UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      FORM 10-K
  þ

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) 
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,
    2009oro

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

38-2626206(State of
    Incorporation)

(IRS Employer Identification
    No.)26255 American Drive, Southfield, MI

48034-6112(Address of principal executive
    offices)

(Zip Code)   Registrants telephone number, including area code:
    (248) 358-1100
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $.01 par value per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
    Documents
    Incorporated by Reference




---



##### 





MEADOWBROOK
    INSURANCE GROUP, INC.
  PART I
  ITEM 1.
    BUSINESS  The
    Company
  48034-6112 (248) 358-1100.
      Consolidations
  ProCentury
    Merger
  30-day ProCentury Merger
   2




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  hard-to-place
      
    Revenue enhancement opportunities:  
    launching a new wholesale relationship in the Midwest;    
    utilization of existing program capabilities for Century general
    agents.  
    Leveraging shared infrastructure and increased size:  
    developing Centers of Expertise for claims management;
    increased size and diversity benefit costs of reinsurance;
    enhanced marketing capabilities through joint business
    development functions; and
    geographic expansion of Century offerings through existing
    admitted markets.  
    Executing on opportunities to leverage other niche capabilities;  
    combined capabilities allow us to receive and evaluate more
    opportunities; and
    independently, neither company would have been able to meet the
    comprehensive risk management solutions that some opportunities
    require.  Other
    Significant Acquisitions
  
    In April 2007, we acquired the business of U.S. Specialty
    Underwriters, Inc. (USSU). USSU is a specialty
    program manager that produces fee based income by underwriting
    targeted classes within excess workers compensation
    coverage for a select group of insurance companies.
    In November 2005, we acquired the business of
    Insurance & Benefit Consultants (IBC) of
    Sarasota, Florida. IBC is a retail and wholesale agency
    specializing in group and individual health insurance products
    and personal financial planning services.
    In August 1999, we acquired the assets of TPA Associates, Inc.,
    all the outstanding stock of TPA Insurance Agency, Inc., and
    Preferred Insurance Agency, Inc. (collectively,
    TPA). TPA is a program-oriented risk management
    company that provides risk management services to self-insured
    clients, manages alternative risk management programs, performs
    underwriting, and loss control services for unaffiliated
    insurance companies.
    In July 1998, we acquired Florida Preferred Administrators, Inc.
    (Florida Preferred), a third party administrator and
    Ameritrust. In December 2002, Ameritrust became a wholly owned
    subsidiary of Star. Florida Preferred provides a broad range of
    risk management services for Ameritrust and other third parties.
    In July 1997, we acquired Crest Financial Corporation
    (Crest), a California-based holding company, which
    formerly owned Williamsburg. Crest provides risk management
    services primarily to Williamsburg. On December 31, 1999,
    Williamsburg became a wholly owned subsidiary of Star.
    In July 1990, we acquired Savers. 3




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   Recent
    Equity Investment
    Employees
    Overview
    and Operational Structure
        
    Specialty Insurance Operations:  
    Net earned premiums  derived from admitted and
    non-admitted products and programs, as well as risk sharing
    vehicles.
    Fee-for-service
    revenue  derived from managed program revenue, as
    well as municipality and association clients.
    Investment income.  
    Agency Operations:  
    Commission revenue  agency commission from
    non-affiliated carriers.    Specialty
    Insurance Operations
   4




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      
    are low to medium hazard;
    have more predictable underwriting results;
    are adequately rated and priced by rates and policy forms that
    are filed and approved by state regulatory agencies;
    require the protection of state guaranty funds; and
    are required to purchase admitted insurance products.  hard-to-place
  
    the unique nature of the insured business is outside the risk
    profile of standard lines carriers;
    the risk associated with an insured is higher than the risk
    anticipated by a standard lines carrier when it filed its rates
    and forms for regulatory approval, which prevents it from
    charging a premium that is thought to be appropriate for the
    heightened risk;
    many geographic regions are considered to be adverse or more
    risky markets in which to operate due to legal, regulatory or
    claims issues or because they are too remote to warrant a
    marketing effort and, as a result, agents in theses areas have a
    limited choice of admitted insurers; and
    small agent organizations who do not generate enough premium
    volume to qualify for direct relationships with standard lines
    carriers.  fee-for-service
    Specialty
    Insurance Operations Programs and Products
   5




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      start-up
    Description
    of Specialty Insurance Operations
  fully-insured rent-a-captive. fee-for-service
  Fully-Insured
    Programs and Products:
    Risk-Sharing
    Programs:
  Quota Sharing:
 6




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  rent-a-captive. rent-a-captive rent-a-captive,
     7




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    QUOTA
    SHARE REINSURANCE RISK-SHARING STRUCTURE
  
    (1)
    
    We account for transactions with
    these risk-sharing clients as reinsurance, in accordance with
    accounting guidance as it relates to reinsurance and insurance
    products.       8




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      and/or
    excess-of-loss excess-of-loss
  Profit-Sharing:
  Managed
    Programs:
  fee-for-service fee-for-service
  fee-for-service
  
    program design and development;
    underwriting;
    reinsurance placement;
    policy administration;
    loss prevention and control;
    claims administration and handling;
    litigation management;
    information technology and processing; 9




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   
    accounting functions; and
    general operational functions and oversight of the program.      Description
    of Major Specialty Insurance Services
  fee-for-service
  Program and Product Design
  Underwriting Risk Selection and Policy
    Issuance
  Claims Administration and
    Handling
  Loss Prevention and Control
  Administration of Risk-Bearing
    Entities and/or rent-a-captives.
  Reinsurance Placement excess-of-loss
 10




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Sales, Marketing, and Public
    Relations
  Business Processing Technology
    Platform
    Agency
    Operations
    Customer
    Concentration
    Objective
    and Strategy
      
    Generate consistent investment income with a low-risk,
    high-quality, primarily fixed income portfolio;    
    Generate stable, consistent fee and commission income through
    our agency and specialty insurance operations; and
    Generate free cash flow from dividends from our Insurance
    Company Subsidiaries and non-regulated insurance administration
    services.   11




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Approach
    on Underwriting Discipline
                  Insurance
    Company Subsidiaries
  small-to-medium
    rent-a-captive
 12




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
          Gross Written Premium

2009


%


2008


%


2007


%


2006


%


2005


%Workers Compensation

$
233,269



33.87
%

$
137,503



30.04
%

$
116,717



33.69
%

$
118,794



35.90
%

$
133,732



40.26
%Commercial Multi-Peril Liability


43,428



6.31
%


29,114



6.36
%


69,970



20.20
%


67,764



20.48
%


59,928



18.04
%Commercial Multi-Peril Property


54,901



7.97
%


37,519



8.20
%


30,394



8.77
%


26,591



8.04
%


26,050



7.84
%Other Liability


169,968



24.68
%


116,988



25.56
%


28,550



8.24
%


20,001



6.04
%


16,167



4.87
%Commercial Auto Liability


92,632



13.45
%


73,952



16.16
%


61,119



17.64
%


59,308



17.92
%


59,144



17.80
%All Other Lines


94,489



13.72
%


62,607



13.68
%


39,701



11.46
%


38,414



11.61
%


37,188



11.19
%Total

$
688,687



100.00
%

$
457,683



100.00
%

$
346,451



100.00
%

$
330,872



100.00
%

$
332,209



100.00
%   Net Earned Premium

2009


%


2008


%


2007


%


2006


%


2005


%Workers Compensation

$
163,834



30.36
%

$
109,312



29.57
%

$
102,256



38.13
%

$
108,085



42.40
%

$
119,423



47.78
%Commercial Multi-Peril Liability


37,133



6.88
%


46,326



12.53
%


50,031



18.65
%


45,192



17.73
%


38,541



15.42
%Commercial Multi-Peril Property


45,660



8.46
%


31,847



8.61
%


21,018



7.84
%


17,946



7.04
%


16,288



6.52
%Other Liability


140,486



26.04
%


74,470



20.14
%


15,571



5.81
%


10,433



4.09
%


8,072



3.23
%Commercial Auto Liability


79,802



14.79
%


62,306



16.85
%


53,469



19.94
%


49,341



19.36
%


45,374



18.15
%All Other Lines


72,687



13.47
%


45,460



12.30
%


25,852



9.64
%


23,923



9.38
%


22,261



8.91
%Total

$
539,602



100.00
%

$
369,721



100.00
%

$
268,197



100.00
%

$
254,920



100.00
%

$
249,959



100.00
%   Net Written Premium

2009


%


2008


%


2007


%


2006


%


2005


%Workers Compensation

$
206,246



35.56
%

$
120,507



32.12
%

$
105,003



37.47
%

$
104,846



39.92
%

$
117,287



45.44
%Commercial Multi-Peril Liability


38,825



6.69
%


24,690



6.58
%


52,815



18.85
%


48,737



18.55
%


42,157



16.33
%Commercial Multi-Peril Property


45,462



7.84
%


30,270



8.07
%


23,465



8.37
%


18,767



7.14
%


17,713



6.86
%Other Liability


131,921



22.75
%


87,760



23.39
%


18,915



6.75
%


12,384



4.71
%


8,004



3.10
%Commercial Auto Liability


82,499



14.22
%


64,678



17.24
%


52,798



18.84
%


52,950



20.16
%


49,122



19.03
%All Other Lines


75,065



12.94
%


47,289



12.60
%


27,215



9.71
%


24,984



9.51
%


23,851



9.24
%Total

$
580,018



100.00
%

$
375,194



100.00
%

$
280,211



100.00
%

$
262,668



100.00
%

$
258,134



100.00
%    13




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
             14




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Reserves
    Losses and Loss Adjustment Expenses and
    Reinsurance Recoverables Summary of Significant Accounting Policies Liability for Losses and Loss
    Adjustment Expenses Critical Accounting
    Policies Reserves Managements Discussion and Analysis
  Analysis
    of Loss and Loss Adjustment Expense Development (1)
  Years Ended December 31,2000


2001


2002


2003


2004


2005


2006


2007


2008


2009(In thousands)Reserves for losses and LAE at end of period

$
172,862


$
198,653


$
193,116


$
192,019


$
226,996


$
271,423


$
302,655


$
341,541


$
625,331


$
682,376Deconsolidation of subsidiary(1)


(3,744
)


(5,572
)


(2,973
)


(2,989
)Adjusted reserves for losses and LAE at end of period

$
169,118


$
193,081


$
190,143


$
189,030


$
226,996


$
271,423


$
302,655


$
341,541


$
625,331


$
682,376Cumulative paid as of1 year later


70,952



77,038



78,023



71,427



79,056



83,271



81,779



95,393



173,5252 years later


115,669



130,816



122,180



118,729



124,685



133,809



140,308



155,7453 years later


146,548



157,663



151,720



145,279



153,780



170,226



207,2274 years later


160,673



176,172



167,288



159,220



171,946



210,1105 years later


171,992



186,847



174,778



169,980



195,3286 years later


179,010



191,936



180,489



184,6637 years later


182,954



196,486



190,1338 years later


186,198



204,3869 years later


192,782Reserves re-estimated as of end of year:1 year later


182,976



199,171



193,532



193,559



231,880



268,704



295,563



330,416



596,6612 years later


186,191



205,017



196,448



203,394



227,462



263,069



286,647



327,8623 years later


189,632



207,379



202,126



205,650



226,437



261,319



283,5834 years later


190,305



211,394



203,738



202,748



226,492



260,3735 years later


196,158



213,802



202,028



202,716



229,7466 years later


199,520



212,274



201,786



203,7277 years later


198,500



212,292



201,3558 years later


198,670



211,5509 years later


198,481Net cumulative (deficiency) redundancy:Dollars

$
(29,363
)

$
(18,469
)

$
(11,212
)

$
(14,697
)

$
(2,750
)

$
11,050


$
19,072


$
13,679


$
28,670Percentage


17.4
%


9.6
%


5.9
%


7.8
%


1.2
%


4.1
%


6.3
%


4.0
%


4.6
%Net reserves


169,118



193,081



190,143



189,030



226,996



271,423



302,655



341,541



625,331



682,376Ceded reserves


168,962



195,943



181,817



147,446



151,161



187,254



198,422



198,461



260,366



266,801Gross reserves


338,080



389,024



371,960



336,476



378,157



458,677



501,077



540,002



885,697



949,177Net re-estimated


198,481



211,550



201,355



203,727



229,746



260,373



283,583



327,862



596,661Ceded re-estimated


262,111



287,474



257,730



246,445



206,281



210,880



207,605



208,825



256,828Gross re-estimated


460,592



499,024



459,085



450,172



436,027



471,253



491,188



536,687



853,489Gross cumulative (deficiency) redundancy

$
(122,512
)

