- |  | - | ------ | - |  |  |  | 
|                       |                     |  | Three Months Ended March 31,
|                       |                     |  |                             
|                       |                     |  | 2000                         |        | 1999
|                       |                     |  |                              |        |     
|Revenue:              
|                      
|                      
|                      
|                      
|                       | Net earned premiums |  | $                            | 33,268 |      |  | $ | 26,159 |  
|                      
|                      
|                      
|                      
|                       | Management fees     |  |                              | 6,137  |      |  |   | 4,952  |  
|                      
|                      
|                      
|                      
|                       | Investment income   |  |                              | 2,787  |      |  |   | 2,709  |  
|                       |                     |  |                              |        |      |  |   |       
|                       | Total Revenue       |  | $                            | 42,192 |      |  | $ | 33,820 |  
|                       |                     |  |                              |        |      |  |   |       
|Pre-tax income (loss):
|                      
|                      
|                      
|                      
|                       | Program business    |  | $                            | 533    |      |  | $ | (2,659 | )
|                       |                     |  |                              |        |      |  |   |       

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended March 31, 2000 and 1999

2000 compared to 1999:

Revenue from program business increased $8.4 million, or 24.9%, to $42.2 million
in 2000 from $33.8 million in 1999. This increase reflects 27.2% growth in net
earned premiums to $33.3 million in 2000 from $26.2 million in 1999. This
increase reflects the 1999 acquisition which contributed $3.4 million. Excluding
the impact of the 1999 acquisition, net earned premium increased 14%, or $3.7
million, reflecting growth in existing business. Management fees grew $1.1
million, or 22%, to $6.1 million from $5.0 million. This increase reflects the
1999 acquisition. Excluding the 1999 acquisition, management fees would be
slightly down reflecting a decrease in fees for claims services. The remaining
increase reflects an increase in investment income of $78,000, or 3%, from $2.7
million in 1999 to $2.8 million in 2000.

Program business in 2000 generated a pre-tax income of $533,000, which compares
to a pre-tax loss of $2.6 million in 1999. The 1999 pre-tax loss in program
business reflects the impact of the $4.7 million reserve strengthening charge.
After excluding the 1999 reserve strengthening charge, the decrease in pre-tax
program business reflects the increased pricing pressure that developed during
the second half of 1999.

Agency Operations

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

|               |  |                              |       |      |  |   |       |  |  |  |  | 
|-------------- |  | ---------------------------- | ----- | ---- |  | - | ----- |  |  |  |  | 
|               |  | Three Months Ended March 31,
|               |  |                             
|               |  | 2000                         |       | 1999
|               |  |                              |       |     
|Net commission |  | $                            | 4,275 |      |  | $ | 4,357 | 
|              
|              
|              
|              
|Pre-tax income |  | $                            | 1,116 |      |  | $ | 1,227 | 

2000 compared to 1999:

Agency commissions decreased $82,000, or 1.9%, to $4.3 million in 2000 from $4.4
million in 1999. Agency operations generated pre-tax income of $1.1 million in
2000 compared to $1.2 million in 1999. This decrease primarily reflects a
decrease in contingent commissions for 2000.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS  continued
For the Periods Ended March 31, 2000 and 1999

Other Items

Interest Expense

Interest expense of $1,240,000 and $840,000 was recorded for the three months
ended March 31, 2000 and 1999, respectively. This interest is related to
utilization of the Companys Line of Credit. The increase in interest expense is
a result of both a higher average daily loan balance and higher average interest
rates during 2000 as compared to 1999. The average daily loan balances during
2000 and 1999 were $55.7 million and $38.2 million, respectively. The interest
rate increased from 7.5% at March 31, 1999 to 8.57% at March 31, 2000. The
outstanding balance on this line was $55.8 million at March 31, 2000, as
compared to $55.6 million at December 31, 1999.

Amortization Expense

Amortization expense of $480,000 and $345,000 was recorded for the three months
ended March 31, 2000 and 1999, respectively. This increase in amortization is
related to the goodwill recorded on the 1999 acquisition.