$
(110,000
)

$
(87,125
)

$
(113,696
)

$
(57,870
)

$
(12,576
)

$
9,889


$
3,315


$
32,208     (1)
    
    We performed an evaluation of our
    business relationships and determined our wholly owned
    subsidiary, American Indemnity, did not meet the tests for
    consolidation, as neither us, nor our subsidiary Star, are the
    primary beneficiaries of American Indemnity. Therefore, 15




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  effective January 1, 2004, we
    deconsolidated American Indemnity on a prospective basis in
    accordance with related accounting guidance. Accordingly, we
    adjusted the reserves and development within the above table.    2009


2008GAAP reserves for losses and LAE

$
949,177


$
885,697Reinsurance recoverables for unpaid losses


(266,801
)


(260,366
)Allowances against reinsurance recoverables*






(481
)Statutory reserves for losses and LAE

$
682,376


$
624,850     *
    
    The GAAP allowance for reinsurance
    recoverables is reported as a Schedule F penalty or a
    non-admitted asset for the purpose of statutory accounting.      Reinsurance
  Reinsurance
  Investments
  Investments Investments Managements Discussion and
    Analysis Quantitative and
    Qualitative Disclosures about Market Risk
  Competition
    and Pricing
   16




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    Regulation
  Insurance
    Company Regulation
    
    prior approval of the acquisition of control of an insurance
    company or of any company controlling an insurance company;
    regulation of certain transactions entered into by an insurance
    company with any of its affiliates;
    approval of premium rates, forms and policies used for many
    lines of insurance;
    standards of solvency and minimum amounts of capital and surplus
    that must be maintained;
    establishment of reserves required to be maintained for unearned
    premium, loss and loss adjustment expense, or for other purposes;
    limitations on types and amounts of investments;
    underwriting and claims settlement practices;
    restrictions on the size of risks that may be insured by a
    single company;
    licensing of insurers and agents;
    deposits of securities for the benefit of policyholders; and
    the filing of periodic reports with respect to financial
    condition and other matters.    Insurance
    Holding Company Regulation
   17




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    Various
    State and Federal Regulation
    Reinsurance
    Intermediary
    Licensing
    and Agency Contracts
         18




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Insurance
    Regulation Concerning Change or Acquisition of
    Control
        Membership
    in Insolvency Funds and Associations and Mandatory
    Pools
      Restrictions
    on Dividends and Risk-Based Capital
  Regulatory Matters and Rating Issues Regulatory and
    Rating Issues Managements Discussion and Analysis
 19




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NAIC-IRIS
    Ratios
  Regulatory and
    Rating Issues Managements
    Discussion and Analysis
  Effect of
    Federal Legislation
    Update on
    SEC Investigation
  follow-up
  Available
    Information
  www.meadowbrook.com Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov
 20




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  ITEM 1A.
    RISK
    FACTORS  If our
    estimates of reserves for losses and loss adjustment expenses
    are not adequate, we will have to increase our reserves, which
    would result in reductions in net income, retained earnings,
    statutory surplus, liquidity, and may limit our ability to pay
    future dividends and service debt.
    
    the amounts of claims settlements and awards;
    claims development patterns;
    legislative and judicial activity;
    changes in inflation and economic conditions; and
    the accuracy and timely reporting of claim information.    If our
    financial strength ratings are reduced, we may be adversely
    impacted.
      If
    market conditions cause our reinsurance to be more costly or
    unavailable, we may be required to bear increased risks or
    reduce the level of our underwriting commitments.
  excess-of-loss
 21




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  The
    current economic downturn and continuing volatility in the
    financial market could materially and adversely affect our
    business.
    We are
    subject to credit risk with respect to the obligations of our
    reinsurers and risk-sharing partners. The inability of our
    reinsurers or risk-sharing partners to meet their obligations
    could adversely affect our profitability.
  excess-of-loss
  rent-a-captive,
  Severe
    weather conditions and other catastrophes may result in an
    increase in the number and amount of claims
    incurred.
  Reinsurance
 22




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  We
    face competitive pressures in our business that could cause our
    revenues to decline and adversely affect our
    profitability.
      
    the formation of new insurers and an influx of new capital in
    the marketplace as existing companies attempt to expand their
    business as a result of better pricing
    and/or terms;
    programs in which state-sponsored entities provide property
    insurance in catastrophe-prone areas, other alternative market
    types of coverage; or other non-property insurance and
    changing practices created by the Internet, which has increased
    competition within the insurance business.    Our
    results may fluctuate as a result of many factors, including
    cyclical changes in the insurance industry.
    
    rising levels of actual costs that are not known by companies at
    the time they price their products;
    volatile and unpredictable developments, including man-made,
    weather-related and other natural catastrophes or terrorist
    attacks;
    changes in loss reserves resulting from the general claims and
    legal environments as different types of claims arise and
    judicial interpretations relating to the scope of insurers
    liability develop;
    fluctuations in interest rates, inflationary pressures and other
    changes in the investment environment, which affect returns on
    invested assets and may impact the ultimate payout of
    losses; and
    an increase in medical costs beyond historic or expected annual
    inflationary levels.    Our
    geographic concentration ties our performance to the business,
    economic, natural perils, man made perils, and regulatory
    conditions within our concentrated regions.
   23




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Reinsurance
  Our
    success depends on our ability to appropriately price the risks
    we underwrite.
    
    the availability of sufficient reliable data and our ability to
    properly analyze available data;
    the uncertainties that inherently characterize estimates and
    assumptions;
    the selection and application of appropriate rating and pricing
    techniques;
    any changes in legal standards, claim settlement practices,
    medical care expenses and restoration costs;
    changes in mandated rates or benefits set by the state
    regulators; and
    legislative actions.    The
    failure of any of the loss limitation methods we employ could
    have a material adverse effect on our results of operations and
    financial condition.
  excess-of-loss Excess-of-loss
 24




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Our
    investment results and, therefore, our financial condition may
    be impacted by changes in the business, financial condition or
    operating results of the entities in which we invest, as well as
    changes in government monetary policies, general economic
    conditions and overall capital market conditions, all of which
    impact interest rates.
      
    credit risk, which is the risk that our investments will
    decrease in value due to unfavorable changes in the financial
    prospects or a downgrade in the credit rating of an entity in
    which we have invested;
    equity price risk, which is the risk that we will incur economic
    loss due to a decline in common or preferred stock or bond
    mutual fund share prices; and
    interest rate risk, which is the risk that our investments may
    decrease in value due to increases in interest rates.        We
    could be forced to sell investments to meet our liquidity
    requirements.
   25




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  If our
    businesses do not perform well, we may be required to recognize
    an impairment of our goodwill, which could have a material
    adverse effect on our results of operations and financial
    condition.
    Acquisitions
    and integration of acquired businesses may result in operating
    difficulties, which may prevent us from achieving the expected
    benefits.
    Because
    we are heavily regulated by the states in which we operate, we
    may be limited in the way we operate.
    
    standards of solvency, including risk-based capital measurements;
    restrictions on the nature, quality and concentration of
    investments;
    restrictions on the types of terms that we can include in the
    insurance policies we offer;
    required methods of accounting;
    required reserves for unearned premiums, losses and other
    purposes;
    permissible underwriting and claims settlement
    practices; and
    assessments for the provision of funds necessary for the
    settlement of covered claims under certain insurance policies
    provided by impaired, insolvent or failed insurance companies. 26




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
       Litigation
    may have an adverse effect on our business
    Our
    reliance on producers subjects us to their credit
    risk.
    Provisions
    of the Michigan Business Corporation Act, our articles of
    incorporation and other corporate governing documents and the
    insurance laws of Michigan and Missouri may discourage takeover
    attempts.
   27




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
          Most
    states assess our Insurance Company Subsidiaries to provide
    funds for failing insurance companies and those assessments
    could be material.
    We may
    require additional capital in the future, which may not be
    available or may only be available on unfavorable
    terms.
  and/or
 28




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Our
    status as an insurance holding company with no direct operations
    could adversely affect our ability to meet our debt obligations
    and pay shareholder dividends.
    Our
    performance is dependent on the continued services and
    performance of our senior management and other key
    personnel.
      Although
    we have paid cash dividends in the past, we may not pay cash
    dividends in the future.
    We
    rely on our information technology and telecommunications
    systems to conduct our business.
   29




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    Managing
    technology initiatives and obtaining the efficiencies
    anticipated with technology implementation may present
    significant challenges.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES            ITEM 3.
    LEGAL
    PROCEEDINGS   30




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    ITEM 4.
    RESERVED 31




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  PART II
  ITEM 5.
    Market
    Price of and Dividends on the Registrants Common Equity
    and Related Stockholder Matters  Shareholder Information
    Corporate Headquarters26255 American Drive
    Southfield, MI
    48034-6112
    Phone:
    (248) 358-1100Independent Registered
    Public Accounting FirmErnst & Young LLP
    Detroit, MICorporate CounselHoward & Howard Attorneys PLLC.
    Royal Oak, MI

Transfer Agent & RegistrarBNY Mellon Shareowner Services
    P.O. Box 358015
    Pittsburgh, PA 15252-8015Stock ListingNew York Stock Exchange
    Symbol: MIG

Annual MeetingThe Annual Meeting of Shareholders
    will be held at:2:00 p.m.
    May 18, 2010Corporate Headquarters26255 American Drive
    Southfield,  MI   Shareholder
    Relations and
    Form 10-K
  Form 10-K,
  (248) 204-8178
  Direct
    Investment Plan
    442-8134
  www.bnymellon.com/shareowner/isd
  Share
    Price and Dividend Information
    December 31, 2009

High


Low


DividendsFirst Quarter

$
7.01


$
5.08


$
0.02Second Quarter


7.64



5.70



0.02Third Quarter


8.21



6.27



0.03Fourth Quarter


7.75



6.53



0.03   32




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  December 31, 2008

High

Low

DividendsFirst Quarter

$
9.95


$
7.16


$
0.02Second Quarter


8.60



5.20



0.02Third Quarter


8.25



5.20



0.02Fourth Quarter


7.59



3.97



0.02   Liquidity and Capital Resources Managements Discussion and Analysis.
    Shareholders
    of Record
    Purchase
    of Equity Securities by the Issuer
      Total Number of


Maximum NumberAverage


Shares Purchased


of Shares That MayTotal


Price


as Part of Publicly


Yet Be RepurchasedNumber of


Paid per


Announced Plans or


Under the Plans orPeriod

Shares


Share


Programs


ProgramsOctober 1  October 31, 2009





$








1,900,000November 1  November 30, 2009


533,008


$
6.92







1,366,992December 1  December 31, 2009


1,094,894


$
7.16







272,098Total


1,627,902


$
7.08



  33




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Performance
    Graph
      Comparison of Five Year Cumulative Total Return
  
  Period EndingIndex


12/31/04


12/31/05


12/31/06


12/31/07


12/31/08


12/31/09Meadowbrook Insurance Group, Inc.



100.00




117.03




198.20




188.58




130.74




152.33Russell 2000



100.00




104.55




123.76




121.82




80.66




102.58SNL Insurance $1B-$2.5B



100.00




115.46




144.94




140.54




115.72




126.38  34




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA  For the Years Ended December 31,2009


2008


2007


2006


2005(In thousands, except per share and ratio data)Income Statement Data:Gross written premiums

$
688,687


$
457,683


$
346,451


$
330,872


$
332,209Net written premiums


580,018



375,194



280,211



262,668



258,134Net earned premiums


539,602



369,721



268,197



254,920



249,959Net commissions and fees


37,881



42,904



45,988



41,172



35,916Net investment income


50,366



36,624



26,400



22,075



17,975Net realized (losses) gains


(225
)


(11,422
)


150



69



167Total revenue


627,624



437,827



340,735



318,236



304,017Net losses and LAE


307,087



212,885



150,969



146,293



151,542Policy acquisition and other underwriting expenses


110,715



69,294



53,717



50,479



44,439Other administrative expenses


39,413



35,000



32,269



28,824



26,810Salaries and employee benefits


80,923



62,862



56,433



54,569



51,331Amortization expense


5,781



6,310



1,930



590



373Interest expense


10,596



7,681



6,030



5,976



3,856Income before income taxes and equity earnings


73,109



43,795



39,387



31,505



25,666Equity earnings of affiliates, net of tax


874















Equity earnings of unconsolidated subsidiaries, net of tax


(12
)


269



331



128



1Net income


52,650



27,397



27,992



22,034



17,910Earnings per share  Diluted

$
0.92


$
0.61


$
0.85


$
0.75


$
0.60Balance Sheet Data:Total investments and cash and cash equivalents

$
1,203,215


$
1,085,648


$
651,601


$
527,600


$
460,233Total assets


1,989,816



1,813,916



1,113,966



969,000



901,344Loss and LAE reserves


949,177



885,697



540,002



501,077



458,677Debt


49,875



60,250







7,000



7,000Debentures


80,930



80,930



55,930



55,930



55,930Shareholders equity


502,881



438,170



301,894



201,693



177,365Book value per share

$
9.06


$
7.64


$
8.16


$
6.93


$
6.19Other Data:GAAP ratios (insurance companies only):Net loss and LAE ratio(1)


60.7
%


62.0
%


61.2
%


62.3
%


65.2
%Expense ratio(1)


31.9
%


31.3
%


34.2
%


34.5
%


33.5
%Combined ratio


92.6
%


93.3
%


95.4
%


96.8
%


98.7
%Accident year combined ratio(2)


97.9
%


97.8
%


98.0
%


97.9
%


96.8
%Total (favorable) adverse development on prior years

$
(28,670
)

$
(16,772
)

$
(7,091
)

$
(2,719
)

$
4,884  35




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    (1)
    
    Both the GAAP loss and loss adjustment expense ratio and the
    GAAP expense ratio are calculated based upon unconsolidated
    insurance company operations. The following table details these
    ratios and includes the intercompany fees, which are eliminated
    upon consolidation.(2)
    
    The accident year combined ratio is the sum of the expense ratio
    and accident year loss ratio. The accident year loss ratio
    measures loss and LAE occuring in a particular year, regardless
    of when they are reported and does not take into consideration
    changes in estimates in loss reserves from prior accident years.  Unconsolidated
    GAAP data  Ratio Calculation Table:
  For the Years Ended December 31,2009


2008


2007


2006


2005Net earned premiums

$
539,602


$
369,721


$
268,197


$
254,920


$
249,959Consolidated net losses and LAE

$
307,087


$
212,885


$
150,969


$
146,293


$
151,542Intercompany claim fees


20,339



16,296



13,058



12,553



11,523Unconsolidated net losses and LAE

$
327,426


$
229,181


$
164,027


$
158,846


$
163,065GAAP net loss and LAE ratio


60.7
%


62.0
%


61.2
%


62.3
%


65.2
%Consolidated policy acquisition and other underwriting expenses

$
110,715


$
69,349


$
53,717


$
50,479


$
44,439Intercompany administrative and other underwriting fees


61,422



46,371



37,890



37,442



39,231Unconsolidated policy acquisition and other underwriting expenses

$
172,137


$
115,720


$
91,607


$
87,921


$
83,670    36




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS
  ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  This
    Form 10-K
    may provide information including certain statements which
    constitute forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. These include statements regarding the intent, belief,
    or current expectations of management, including, but not
    limited to, those statements that use the words
    believes, expects,
    anticipates, estimates, or similar
    expressions. You are cautioned that any such forward-looking
    statements are not guarantees of future performance and involve
    a number of risks and uncertainties, and results could differ
    materially from those indicated by such forward-looking
    statements. Among the important factors that could cause actual
    results to differ materially from those indicated by such
    forward-looking statements are: the frequency and severity of
    claims; uncertainties inherent in reserve estimates;
    catastrophic events; a change in the demand for, pricing of,
    availability or collectibility of reinsurance; increased rate
    pressure on premiums; ability to obtain rate increases in
    current market conditions; investment rate of return; changes in
    and adherence to insurance regulation; actions taken by
    regulators, rating agencies or lenders; attainment of certain
    processing efficiencies; changing rates of inflation; general
    economic conditions and other risks identified in our reports
    and registration statements filed with the Securities and
    Exchange Commission. We are not under any obligation to (and
    expressly disclaim any such obligation to) update or alter our
    forward-looking statements whether as a result of new
    information, future events or otherwise.
  Business
    Overview
    fee-for-service
   37




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  30-day
  hard-to-place
      
    Revenue enhancement opportunities:  
    launching a new wholesale relationship in the Midwest;
    offering a surplus lines market need for an existing
    workers compensation partner in New England; and
    utilization of existing program capabilities for Century general
    agents.  
    Leveraging shared infrastructure and increased size;  
    developing Centers of Expertise for claims management:
    increased size and diversity benefit costs of reinsurance;
    enhanced marketing capabilities through joint business
    development functions; and
    geographic expansion of Century offerings through existing
    admitted markets.  
    Executing on opportunities to leverage other niche capabilities:  
    combined capabilities allow us to receive and evaluate more
    opportunities; and
    independently, neither company would have been able to meet the
    comprehensive risk management solutions that some opportunities
    require.  Specialty
    Insurance Operations
  fee-for-service
 38




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        fee-for-service
  fully-insured rent-a-captive. fee-for-service
     39




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Agency
    Operations
      For the Years Ended December 31,2009


2008


2007RevenuesNet earned premiums

$
539,602


$
369,721


$
268,197Management fees


18,901



21,168



23,963Claims fees


7,428



8,879



9,025Loss control fees


1,975



2,069



2,151Reinsurance placement


931



728



929Investment income


49,910



35,888



25,487Net realized (losses) gains


(225
)


(11,422
)


150Specialty insurance operations


618,522



427,031



329,902Agency operations


9,561



11,064



11,316Holding Company interest income earned


456



736



913Intersegment revenue


(915
)


(1,004
)


(1,396
)Consolidated revenue

$
627,624


$
437,827


$
340,735   Critical
    Accounting Policies
  General
    Losses
    and Loss Adjustment Expenses
     40




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Components
    of Losses and Loss Adjustment Expense
    Case


IBNR


TotalDirect

$
263,064


$
570,095


$
833,159Assumed-Directly Managed(1)


39,474



46,909



86,383Assumed-Residual Markets(2)


9,401



12,505



21,906Assumed-Retroceded


958



387



1,345Assumed-Other


4,528



1,856



6,384Gross


317,425



631,752



949,177Less Ceded


84,534



182,267



266,801Net

$
232,891


$
449,485


$
682,376     (1)
    
    Directly managed represents
    business managed and processed by our underwriting, claims, and
    loss control departments, utilizing our internal systems and
    related controls.(2)
    
    Residual markets represent
    mandatory pooled workers compensation business allocated
    to individual insurance company writers based on the
    insurers market share in a given state.     41




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Net Case


Net IBNR


TotalWorkers Compensation

$
80,001


$
105,728


$
185,729Residual Markets


9,401



12,506



21,907Commercial Multiple Peril/General Liability


84,710



248,978



333,688Commercial Automobile


42,618



62,850



105,468Other


16,161



19,423



35,584Total

$
232,891


$
449,485


$
682,376   Claim
    Reserving Process and Methodology
  case-by-case
        
    Paid Development Method      42




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
         Paid Development Method.
    Incurred Development Method.
    Paid Bornhuetter-Ferguson Method.
   43




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Reported Bornhuetter-Ferguson
    Method.
    Initial Expected Loss Method.
    Paid Roll-forward Method.
  Incurred Roll-forward Method.
    Construction Defect Method.
     44




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
            Variability
    of Claim Reserve Estimates
     45




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Analysis of
    Loss and Loss Adjustment Expense Development
    Pre-tax Impact on Earnings from a Variance in Future Loss
    Payments and Case Reserves as of December 31, 2009(in thousands)Line of Business

Minimum Reserve Range


Maximum Reserve RangeWorkers Compensation (including Residual Markets)

$
(12,888
)


(6.2
)%

$
7,965



3.8
%Commercial Multiple Peril/General Liability


(39,955
)


(12.0
)%


26,691



8.0
%Commercial Automobile


(6,758
)


(6.4
)%


5,226



5.0
%Other


(2,543
)


(7.1
)%


1,912



5.4
%Total

$
(62,143
)


(9.1
)%

$
41,795



6.1
%  46




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
            Reinsurance
    Recoverables
    rent-a-captive,
 47




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Investments
  other-than-temporary
    other-than-temporary.
      
    Historical and implied volatility of the security;
    Length of time and extent to which the fair value has been less
    than amortized cost;
    Conditions specifically related to the security such as default
    rates, loss severities, loan to value ratios, current levels of
    subordination, third party guarantees, and vintage;
    Specific conditions in an industry or geographic area;
    Any changes to the rating of the security by a rating agency; 48




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   
    Failure, if any, of the issuer of the security to make scheduled
    payments; and
    Recoveries or additional declines in fair value subsequent to
    the balance sheet date.      Revenue
    Recognition
  Financial
    Services  Insurance
        sub-producer
   49




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Equity
    Earnings of Affiliates
    323-10-35-6, Investments  Equity Method and Joint
    Ventures  Subsequent Measurement.
  Legal
    Contingencies
    Goodwill
     50




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Deferred
    Policy Acquisition Costs
    Federal
    Income Taxes
      Results
    of Operations
  Executive
    Overview
       51




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
            2009
    compared to 2008:
   52




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          2008
    compared to 2007:
     53




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Specialty
    Insurance Operations
    For the Years Ended December 31,2009


2008


2007Revenue:Net earned premiums

$
539,602


$
369,721


$
268,197Management fees


18,901



21,168



23,963Claims fees


7,428



8,879



9,025Loss control fees


1,975



2,069



2,151Reinsurance placement


931



728



929Investment income


49,910



35,888



25,487Net realized (losses) gains


(225
)


(11,422
)


150Total revenue

$
618,522


$
427,031


$
329,902Pre-tax income:Specialty insurance operations

$
97,346


$
60,125


$
47,898   2009
    compared to 2008:
   54




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
             55




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Other Items  Reserves
    2008
    compared to 2007:
           56




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          Agency
    Operations
    For the Years Ended December 31,2009

2008

2007Net commission

$
9,561


$
11,064


$
11,316Pre-tax (loss) income(1)

$
(1,010
)

$
1,142


$
2,087     (1)
    
    Our agency operations include an
    allocation of corporate overhead, which includes expenses
    associated with accounting, information services, legal, and
    other corporate services. The corporate overhead allocation
    excludes those expenses specific to the holding company. For the
    years ended December 31, 2009, 2008, and 2007, the
    allocation of corporate overhead to the agency operations
    segment was $3.4 million, $2.8 million, and
    $2.8 million, respectively. 57




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   2009
    compared to 2008:
      2008
    compared to 2007:
      Other
    Items
  Reserves
    Minimum Reserve


Maximum ReserveLine of Business

Range


Range


Selected ReservesWorkers Compensation(1)

$
194,753


$
215,606


$
207,636Commercial Multiple Peril/General Liability


293,767



360,413



333,687Commercial Automobile


98,676



110,660



105,469Other


33,037



37,492



35,584Total Net Reserves

$
620,233


$
724,171


$
682,376     (1)
    
    Includes residual markets   58




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Reserves at


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior


Total


December 31,Line of Business

2008


Year


Years


Incurred


Year


Years


Paid


2009Workers Compensation

$
147,813


$
104,259


$
(7,787
)

$
96,472


$
17,495


$
41,061


$
58,556


$
185,729Residual Markets


23,984



6,588



(3,585
)


3,003



2,474



2,606



5,080



21,907Commercial Multiple Peril/General Liability


317,188



101,992



(9,395
)


92,597



3,626



72,471



76,097



333,688Commercial Automobile


92,788



66,080



(4,073
)


62,007



16,722



32,605



49,327



105,468Other


43,558



56,838



(3,830
)


53,008



36,200



24,782



60,982



35,584Net Reserves


625,331


$
335,757


$
(28,670
)