Taxes

The provision for income taxes was a $244,000 benefit for the three months ended
March 31, 2000, and a $1.4 million provision for the same period in 1999,
representing effective tax rates of 176% and 49%, respectively. Historically,
the Companys tax rates vary from the 34% corporate rate due to its heavily
tax-exempt investment portfolio. Tax exempt securities at March 31, 2000
represented 50.5% of the portfolio, down from 53.2% at year-end, and down from
70.2% at March 31, 1999. The Company is shifting its portfolio to taxable
securities, by reinvesting cash from operations and maturing securities and is
completing an analysis of additional sales and purchases to re-balance the debt
security portfolio aimed at maximizing after-tax investment yields and
minimizing current outflow related to taxes.

Liquidity and Capital Resources

The principal sources of funds for the Company are insurance premiums,
investment income, proceeds from the maturity and sale of invested assets, risk
management fees and agency commissions. Funds are primarily used for the payment
of claims, commissions, salaries and employee benefits, and other operating
expenses. In addition, the Company has a high volume of intercompany
transactions due to the payment of management fees by the insurance subsidiaries
to the risk management subsidiaries, which are subject to regulatory approval by
state insurance departments.

Cash flow provided by operations for the three months ended March 31, 2000 and
1999 was $7.1 million and $12.6 million, respectively. At March 31, 2000, the
Company held $25.6 million in cash and cash equivalents.

The Company has an unsecured Line of Credit totaling $60.0 million, of which
$55.8 million was outstanding at March 31, 2000 and $55.6 million was
outstanding at December 31, 1999. The Line

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##### Table of Contents



MANAGEMENTSS DISCUSSION AND ANALYSIS  continued
For the Periods Ended March 31, 2000 and 1999

of Credit expires on August 1, 2002.
The Company drew on this Line of Credit during 1999 primarily to meet
acquisition and cash flow needs.

One of the Companys principal corporate objectives is to operate at appropriate
leverage ratios. The Company plans to reduce its reliance on bank debt in 2000
from currently identified sources of capital.

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##### Table of Contents






PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

On June 26, 1995, two shareholders and an officer of a former agent (the
Primary Plaintiffs) of Star, and a former spouse of one shareholder and an
employee of the former agent (the Individual Plaintiffs) initiated legal
proceedings against, among others, Star and Meadowbrook in the District Court
for Washoe County, Reno, Nevada. All of the plaintiffs requested injunctive
relief, compensatory damages, punitive and exemplary damages, and attorneys
fees in an unspecified amount. The Nevada Insurance Department revoked the
license of one of the Primary Plaintiffs and one of the Individual Plaintiffs
and denied further licensing of the other Primary Plaintiffs.

The Company vigorously defended itself and filed counter-claims against the
Primary and Individual Plaintiffs. On April 1, 1998, the Court issued an Order
dismissing all claims of the Primary Plaintiffs with prejudice.

On January 12, 1999, the remaining claims of the Individual Plaintiffs and the
counterclaims of Meadowbrook and Star against the Primary and Individual
Plaintiffs were tried. On February 2, 1999, the jury returned a verdict in favor
of Meadowbrook and Star against the Primary Plaintiffs and Individual
Plaintiffs. In addition, the jury found against the Individual Plaintiffs and in
favor of Meadowbrook and Star on their remaining claims. On April 21, 1999, the
Court found in favor of Meadowbrook and Star and against the Primary and
Individual Plaintiffs on all outstanding claims for equitable relief. It is not
expected that the outcome of this litigation will have a material impact on the
financial condition of the Company.

A Final Judgment has been entered with the Court, which is subject to an appeal.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8K

|           |                                                           |                                              
|---------- | --------------------------------------------------------- | ---------------------------------------------
|(A)        | The following documents are filed as part of this Report:
|          
|          
|          
|          
|          
|ExhibitNo. |                                                           | Description                                  
|           |                                                           |                                              
|          
|          
|          
|          
|          
|11         |                                                           | Statement recomputation of per share earnings
|          
|          
|          
|          
|27         |                                                           | Financial Data Schedule                      
|          
|          
|          
|          
|          
|(B)        | Reports on Form 8-K                                      
|          
|          
|          
|          
|          
|None      

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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/ William S. Lohmeyer
| |                                              
| | Sr. Vice President andChief Financial Officer

Dated: May 15, 2000

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##### Table of Contents



Exhibit Index

|            |  |                                                                                     
|----------- |  | ------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                         
|            |  |                                                                                     
|           
|           
|           
|           
|11          |  | Meadowbrook Insurance Group, Inc. and Subsidiaries Computation of Per
Share Earnings
|           
|           
|           
|           
|           
|27          |  | Financial Data Schedule