$
307,087


$
76,517


$
173,525


$
250,042



682,376Reinsurance Recoverable


260,366



























266,801Consolidated

$
885,697


























$
949,177   Re-estimated


DevelopmentReserves at


as aReserves at


December 31,


Percentage ofDecember 31,


2009


Prior YearLine of Business

2008


on Prior Years


ReservesWorkers Compensation

$
147,813


$
140,026



(5.3
)%Commercial Multiple Peril/General Liability


317,188



307,793



(3.0
)%Commercial Automobile


92,788



88,715



(4.4
)%Other


43,558



39,728



(8.8
)%Sub-total


601,347



576,262



(4.2
)%Residual Markets


23,984



20,399



(14.9
)%Total Net Reserves

$
625,331


$
596,661



(4.6
)%  59




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Workers
    Compensation Excluding Residual Markets
    Commercial
    Multiple Peril and General Liability
    Commercial
    Automobile
    Other
    Residual
    Markets
   60




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Salaries
    and Employee Benefits
      Variable Compensation
  Other
    Administrative Expenses
        Amortization
    Expense
   61




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Interest
    Expense
  Liquidity and
    Capital Resources
    Federal
    Income Taxes
      Other
    Than Temporary Impairments
     62




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Investment Critical Accounting Policies Managements
    Discussion and Analysis Investments
  Liquidity
    and Capital Resources
           63




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Other
    Items
  Debentures
    InterestRate atDecember 31,Year of



Year







2009

PrincipalIssuance

Description

Callable


Year Due


Interest Rate Terms

(1)

Amount2003

Junior subordinated debentures


2008



2033


Three-month LIBOR, plus 4.05%


4.30
%

$
10,3102004

Senior debentures


2009



2034


Three-month LIBOR, plus 4.00%


4.27
%


13,0002004

Senior debentures


2009



2034


Three-month LIBOR, plus 4.20%


4.46
%


12,0002005

Junior subordinated debentures


2010



2035


Three-month LIBOR, plus 3.58%


3.83
%


20,620Junior subordinated debentures(2)


2007



2032


Three-month LIBOR, plus 4.00%


4.26
%


15,000Junior subordinated debentures(2)


2008



2033


Three-month LIBOR, plus 4.10%


4.37
%


10,000Total















$
80,930     (1)
    
    The underlying three-month LIBOR
    rate varies as a result of the interest rate reset dates used in
    determining the three-month LIBOR rate, which varies for each
    long-term debt item each quarter.(2)
    
    Represents the junior subordinated
    debentures acquired in conjunction with the Merger.         64




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Interest
    Rate Swaps
      FixedAmount atExpiration




Counterparty




December 31,Effective Date


Date


Debt Instrument

Interest Rate Terms

Fixed Rate


200910/6/2005



9/16/2010


Junior subordinated debentures

Three-month LIBOR, plus 3.58%


8.340
%

$
20,0004/23/2008



5/24/2011


Senior debentures

Three-month LIBOR, plus 4.20%


7.720
%


7,0004/23/2008



6/30/2013


Junior subordinated debentures

Three-month LIBOR, plus 4.05%


8.020
%


10,0004/29/2008



4/29/2013


Senior debentures

Three-month LIBOR, plus 4.00%


7.940
%


13,0007/31/2008



7/31/2013


Term loan(1)

Three-month LIBOR


3.950
%


49,8758/15/2008



8/15/2013


Junior subordinated debentures(2)

Three-month LIBOR


3.780
%


10,0009/4/2008



9/4/2013


Junior subordinated debentures(2)

Three-month LIBOR


3.790
%


15,000     (1)
    
    Relates to our term loan, which has
    an effective date of July 31, 2008 and an expiration date
    of July 31, 2013. We are required to make fixed rate
    interest payments on the current balance of the term loan,
    amortizing in accordance with the term loan amortization
    schedule. We fixed only the variable interest portion of the
    loan. As of December 31, 2009, the actual interest payments
    associated with the term loan also include an additional rate of
    2.00% in accordance with the credit agreement.(2)
    
    Relates to the debentures acquired
    from the ProCentury merger. We fixed only the variable interest
    portion of the debt. The actual interest payments associated
    with the debentures also include an additional rate of 4.10% and
    4.00% on the $10.0 million and $15.0 million
    debentures, respectively.       65




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Credit
    Facilities
        Investment
    Portfolio
      Shareholders
    Equity
       66




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  2007-2008 Variable
    Compensation
      ProCentury
    Merger
  30-day
      Equity
    Earnings of Affiliates
   67




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Adjusted
    Expense Ratio
  fee-for-service fee-for-service
  For the Years Ended December 31,2009


2008


2007Net earned premiums

$
539,602


$
369,721


$
268,197Less:  Consolidated net loss and LAE


307,087



212,885



150,969Intercompany claim fees


20,339



16,296



13,058Unconsolidated net loss and LAE


327,426



229,181



164,027Consolidated policy acquisition and other underwriting expenses


110,715



69,349



53,717Intercompany administrative and other underwriting fees


61,422



46,371



37,890Unconsolidated policy acquisition and other underwriting expenses


172,137



115,720



91,607Underwriting income

$
40,039


$
24,820


$
12,563GAAP combined ratio as reported


92.6
%


93.3
%


95.4
%Specialty insurance operations pre-tax income

$
97,346


$
60,125


$
47,898Less:  Underwriting income


40,039



24,820



12,563Net investment income and realized (losses) gains


50,141



25,202



26,550Equity earnings of affiliates


1,344







Fee-based operations pre-tax income


5,822



10,103



8,785Agency operations pre-tax income


(1,010
)


1,142



2,087Total
    fee-for-service
    pre-tax income

$
4,812


$
11,245


$
10,872GAAP expense ratio as reported


31.9
%


31.3
%


34.2
%Adjustment to include pre-tax income from total
    fee-for-service
    income(1)


0.9
%


3.0
%


4.1
%GAAP expense ratio as adjusted


31.0
%


28.3
%


30.1
%GAAP loss and LAE ratio as reported


60.7
%


62.0
%


61.2
%GAAP combined ratio as adjusted


91.7
%


90.3
%


91.3
%Reconciliation of consolidated pre-tax income:Specialty insurance operations pre-tax income:Fee-based operations pre-tax income

$
5,822


$
10,103


$
8,785Underwriting income


40,039



24,820



12,563Net investment income and realized (losses) gains


50,141



25,202



26,550Equity earnings of affiliates


1,344







Total specialty insurance operations pre-tax income


97,346



60,125



47,898Agency operations pre-tax income


(1,010
)


1,142



2,087Less:  Holding company expenses


5,506



3,481



2,638Interest expense


10,596



7,681



6,030Amortization expense


5,781



6,310



1,930Equity earnings of affiliates


1,344







Consolidated pre-tax income

$
73,109


$
43,795


$
39,387     (1)
    
    Adjustment to include pre-tax income from total
    fee-for-service
    income is calculated by dividing total
    fee-for-service
    income by net earned premiums. 68




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   Regulatory
     69




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Contractual
    Obligations and Commitments
    Payments Due by PeriodLess Than


One to


Three to


More ThanTotal


One Year


Three Years


Five Years


Five YearsNon-regulated companies:Term Loan

$
49,875


$
12,125


$
29,500


$
8,250


$
Lines of Credit(1)


















Debentures(2):Senior debentures due 2034; issued $13.0 million


13,000















13,000Senior debentures due 2034; issued $12.0 million


12,000















12,000Junior subordinated debentures due 2035; issued
    $20.6 million


20,620















20,620Junior subordinated debentures due 2033; issued
    $10.3 million


10,310















10,310Junior subordinated debentures due 2032; issued
    $15.0 million(3)


15,000















15,000Junior subordinated debentures due 2033; issued
    $10.0 million(3)


10,000















10,000Total Debt


130,805



12,125



29,500



8,250



80,930Interest on Term Loan(4)


6,027



2,746



3,076



205



Interest on Debentures:Senior debentures due 2034; issued $13.0 million


7,224



1,032



2,064



2,064



2,064Senior debentures due 2034; issued $12.0 million


5,344



763



1,527



1,527



1,527Junior subordinated debentures due 2035; issued
    $20.6 million


11,841



1,692



3,383



3,383



3,383Junior subordinated debentures due 2033; issued
    $10.3 million


5,708



815



1,631



1,631



1,631Junior subordinated debentures due 2032; issued
    $15.0 million(3)


8,180



1,169



2,337



2,337



2,337Junior subordinated debentures due 2033; issued
    $10.3 million(3)


5,516



788



1,576



1,576



1,576Total Interest Payable


49,840



9,005



15,594



12,723



12,518Operating lease obligations(5)


13,198



4,134



6,467



2,597



Regulated companies:Losses and loss adjustment expenses(6)


949,177



261,004



330,500



132,802



224,871Total

$
1,143,020


$
286,268


$
382,061


$
156,372


$
318,319     (1)
    
    Relates to our revolving line of credit, which currently does
    not have an outstanding balance.(2)
    
    Five year call feature associated with debentures, estimated
    seven year repayment. For a description of our debentures and
    related interest rate terms, as well as actual rates in
    accordance with our interest rate swap transactions, refer to
    Note 8  Debtand Note 9 
    Derivative Instruments. 70




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   (3)
    
    Relates to the junior subordinated debentures acquired in
    conjunction with the ProCentury merger.(4)
    
    For a description of our term loan and its interest rate terms,
    as well as actual rates in accordance with our interest rate
    swap transaction, refer to Note 8  Debtand Note 9  Derivative Instruments.(5)
    
    Consists of rental obligations under real estate leases related
    to branch offices. In addition, includes amounts related to
    equipment leases.(6)
    
    The loss and loss adjustment expense payments do not have
    contractual maturity dates and the exact timing of payments
    cannot be predicted with certainty. However, based upon
    historical payment patterns, we have included an estimate of our
    gross losses and loss adjustment expenses. In addition, we have
    anticipated cash receipts on reinsurance recoverables on unpaid
    losses and loss adjustment expenses of $266.8 million, of
    which we estimate that these payments to be paid for losses and
    loss adjustment expenses for the periods less than one year, one
    to three years, three to five years, and more than five years to
    be $49.9 million, $74.5 million, $36.2 million,
    and $106.2 million, respectively, resulting in net losses
    and loss adjustment expenses of $211.1 million,
    $256.0 million, $96.6 million, and
    $118.7 million, respectively.    Variable
    Compensation
      2007-2009 2009-2011
 71




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Regulatory
    and Rating Issues
          :
  Ratio

Usual Range

ValueCompany: StarAdjusted Liabilities to Liquid Assets

Under 100%

116%(1)Company: WilliamsburgGross Agents Balances to Policyholders Surplus

Under 40%

40%(2)Company: ProCentury Insurance CompanyChange in Net Premiums Written

Over -33% or Under 33%

184%(3)     (1)
    
    Adjusted Liabilities to Liquid Assets on Star is outside the
    usual range primarily as a result of our Intercompany
    Reinsurance Pooling Agreement. The Adjusted Liabilities includes
    the gross amount of reinsurance payables related to the pool and
    does not allow an offset to those payables for any reinsurance
    recoverables related to the pool. In addition, the reinsurance
    recoverables are not included in the Liquid Assets portion of
    the formula. This causes the ratio results to appear much higher
    due to the timing of the settlement of the pool balances. Pool
    balances between the entities are settled in the month following
    the completion of the pooling. 72




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   (2)
    
    The Gross Agents Balances to Policyholders Surplus
    on Williamsburg was impacted by our Intercompany Reinsurance
    Pooling Agreement. Williamsburgs assumed premium
    receivable increased as a result of the pooling agreement.
    Excluding the intercompany pooling, this ratio would have been
    within the usual range for 2009. These balances settled on
    January 21, 2010, resulting in an updated ratio of 93%.(3)
    
    The Change in Net Premiums Written outside the usual range
    resulted primarily from the Intercompany Reinsurance Pooling
    Agreement whereby ProCentury Insurance Company is assuming its
    share of a much larger pool base in 2009. ProCentury Insurance
    Company also wrote additional direct business in the ocean
    marine, inland marine and commercial auto liability lines of
    business in 2009, compared with 2008.  Reinsurance
    Considerations
  excess-of-loss
    excess-of-loss excess-of-loss
  Reinsurance Premium Ceded

Reinsurance Recoverable

A.M. BestReinsurer

December 31, 2009

December 31, 2009

Rating(In thousands)

(In thousands)Motors Insurance Corporation(1)

$
9,032


$
19,203



B++Swiss Reinsurance America Corporation


8,372



17,045



AMunich Reinsurance America


7,654



18,502



A+Lloyds Syndicate Number 2003


4,145



9,619



AAspen Insurance UK Ltd.


4,107



17,097



A     (1)
    
    Effective January 1, 2010, a novation was completed which
    transferred all the ceded premium and reinsurance recoverables
    between us and Motors Insurance Corporation to Maiden
    Reinsurance Company (Maiden Re). All reinsurance transactions
    and related collateral and trust accounts are now with Maiden
    Re, which has an A.M. Best rating of A−.  rent-a-captive
   73




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Off-Balance
    Sheet Arrangements
  Regulation S-K.
  Convertible
    Note
    Accounting
    Standards Codification
  The FASB
    Accounting Standards Codification and the Hierarchy of Generally
    Accepted Accounting Principles  a replacement of FASB
    Statement No. 162,
  Recent
    Accounting Standards
  320-10-65, Debt and Equity Securities  Transition and
    Open Effective Date Information No. FAS 115-2 FAS 124-2, Recognition and Presentation of
    Other-Than-Temporary-Impairments 320-10-65 other-than-temporary other-than-temporarily 320-10-65 other-than-temporary-impairment other-than-temporary-impairment 320-10-65 320-10-65 320-10-65 320-10-65
 74




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    820-10-65-4, Fair Value Measurements and Disclosures 
    Transition and Open Effective Date Information No. FAS 157-4, Determining Fair Value When the Volume and Level of
    Activity for the Asset or Liability Have Significantly Decreased
    and Identifying Transactions that are Not Orderly) 820-10-65-4 Fair Value Measurements and
    Disclosures 820-10-65-4 820-10-65-4 820-10-65-4
  825-10-65-1, Financial Instruments  Transition and Open
    Effective Date Information FAS 107-1 28-1, Interim Disclosures about Fair Value of Financial
    Instruments) 825-10-65-1 825-10-65-1 825-10-65-1
  805-20 Business Combinations  Identifiable Assets
    and Liabilities, and Any Noncontrolling Interest Accounting for
    Assets Acquired and Liabilities Assumed in a Business
    Combination that Arise from Contingencies. 805-20 805-20 805-20
  Subsequent
    Events Subsequent Events
  Consolidation Amendments to FASB
    Interpretation No. 46(R).
 75




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Related
    Party Transactions
  Related Party Transaction
 76




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Item 7A.
    Qualitative
    and Quantitative Disclosures About Market Risk            Rates Down 100bps

Rates Unchanged

Rates Up 100bpsFair Value

$
1,142,670


$
1,088,554


$
1,032,815Yield to Maturity or Call


2.59
%


3.62
%


4.63
%Effective Duration


4.67



5.09



5.30        77




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    Derivative Instrument
    Item 8.
    Financial
    Statements and Supplementary Data  Quarterly Financial Data (Unaudited)
  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
 78




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      Form 10-K
  Changes
    in Internal Control over Financial Reporting
    Item 9B.
    Other
    Information    PART III
    Item 10.
    Directors,
    Executive Officers, and Corporate Governance  Information about the Nominees, the Incumbent
    Directors and Other Executive Officers, Corporate
    Governance, Code of Conduct, Report of
    the Audit Committee, and Section 16(a)
    Beneficial Ownership Reporting Compliance
  Item 11.
    Executive
    Compensation  Compensation of Executive Officers,
    Director Compensation, Report of the
    Compensation Committee of the Board on Executive
    Compensation,Employment Agreements,
    Other Senior Executive Employment Agreements, Compensation Committee Interlocks and Insider
    Participation
 79




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Security Ownership of Certain Beneficial Owners
    and Management
  Equity Compensation Plan InformationNumber of SecuritiesRemaining Available forNumber of Securities to


Weighted-Average


Future Issuance Underbe Issued Upon Exercise


Exercise Price of


Equity Compensationof Outstanding Options,


Outstanding Options,


Plans (ExcludingWarrants and Rights


Warrants and Rights


Securities in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders(1)


0


$
0.00



2,617,749Equity compensation plans not approved by security holders










Total


0


$
0.00



2,617,749     (1)
    
    The 2,617,749 number of shares remaining available for future
    issuance relates to our 2002 Amended and Restated Stock Option
    Plan of 617,749 shares and our 2009 Equity Compensation
    plan of 2,000,000 shares.  Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  Certain Relationships and Related Party
    Transactions Independence
    Determination
  Item 14.
    Principal
    Accountant Fees and Services  The Second Proposal on Which You are Voting on
    Ratification of Appointment of Independent Registered Public
    Accounting Firm
 80




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   
  PART IV
  Item 15.
    Exhibits,
    Financial Statement Schedules    Page1.


List of Financial Statements:Report of Independent Registered Public
    Accounting Firm on Financial Statements


82Report of Independent Registered Public
    Accounting Firm on Internal Control over Financial Reporting


83Consolidated Balance Sheet 
    December 31, 2009 and 2008


84Consolidated Statement of Income  For
    Years Ended December 31, 2009, 2008, and 2007


85Consolidated Statement of Comprehensive
    Income  For Years Ended December 31, 2009, 2008,
    and 2007


86Consolidated Statement of Shareholders
    Equity  For Years Ended December 31, 2009, 2008,
    and 2007


87Consolidated Statement of Cash Flows 
    For Years Ended December 31, 2009, 2008, and 2007


88Notes to Consolidated Financial Statements


89-1272.


Financial Statement SchedulesSchedule I Summary of Investments Other Than
    Investments in Related Parties


128Schedule II Condensed Financial Information
    of Registrant


129-132Schedule III Supplementary Insurance
    Information


133-135Schedule IV Reinsurance


136Schedule V Valuation and Qualifying
    accounts


137Schedule VI Supplemental Information
    Concerning Property and Casualty Insurance Operations


1383.


Exhibits: The Exhibits listed on the accompanying
    Exhibit Index immediately following the financial statement
    schedule are filed as part of, or incorporated by reference
    into, this
    Form 10-K.   81




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board of
    Directors and Shareholders of
         other-than-temporary
    
    82




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
    83




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    BALANCE SHEET
  December 31,2009


2008(In thousands,except share data)ASSETSInvestmentsDebt securities available for sale, at fair value (amortized
    cost of $1,045,454 and $977,613 in 2009 and 2008, respectively)

$
1,088,554


$
986,483Equity securities available for sale, at fair value (cost of
    $26,919 and $27,660 in 2009 and 2008, respectively)


28,342



22,577Cash and cash equivalents


86,319



76,588Accrued investment income


11,599



10,441Premiums and agent balances receivable (net of allowance of
    $3,446 and $2,945 in 2009 and 2008, respectively)


155,327



117,675Reinsurance recoverable on:Paid losses


7,724



8,337Unpaid losses


266,801



260,366Prepaid reinsurance premiums


35,298



31,885Deferred policy acquisition costs


68,787



56,454Deferred income taxes, net


5,645



22,718Goodwill


118,842



119,028Other intangible assets


41,301



46,951Other assets


75,277



54,413Total assets

$
1,989,816


$
1,813,916LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesLosses and loss adjustment expenses

$
949,177


$
885,697Unearned premiums


325,915



282,086Debt


49,875



60,250Debentures


80,930



80,930Accounts payable and accrued expenses


34,251



27,839Reinsurance funds held and balances payable


29,161



27,793Payable to insurance companies


3,314



3,221Other liabilities


14,312



7,930Total liabilities


1,486,935



1,375,746Shareholders EquityCommon stock, $0.01 stated value; authorized
    75,000,000 shares; 55,519,970 and 57,341,989 shares
    issued and outstanding


555



573Additional paid-in capital


304,930



314,641Retained earnings


172,441



127,157Note receivable from officer


(825
)


(852
)Accumulated other comprehensive income (loss)


25,780



(3,349
)Total shareholders equity


502,881



438,170Total liabilities and shareholders equity

$
1,989,816


$
1,813,916    84




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF INCOME
  For the Years Ended December 31,2009


2008


2007(In thousands, except share and per share data)RevenuesPremiums earnedGross

$
644,858


$
455,782


$
337,099Ceded


(105,256
)


(86,061
)


(68,902
)Net earned premiums


539,602



369,721



268,197Net commissions and fees


37,881



42,904



45,988Net investment income


50,366



36,624



26,400Realized (losses) gains:Total
    other-than-temporary
    impairments on securities


(5,203
)


(11,719
)


Portion of loss recognized in other comprehensive income


1,734







Net
    other-than-temporary
    impairments on securities recognized in earnings


(3,469
)


(11,719
)


Net realized gains excluding
    other-than-temporary
    impairments on securities


3,244



297



150Net realized (losses) gains


(225
)


(11,422
)


150Total revenues


627,624



437,827



340,735ExpensesLosses and loss adjustment expenses


375,938



282,822



191,885Reinsurance recoveries


(68,851
)


(69,937
)


(40,916
)Net losses and loss adjustment expenses


307,087



212,885



150,969Salaries and employee benefits


80,923



62,862



56,433Policy acquisition and other underwriting expenses


110,715



69,294



53,717Other administrative expenses


39,413



35,000



32,269Amortization expense


5,781



6,310



1,930Interest expense


10,596



7,681



6,030Total expenses


554,515



394,032



301,348Income before taxes and equity earnings


73,109



43,795



39,387Federal and state income tax expense


21,321



16,667



11,726Equity earnings of affiliates, net of tax


874







Equity earnings of unconsolidated subsidiaries, net of tax


(12
)


269



331Net income

$
52,650


$
27,397


$
27,992Earnings Per ShareBasic

$
0.92


$
0.61


$
0.85Diluted

$
0.92


$
0.61


$
0.85Weighted average number of common sharesBasic


57,248,497



44,810,944



33,007,200Diluted


57,413,391



44,995,712



33,101,965    85




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF COMPREHENSIVE INCOME
  For the Years Ended December 31,2009


2008


2007(In thousands)Net income

$
52,650


$
27,397


$
27,992Other comprehensive income, net of tax:Unrealized gains (losses) on securities


26,951



(12,960
)


4,810Losses on non-credit
    other-than-temporary
    impairments on securities


(178
)






Net deferred derivative gain (loss)  hedging activity


1,958



(5,457
)


(484
)Less: reclassification adjustment for investment losses included
    in net income


398



11,569



10Other comprehensive income (loss)


29,129



(6,848
)


4,336Comprehensive income

$
81,779


$
20,549


$
32,328    86




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF SHAREHOLDERS EQUITY
  For the Years Ended December 31, 2009, 2008, and 2007AccumulatedOtherAdditional





Note


Comprehensive


TotalCommon


Paid-In


Retained


Receivable


Income


ShareholdersStock


Capital


Earnings


from Officer


(Loss)


Equity(In thousands)Balances January 1, 2007

$
291


$
126,828


$
76,282


$
(871
)

$
(837
)

$
201,693Change on unrealized available for sale securities


















4,820



4,820Net deferred derivative gain  hedging activity


















(484
)


(484
)Long term incentive plan; stock award for
    2007-2008
    plan years






772















772Long term incentive plan; stock award for
    2004-2006
    plan years


4



(1,845
)














(1,841
)Stock-based employee compensation






2















2Issuance of 244,574 shares of common stock


3



1,373















1,376Retirement of 89,466 shares of common stock


(1
)


(1,020
)














(1,021
)Equity offering issuance of 6,437,500 shares of common stock


64



58,520















58,584Issuance of 907,935 shares of common stock for acquisition
    of business of USSU


9



9,991















10,000Note receivable from an officer














1







1Net income










27,992











27,992Balances December 31, 2007


370



194,621



104,274



(870
)


3,499



301,894Change on unrealized available for sale securities


















(1,391
)


(1,391
)Net deferred derivative loss  hedging activity


















(5,457
)


(5,457
)Dividends declared at $0.02 per share










(3,797
)










(3,797
)Long term incentive plan; stock award for
    2007-2008
    plan years






1,902















1,902Issuance of 31,745 shares of common stock






149















149Retirement of 7,000 shares of common stock






(65
)














(65
)Repurchase of 800,000 shares of common stock


(8
)


(4,217
)


(717
)










(4,942
)Issuance of 21,122,990 shares of common stock for merger
    with ProCentury Corporation


211



122,514















122,725Purchase accounting adjustments related to the merger with
    ProCentury Corporation






(263
)














(263
)Note receivable from an officer














18







18Net income










27,397











27,397Balances December 31, 2008


573



314,641



127,157



(852
)


(3,349
)


438,170Change on unrealized available for sale securities


















28,691



28,691Net deferred derivative gain  hedging activity


















1,958



1,958Dividends declared and paid










(5,162
)










(5,162
)Long term incentive plan; stock award for
    2009-2011
    plan years






1,003















1,003Long term incentive plan tax adjustment






(224
)














(224
)Issuance of 105,718 shares of common stock for long term
    incentive plan stock award for
    2007-2008
    plan years


1



(330
)














(329
)Repurchase of 1,927,902 shares of common stock


(19
)


(10,160
)


(3,724
)










(13,903
)Note receivable from an officer














27







27Cumulative effect adjustment for non-credit related portion of
    OTTI recognized in prior earnings










1,520







(1,520
)


Net income










52,650











52,650Balances December 31, 2009

$
555


$
304,930


$
172,441


$
(825
)

$
25,780


$
502,881    87




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF CASH FLOWS
  For the Years Ended December 31,2009


2008


2007(In thousands, expect share data)Cash Flows From Operating ActivitiesNet income

$
52,650


$
27,397


$
27,992Adjustments to reconcile net income to net cash provided by
    operating activities:Amortization of other intangible assets


5,780



6,310



1,930Amortization of deferred debenture issuance costs


347



496



353Depreciation of furniture, equipment, and building


5,251



3,953



3,147Net accretion of discount and premiums on bonds


3,128



3,080



2,707Loss on investments, net


398



11,566



16Gain on sale of fixed assets


(88
)


(88
)


(88
)Stock-based employee compensation










2Incremental tax benefits from stock options exercised






(80
)


(728
)Long term incentive plan expense


1,003



817



772Equity earnings of affiliates, net of taxes


(874
)






Deferred income tax expense


3,285



2,742



(1,538
)Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable


(37,652
)


6,162



2,111Reinsurance recoverable on paid and unpaid losses


(5,822
)


(23,667
)


3,166Prepaid reinsurance premiums


(3,413
)


3,572



2,662Deferred policy acquisition costs


(12,333
)


(2,092
)


976Other assets


(2,340
)


(4,550
)


13Increase (decrease) in:Losses and loss adjustment expenses


63,480



56,163



38,925Unearned premiums


43,829



1,901



9,352Payable to insurance companies


93



(3,009
)


789Funds held and reinsurance balances payable


4,552



(2,533
)


1,292Other liabilities


6,411



5,782



(5,244
)Total adjustments


75,035



66,525



60,615Net cash provided by operating activities


127,685



93,922



88,607Cash Flows From Investing ActivitiesPurchase of equity securities available for sale


(306
)


(446
)


Purchase of debt securities available for sale


(261,705
)


(107,899
)


(393,676
)Proceeds from sale of equity securities available for sale


258



69



Proceeds from sales and maturities of debt securities available
    for sale


192,929



105,426



272,337Capital expenditures


(3,627
)


(3,007
)


(3,109
)Purchase of books of business


(2,095
)


(2,454
)


(3,344
)Acquisition of U.S. Specialty Underwriters, Inc.(1)






(20,971
)


(12,644
)Merger with ProCentury, net of cash acquired






(74,913
)


Equity investment in insurance holding limited liability company


(14,782
)






Loan receivable






(1,656
)


(310
)Net cash deposited (withheld) in funds held


298



(3,055
)


344Other investing activities






(370
)


Net cash used in investing activities


(89,030
)


(109,276
)


(140,402
)Cash Flows From Financing ActivitiesProceeds from lines of credit






73,000



19,025Payment of lines of credit


(10,375
)


(12,750
)


(26,025
)Book overdrafts


(141
)


(384
)


(39
)Dividend paid on common stock


(5,162
)


(3,797
)


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


(330
)






(1,841
)Stock options exercised






4



(374
)Share repurchases of common stock(2)


(12,790
)


(4,942
)


Incremental tax benefits from stock options exercised






80



728Net proceeds received from public equity offering










58,585Other financing activities


(126
)


(114
)


(295
)Net cash (used in) provided by financing activities


(28,924
)


51,097



49,764Net increase (decrease) in cash and cash equivalents


9,731



35,743



(2,031
)Cash and cash equivalents, beginning of year


76,588



40,845



42,876Cash and cash equivalents, end of year

$
86,319


$
76,588


$
40,845Supplemental Disclosure of Cash Flow Information:Interest paid

$
9,575


$
6,513


$
5,894Net income taxes paid

$
21,913


$
10,855


$
11,557Supplemental Disclosure of Non Cash Investing and Financing
    Activities:Tax benefit from stock options

$



$
80


$
728Stock-based employee compensation

$



$



$
2Common stock portion of purchase price for acquisition of U.S.
    Specialty Underwriters, Inc.

$



$



$
10,000Common stock portion of purchase price for merger with
    ProCentury Corporation

$



$
122,725


$
    (1)
    
    Effective January 31, 2008,
    the Company exercised its option to purchase the remainder of
    the economics related to the acquisition of the USSU business.(2)
    
    The Company repurchased
    150,000 shares at the end of 2009. The cash settlement
    related to these share repurchases did not occur until January
    2010, therefore $1.1 million was not considered a cash
    outflow as of December 31, 2009.   88




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Summary
    of Significant Accounting Policies  Basis of
    Presentation and Principles of Consolidation
    Note 2  ProCentury Merger
        Business
   89




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of
    Estimates
    Cash and
    Cash Equivalents
    Investments
  other-than-temporary
    other-than-temporary.
   90




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    Historical and implied volatility of the security;
    Length of time and extent to which the fair value has been less
    than amortized cost;
    Conditions specifically related to the security such as default
    rates, loss severities, loan to value ratios, current levels of
    subordination, third party guarantees, and vintage;
    Specific conditions in an industry or geographic area;
    Any changes to the rating of the security by a rating agency;
    Failure, if any, of the issuer of the security to make scheduled
    payments; and
    Recoveries or additional declines in fair value subsequent to
    the balance sheet date.       Investments
  Losses
    and Loss Adjustment Expenses and Reinsurance
    Recoverables
     91




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Revenue
    Recognition
  Financial
    Services  Insurance
        sub-producer
   92




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Equity
    Earnings of Affiliates
    323-10-35-6, Investments  Equity Method and Joint
    Ventures  Subsequent Measurement.
  Deferred
    Policy Acquisition Costs
    Participating
    Policyholder Dividends
    Furniture
    and Equipment
    Goodwill
   93




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Income
    Taxes
        Stock
    Options
    Long Term
    Incentive Plan
   94




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Variable Compensation
  Deferred
    Compensation Plan
    Earnings
    Per Share
      Comprehensive
    Income
    Derivative
    Instruments
   95




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value Disclosures
  Derivative Instruments
  Shareholder
    Rights Plan (Rights Agreement)
      Revision
    to Previously Reported Statement of Cash Flows for
    December 31, 2008
  Form 10-Q
  
    Cash flows used in investing activities for the purchase of
    securities and cash flows provided by investing activities from
    the proceeds from the sales and maturities of securities had
    revisions. The previously reported cash flow information in
    investing activities included non-cash transfers between
    investment portfolios within an entity or between affiliated
    entities. These non-cash transfers did not constitute actual
    purchases and sales and, therefore, resulted in an overstatement
    of cash used for the purchase of securities and cash provided by
    proceeds from the sales and maturities of securities.
    Cash flows pertaining to operating activities and investing
    activities also had revisions as a result of the classification
    related to opening balance sheet information and purchase
    accounting items, specifically related to the Companys
    merger with ProCentury in the third quarter of 2008. 96




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       For the Year Ended December 31, 2008As Previously

TotalReported

Revisions

As RevisedOperating ActivitiesLoss on sale of investments

$
11,569


$
(3
)

$
11,566Other assets


6,848



(11,398
)


(4,550
)Other liabilities


1,376



4,406



5,782Total adjustments


73,520



(6,995
)


66,525Net cash provided by operating activities


100,917



(6,995
)


93,922Investing ActivitiesPurchase of equity securities available for sale






(446
)


(446
)Purchase of debt securities available for sale


(171,750
)


63,851



(107,899
)Proceeds from sales and maturities of equity securities
    available for sale


79



(10
)


69Proceeds from sales and maturities of debt securities available
    for sale


168,582



(63,156
)


105,426Merger with ProCentury, net of cash acquired


(82,039
)


7,126



(74,913
)Other investing activities






(370
)


(370
)Net cash used in investing activities


(116,271
)


6,995



(109,276
)   Accounting
    Standards Codification
  The FASB
    Accounting Standards Codification and the Hierarchy of Generally
    Accepted Accounting Principles  a replacement of FASB
    Statement No. 162,
  Recent
    Accounting Standards
  320-10-65, Debt and Equity Securities  Transition and
    Open Effective Date Information No. FAS 115-2 FAS 124-2, Recognition and Presentation of
    Other-Than-Temporary-Impairments 320-10-65 other-than-temporary
 97




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  other-than-temporarily 320-10-65 other-than-temporary-impairment other-than-temporary-impairment 320-10-65 320-10-65 320-10-65 320-10-65
  820-10-65-4, Fair Value Measurements and Disclosures 
    Transition and Open Effective Date Information No. FAS 157-4, Determining Fair Value When the Volume and Level of
    Activity for the Asset or Liability Have Significantly Decreased
    and Identifying Transactions that are Not Orderly) 820-10-65-4 Fair Value Measurements and
    Disclosures 820-10-65-4 820-10-65-4 820-10-65-4
  825-10-65-1, Financial Instruments  Transition and Open
    Effective Date Information FAS 107-1 28-1, Interim Disclosures about Fair Value of Financial
    Instruments) 825-10-65-1 825-10-65-1 825-10-65-1
  805-20 Business Combinations  Identifiable Assets
    and Liabilities, and Any Noncontrolling Interest Accounting for
    Assets Acquired and Liabilities Assumed in a Business
    Combination that Arise from Contingencies. 805-20 805-20 805-20
  Subsequent
    Events Subsequent Events
  Consolidation Amendments to FASB
    Interpretation No. 46(R).
 98




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2.
    Procentury
    Merger  30-day
      hard-to-place
      Business Combinations
 99




---



##### 



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


Subsequent


As AdjustedThrough


Purchase


ThroughDecember 31,


Accounting


December 31,2008


Adjustments


2009Cash consideration portion of purchase price

$
99,073


$



$
99,073Value of equity issued for stock consideration portion of
    purchase price


122,725







122,725Transaction related costs of Meadowbrook


5,949



(184
)


5,765Purchase price

$
227,747


$
(184
)

$
227,563       As Adjusted


Subsequent


As AdjustedThrough


Purchase


ThroughDecember 31,


Accounting


December 31,2008


Adjustments


2009(In thousands)ASSETSCash

$
23,248


$



$
23,248Investments


412,542







412,542Agent balances


36,497







36,497Deferred policy acquisition costs


27,435







27,435Federal income taxes recoverable


7,386







7,386Deferred taxes


7,451







7,451Reinsurance recoverables


45,522







45,522Prepaid insurance premiums


17,695







17,695Goodwill


59,490



(186
)


59,304Other intangible assets


26,000







26,000Other assets(1)


27,164



2



27,166Total Assets

$
690,430


$
(184
)

$
690,246LIABILITIESLosses and loss adjustment expenses

$
289,533


$



$
289,533Unearned premiums


126,259







126,259Reinsurance funds held and balances payable


13,911







13,911Debentures


25,000







25,000Other liabilities(1)


7,980







7,980Total Liabilities


462,683







462,683Purchase price

$
227,747


$
(184
)

$
227,563     (1)
    
    Other assets include a receivable of $11.6 million and
    other liabilities include a payable of $4.7 million, both
    of which represent a pre-merger transaction with the Company.
    The pre-merger receivable and payable with the Company were
    eliminated upon consolidation of the combined company. 100




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Years EndedDecember 31,2008


2007(In thousands)Revenues

$
561,049


$
578,585Expenses(1)


520,211



503,156Income before taxes and equity earnings


40,838



75,429Income tax expense


15,596



23,012Net income

$
25,242


$
52,417Net income per diluted share

$
0.43


$
0.97Weighted average number of common shares:Diluted(2)


58,153,667



54,224,955     (1)
    
    The pro forma results for the year ended December 31, 2008,
    include approximately $7.0 million in expenses related to
    transaction costs and restructuring charges ProCentury incurred
    in conjunction with the Merger.(2)
    
    The weighted average number of diluted common shares has been
    adjusted giving effect as if the shares issued in accordance
    with the purchase price had been as of the beginning of each
    period presented.  3.
    Investments    December 31, 2009GrossCost or


Gross


Gross


Unrealized


EstimatedAmortized


Unrealized


Unrealized


Non-Credit


FairCost


Gains


Losses


OTTI(1)


ValueDebt Securities:U.S. Government and agencies

$
26,177


$
1,037


$
(60
)

$



$
27,154Obligations of states and political subs


499,384



21,566



(816
)






520,134Corporate securities


257,187



10,872



(892
)


(22
)


267,145Redeemable preferred stocks


2,689



1,349



(38
)






4,000Residential mortgage-backed securities


214,562



11,379



(114
)


(615
)


225,212Commercial mortgage-backed securities


24,015



292



(579
)






23,728Asset-backed securities


21,440



983



(181
)


(1,061
)


21,181Total Debt Securities available for sale


1,045,454



47,478



(2,680
)


(1,698
)


1,088,554Equity Securities:Perpetual preferred stock


12,131



1,350



(168
)






13,313Common stock


14,788



691



(450
)






15,029Total Equity Securities available for sale


26,919



2,041



(618
)






28,342Total Securities available for sale

$
1,072,373


$
49,519


$
(3,298
)

$
(1,698
)

$
1,116,896     (1)
    
    Includes unrealized gains (losses) related to securities with
    non-credit OTTI. 101




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   December 31, 2008GrossCost or


Gross


Gross


Unrealized


EstimatedAmortized


Unrealized


Unrealized


Non-Credit


FairCost


Gains


Losses


OTTI


ValueDebt Securities:U.S. Government and agencies

$
51,248


$
5,015


$



$



$
56,263Obligations of states and political subs


475,369



8,429



(3,876
)






479,922Corporate securities


143,916



1,815



(4,505
)






141,226Redeemable preferred stocks


2,689



25



(444
)






2,270Residential mortgage-backed securities


247,949



10,090



(2,562
)






255,477Commercial mortgage-backed securities


28,168



48



(3,554
)






24,662Asset-backed securities


28,274



366



(1,977
)






26,663Total Debt Securities available for sale


977,613



25,788



(16,918
)






986,483Equity Securities:Perpetual preferred stock


12,945



58



(2,524
)






10,479Common stock


14,715







(2,617
)






12,098Total Equity Securities available for sale


27,660



58



(5,141
)






22,577Total Securities available for sale

$
1,005,273


$
25,846


$
(22,059
)

$



$
1,009,060     December 31,


December 31,2009


2008Unrealized gains

$
49,519


$
25,846Unrealized losses


(3,298
)


(22,059
)Non-credit OTTI(1)


(1,698
)


Net unrealized gains


44,523



3,787Deferred federal income tax expense


(15,583
)


(1,325
)Valuation allowance adjustment on deferred income taxes


694



Net unrealized gains on investments, net of deferred federal
    income taxes

$
29,634


$
2,462     (1)
    
    Includes unrealized gains (losses) related to securities with
    non-credit OTTI. 102




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2009


2008


2007Realized (losses) gains:Debt securities:Gross realized gains

$
3,977


$
352


$
88Gross realized losses


(3,587
)


(3,266
)


(252
)Total debt securities


390



(2,914
)


(164
)Equity Securities:Gross realized gains


70







Gross realized losses


(858
)


(8,655
)


Total equity securities


(788
)


(8,655
)


Net realized losses

$
(398
)

$
(11,569
)

$
(164
)OTTI included in realized losses on securities above

$
(3,469
)

$
(11,719
)

$
       Available for SaleAmortized


EstimatedCost


Fair ValueDue in one year or less

$
36,235


$
37,110Due after one year through five years


155,315



164,892Due after five years through ten years


423,408



442,110Due after ten years


170,479



174,321Mortgage-backed securities, collateralized obligations and
    asset-backed securities


260,017



270,121$
1,045,454


$
1,088,554     December 31,2009


2008


2007Net Investment Income Earned From:Debt securities

$
48,187


$
33,906


$
23,746Equity Securities


2,168



1,105



25Cash and cash equivalents


1,057



2,485



3,224Total gross investment income


51,412



37,496



26,995Less investment expenses


1,046



872



595Net investment income

$
50,366


$
36,624


$
26,400  103




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
    other-than-temporary.
      
    Historical and implied volatility of the security;
    Length of time and extent to which the fair value has been less
    than amortized cost;
    Conditions specifically related to the security such as default
    rates, loss severities, loan to value ratios, current levels of
    subordination, third party guarantees, and vintage;
    Specific conditions in an industry or geographic area;
    Any changes to the rating of the security by a rating agency;
    Failure, if any, of the issuer of the security to make scheduled
    payments; and
    Recoveries or additional declines in fair value subsequent to
    the balance sheet date. 104




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           December 31, 2009Less than 12 months


Greater than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments


Unrealized


Investments


Unrealized


Investments


Unrealizedwith


Losses and


with


Losses and


with


Losses andUnrealized


Non-Credit


Unrealized


Non-Credit


Unrealized


Non-CreditLosses


OTTI


Losses


OTTI


Losses


OTTIDebt Securities:U.S. Government and agencies

$
3,546


$
(60
)

$



$



$
3,546


$
(60
)Obligations of states and political subs


53,577



(640
)


7,115



(176
)


60,692



(816
)Corporate securities


55,276



(912
)


199



(2
)


55,475



(914
)Redeemable preferred stocks










721



(38
)


721



(38
)Residential mortgage-backed securities


5,971



(79
)


4,596



(650
)


10,567



(729
)Commercial mortgage-backed securities


3,286



(20
)


8,109



(559
)


11,395



(579
)Asset-backed securities


3,177



(972
)


1,354



(270
)


4,531



(1,242
)Total Debt Securities


124,833



(2,683
)


22,094



(1,695
)


146,927



(4,378
)Equity Securities:Perpetual preferred stock


103



(24
)


2,862



(144
)


2,965



(168
)Common stock










5,074



(450
)


5,074



(450
)Total Equity Securities


103



(24
)


7,936



(594
)


8,039



(618
)Total Securities

$
124,936


$
(2,707
)

$
30,030


$
(2,289
)

$
154,966


$
(4,996
)   105




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2008Less than 12 months


Greater than 12 months


TotalFair Value of


Gross


Fair Value of


Gross


Fair Value of


GrossInvestments


Unrealized


Investments


Unrealized


Investments


Unrealizedwith


Losses and


with


Losses and


with


Losses andUnrealized


Non-Credit


Unrealized


Non-Credit


Unrealized


Non-CreditLosses


OTTI


Losses


OTTI


Losses


OTTIDebt Securities:U.S. Government and agencies

$



$



$



$



$



$
Obligations of states and political subs


130,948



(3,516
)


4,778



(360
)


135,726



(3,876
)Corporate securities


71,600



(3,577
)


8,141



(928
)


79,741



(4,505
)Redeemable preferred stocks


1,362



(444
)










1,362



(444
)Residential mortgage-backed securities


9,739



(2,562
)










9,739



(2,562
)Commercial mortgage-backed securities


12,345



(2,140
)


10,136



(1,414
)


22,481



(3,554
)Asset-backed securities


21,807



(999
)


1,464



(978
)


23,271



(1,977
)Total Debt Securities


247,801



(13,238
)


24,519



(3,680
)


272,320



(16,918
)Equity Securities:Perpetual preferred stock


9,360



(2,524
)










9,360



(2,524
)Common stock


11,806



(2,617
)










11,806



(2,617
)Total Equity Securities


21,166



(5,141
)










21,166



(5,141
)Total Securities

$
268,967


$
(18,379
)

$
24,519


$
(3,680
)

$
293,486


$
(22,059
)     Balance as of April 1, 2009

$
(46
)Additional credit impairments on:Previously impaired securities


(459
)Securities for which an impairment was not previously recognized


(42
)Reductions


Balance as of December 31, 2009

$
(547
)   4.
    Fair
    Value Measurements     106




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Level 1  Observable unadjusted quoted prices in
    active markets for identical securities.      
    Level 2  Observable inputs other than quoted
    prices in active markets for identical securities, including:
    quoted prices in active markets for similar securities; quoted
    prices for identical or similar securities in markets that are
    not active; inputs other than quoted prices that are observable
    for the security (e.g., interest rates, yield curves observable
    at commonly quoted intervals, volatilities, prepayment speeds,
    credit risks, default rates); and inputs derived from or
    corroborated by observable market data by correlation or other
    means.      
    Level 3  Unobservable inputs, including the
    reporting entitys own data (e.g., cash flow estimates), as
    long as there are no contrary data indicating market
    participants would use different assumptions.     107




---



##### 



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


SignificantMarkets for


Other


SignificantDecember 31,


Identical


Observable


Unobservable2009


Assets


Inputs


InputsTotal


(Level 1)


(Level 2)


(Level 3)Debt Securities:U.S. Government and agencies

$
27,154


$



$
27,154


$
Obligations of states and political subs


520,134







520,134



Corporate securities


267,145







266,455



690Redeemable preferred stocks


4,000



4,000Residential mortgage-backed securities


225,212







225,210



2Commercial mortgage-backed securities


23,728







23,681



47Asset-backed securities


21,181







17,759



3,422Total Debt Securities available for sale


1,088,554



4,000



1,080,393



4,161Equity Securities:Perpetual preferred stock


13,313



13,313







Common stock


15,029



15,029







Total Equity Securities available for sale


28,342



28,342







Total Securities available for sale

$
1,116,896


$
32,342


$
1,080,393


$
4,161Derivatives  interest rate swaps

$
(5,928
)

$



$
(5,928
)

$
     Fair ValueMeasurementUsingSignificantUnobservableInputs - Level 3Balance as of January 1, 2009

$
11,991Total gains or losses (realized/unrealized):Included in earnings


(83
)Included in other comprehensive income


(347
)Purchases, issuances and settlements


1,987Transfers in and out of Level 3


(9,387
)Balance as of December 31, 2009

$
4,161Total gains or losses for the period included in earnings
    attributable to the change in unrealized gains or losses
    relating to assets still held at the reporting date

$
(237
)   Items Measured
    at Fair Value on a Nonrecurring Basis
   108




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Liability
    for Losses and Loss Adjustment Expenses    For the Years Ended December 31,2009


2008


2007Balance, beginning of year

$
885,697


$
540,002


$
501,077Less reinsurance recoverables


260,366



198,461



198,422Net balance, beginning of year


625,331



341,541



302,655Additional net reserves acquired at August 1, 2008(1)






247,739



Total beginning reserves


625,331



589,280



302,655Incurred related to:Current year


335,757



229,657



158,060Prior years


(28,670
)


(16,772
)


(7,091
)Total incurred


307,087



212,885



150,969Paid related to:Current year


76,517



56,914



30,303Prior years


173,525



119,920



81,780Total paid


250,042



176,834



112,083Net balance, end of year


682,376



625,331



341,541Plus reinsurance recoverables


266,801



260,366



198,461Balance, end of year

$
949,177


$
885,697


$
540,002     (1)
    
    Amount represents the fair value of the reserves acquired from
    ProCentury. Please refer to Note 2 
    ProCentury Mergerfor related disclosures.       109




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      6.
    Reinsurance  excess-of-loss
      excess-of-loss
       110




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    excess-of-loss excess-of-loss excess-of-loss
               111




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              2009


2008


2007Written


Earned


Written


Earned


Written


EarnedDirect

$
678,380


$
637,043


$
449,618


$
441,709


$
307,266


$
266,049Assumed


10,307



7,815



8,065



14,073



39,184



71,050Ceded


(108,669
)


(105,256
)


(82,489
)


(86,061
)


(66,239
)


(68,902
)Net

$
580,018


$
539,602


$
375,194


$
369,721


$
280,211


$
268,197     7.
    Segment
    Information    Specialty
    Insurance Operations
  fee-for-service
 112




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Agency
    Operations
      For the Years Ended December 31,2009


2008


2007RevenuesNet earned premiums

$
539,602


$
369,721


$
268,197Management fees


18,901



21,168



23,963Claims fees


7,428



8,879



9,025Loss control fees


1,975



2,069



2,151Reinsurance placement


931



728



929Investment income


49,910



35,888



25,487Net realized (losses) gains


(225
)


(11,422
)


150Specialty insurance operations


618,522



427,031



329,902Agency operations


9,561



11,064



11,316Holding Company interest income earned


456



736



913Intersegment revenue


(915
)


(1,004
)


(1,396
)Consolidated revenue

$
627,624


$
437,827


$
340,735Pre-tax income:Specialty insurance operations

$
97,346


$
60,125


$
47,898Agency operations(1)


(1,010
)


1,142



2,087Non-allocated expenses


(21,883
)


(17,472
)


(10,598
)Consolidated


74,453



43,795



39,387Less: Equity earnings of affiliates, gross of tax, which were
    included in specialty insurance operations


1,344







Consolidated pre-tax income

$
73,109


$
43,795


$
39,387     (1)
    
    The Companys agency operations include an allocation of
    corporate overhead, which includes expenses associated with
    accounting, information services, legal, and other corporate
    services. The corporate 113




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  overhead allocation excludes those expenses specific to the
    holding company. For the years ended December 31, 2009,
    2008, and 2007, the allocation of corporate overhead to the
    agency operations segment was $3.4 million,
    $2.8 million, and $2.8 million, respectively.    For the Years Ended December 31,2009


2008


2007Holding company expenses

$
(5,506
)

$
(3,481
)

$
(2,638
)Amortization


(5,781
)


(6,310
)


(1,930
)Interest expense


(10,596
)


(7,681
)


(6,030
)$
(21,883
)

$
(17,472
)

$
(10,598
)   8.
    Debt  Credit
    Facilities
    Derivative Instruments
   114




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Debentures
    InterestRate atDecember 31,Year







2009


PrincipalDescription

Callable


Year Due


Interest Rate Terms

(1)


AmountJunior subordinated debentures


2008



2033


Three-month LIBOR, plus 4.05%


4.30
%

$
10,310Senior debentures


2009



2034


Three-month LIBOR, plus 4.00%


4.27
%


13,000Senior debentures


2009



2034


Three-month LIBOR, plus 4.20%


4.46
%


12,000Junior subordinated debentures


2010



2035


Three-month LIBOR, plus 3.58%


3.83
%


20,620Junior subordinated debentures(2)


2007



2032


Three-month LIBOR, plus 4.00%


4.26
%


15,000Junior subordinated debentures(2)


2008



2033


Three-month LIBOR, plus 4.10%


4.37
%


10,000Total















$
80,930     (1)
    
    The underlying three-month LIBOR rate varies as a result of the
    interest rate reset dates used in determining the three-month
    LIBOR rate, which varies for each long-term debt item each
    quarter.(2)
    
    Represents the junior subordinated debentures acquired in
    conjunction with the Merger.             115




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Derivative
    Instruments      FixedAmount atExpiration




Counterparty




December 31,Effective Date


Date


Debt Instrument

Interest Rate Terms

Fixed Rate


200910/06/2005



09/16/2010


Junior subordinated debentures

Three-month LIBOR, plus 3.58%


8.340
%

$
20,00004/23/2008



05/24/2011


Senior debentures

Three-month LIBOR, plus 4.20%


7.720
%


7,00004/23/2008



06/30/2013


Junior subordinated debentures

Three-month LIBOR, plus 4.05%


8.020
%


10,00004/29/2008



04/29/2013


Senior debentures

Three-month LIBOR, plus 4.00%


7.940
%


13,00007/31/2008



07/31/2013


Term loan(1)

Three-month LIBOR


3.950
%


49,87508/15/2008



08/15/2013


Junior subordinated debentures(2)

Three-month LIBOR


3.780
%


10,00009/04/2008



09/04/2013


Junior subordinated debentures(2)

Three-month LIBOR


3.790
%


15,000     (1)
    
    Relates to the Companys term loan, which has an effective
    date of July 31, 2008 and an expiration date of
    July 31, 2013. The Company is required to make fixed rate
    interest payments on the current balance of the term loan,
    amortizing in accordance with the term loan amortization
    schedule. The Company fixed only the variable interest portion
    of the loan. As of December 31, 2009, the actual interest
    payments associated with the term loan also include an
    additional rate of 2.00% in accordance with the credit agreement.(2)
    
    Relates to the debentures acquired from the ProCentury merger.
    The Company fixed only the variable interest portion of the
    debt. The actual interest payments associated with the
    debentures also include an additional rate of 4.10% and 4.00% on
    the $10.0 million and $15.0 million debentures,
    respectively.      Debt
   116




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    10.
    Regulatory
    Matters and Rating Issues      2009:

Star

Savers

Williamsburg

Ameritrust

Century

PICStatutory capital and surplus

$
207,035


$
44,419


$
22,896


$
20,231


$
144,812


$
29,096RBC authorized control level

$
47,103


$
8,180


$
4,230


$
3,665


$
24,271


$
5,916Statutory net income

$
25,379


$
6,784


$
3,035


$
2,994


$
26,622


$
(1,557
)   2008:

Star

Savers

Williamsburg

Ameritrust

Century

PICStatutory capital and surplus

$
199,889


$
42,718


$
21,945


$
19,177


$
122,948


$
31,228RBC authorized control level

$
36,244


$
6,499


$
3,382


$
2,893


$
33,918


$
2,860Statutory net income

$
27,179


$
6,546


$
2,783


$
2,671


$
(11,227
)

$
2,371   .
   117




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          11.
    Deferred
    Policy Acquisition Costs    For the Years Ended December 31,2009


2008


2007Balance, beginning of period

$
56,454


$
26,926


$
27,902Additional deferred policy acquisition costs at August 1,
    2008(1)






27,436



Acquisition costs deferred


114,103



54,652



37,395Amortized to expense during the period


(101,770
)


(52,560
)


(38,371
)Balance, end of period

$
68,787


$
56,454


$
26,926     (1)
    
    Deferred policy acquisition costs activity for 2008 includes
    that related to ProCentury of $27.4 million added at
    August 1, 2008.    12.
    Income
    Taxes    For the Years Ended December 31,2009


2008


2007Current tax expense

$
18,036


$
13,925


$
13,264Deferred tax expense (benefit)


3,285



2,742



(1,538
)Total provision for income tax expense

$
21,321


$
16,667


$
11,726  118




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Years Ended December 31,2009


2008


2007Tax provision at statutory rate

$
25,588


$
15,338


$
13,760Tax effect of:Tax exempt interest


(5,145
)


(3,840
)


(2,832
)Deferred tax asset valuation allowance


710



4,688



State income taxes, net of federal benefit


291



365



610Other, net


(123
)


116



188Federal and state income tax expense

$
21,321


$
16,667


$
11,726Effective tax expense rate


29.2
%


38.0
%


29.8
%         2009


2008Deferred


Deferred


Deferred


DeferredTax


Tax


Tax


TaxAssets


Liabilities


Assets


LiabilitiesUnpaid losses and loss adjustment expenses

$
26,681


$



$
25,705


$
Unearned premium reserves


20,381







17,519



Unrealized loss / gains on investments






13,508



1,803



Deferred policy acquisition costs






24,075







19,759Goodwill






4,580







3,524Amortization of intangible assets






7,015







8,426Other than temporary impairment losses on investments and
    purchase accounting adjustments


13,168







16,171



Other, net


3,274







1,894



Total deferred taxes


63,504



49,178



63,092



31,709Net deferred tax assets before valuation allowance


14,326







31,383Valuation allowance


(8,681
)






(8,665
)Net deferred tax assets

$
5,645






$
22,718   and/or
 119




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        13.
    Variable
    Compensation  Stock
    Options
    Long
    Term Incentive Plan
    2007-2009
 120




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2009-2011
  2007-2008 2007-2008 2009-2011 2009-2011
  2007-2008
  Deferred
    Compensation Plan
    14.
    Shareholders
    Equity       121




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007-2008 Variable Compensation
      15.
    Earnings
    Per Share      2009


2008


2007Net income, as reported

$
52,650


$
27,397


$
27,992Common shares:BasicWeighted average shares outstanding


57,248,497



44,810,944



33,007,200DilutedWeighted average shares outstanding


57,248,497



44,810,944



33,007,200Dilutive effect of:Stock options






71



16,495Share awards under long term incentive plan


164,894



184,697



78,270Total


57,413,391



44,995,712



33,101,965Net income per common shareBasic

$
0.92


$
0.61


$
0.85Diluted

$
0.92


$
0.61


$
0.85  122




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Goodwill
    and Other Intangible Assets  Goodwill
      SpecialtyInsuranceAgency Operations


Operations


TotalBalance at December 31, 2008

$
3,445


$
115,583


$
119,028Reductions to goodwill  ProCentury merger






(186
)


(186
)Balance at December 31, 2009

$
3,445


$
115,397


$
118,842     Goodwill
    related to ProCentury Merger
      ProCentury Merger
 123




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Intangible Assets
              2010

$
4,9272011


4,6562012


4,7182013


4,0012014


3,613Total amortization expense

$
21,915   17.
    Commitments
    and Contingencies    2010

$
4,1342011


3,5832012


2,8842013


2,3762014


221Thereafter


0Total minimum lease commitments

$
13,198  124




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          18.
    Sale-Leaseback
    Transaction   125




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    19.
    Related
    Party Transactions          20.
    Employee
    Benefit Plans  1 2 and/or
 126




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   21.
    Quarterly
    Financial Data (Unaudited)    1st

2nd

3rd

4thQuarter

Quarter

Quarter

Quarter2009:Gross premiums written

$
159,991


$
156,891


$
188,985


$
182,820Net premiums written


133,516



134,524



158,705



153,273Net premiums earned


129,038



127,140



137,399



146,025Net commissions and fees


10,237



8,396



10,753



8,495Net investment income


12,342



12,397



12,764



12,863Net realized losses (gains)


(1,992
)


(958
)


(742
)


3,467Net losses and LAE incurred


69,787



70,464



83,552



83,284Policy acquisition and other underwriting expenses


23,969



27,139



28,824



30,783Other administrative expenses


10,393



9,917



9,013



10,090Salaries and employee benefits


19,827



19,945



19,630



21,521Amortization expense


1,508



1,420



1,422



1,431Interest expense


2,782



2,659



2,620



2,535Net income


13,540



11,645



11,019



16,446Diluted earnings per share

$
0.24


$
0.20


$
0.19


$
0.29GAAP combined ratio(1)


87.7
%


92.7
%


95.3
%


94.3
%2008:Gross premiums written

$
90,468


$
94,370


$
134,418


$
138,427Net premiums written


71,399



76,071



112,465



115,259Net premiums earned


66,022



77,031



104,243



122,425Net commissions and fees


12,031



9,632



12,309



8,932Net investment income


7,148



6,917



10,622



11,937Net realized losses


(31
)


(146
)


(7,290
)


(3,955
)Net losses and LAE incurred


37,661



43,542



63,932



67,750Policy acquisition and other underwriting expenses


13,147



12,716



19,470



23,961Other administrative expenses


8,832



7,961



8,055



10,153Salaries and employee benefits


12,755



14,143



17,056



18,908Amortization expense


1,551



1,563



1,531



1,665Interest expense


1,311



1,254



2,333



2,783Net income


7,058



8,437



4,195



7,706Diluted earnings per share

$
0.19


$
0.23


$
0.09


$
0.13GAAP combined ratio(1)


93.9
%


90.5
%


96.7
%


91.8
%     (1)
    
    Management uses the GAAP combined ratio and its components to
    assess and benchmark underwriting performance. The GAAP combined
    ratio is the sum of the GAAP loss and loss adjustment expense
    ratio and the GAAP expense ratio. The GAAP loss and loss
    adjustment expense ratio is the unconsolidated net incurred loss
    and loss adjustment expense in relation to net earned premium.
    The GAAP expense ratio is the unconsolidated policy acquisition
    and other underwriting expenses in relation to net earned
    premium. 127




---



##### 



Schedule I
    Meadowbrook Insurance Group, Inc.
    Summary of investments-other than investments in related
    parties
    As of December 31, 2009 Amount atWhichShown on theCost or


Estimated


BalanceAmortized Cost


Fair Value


Sheet(In thousands)Debt Securities:US government and agencies

$
26,177


$
27,154


$
27,154Obligations of states and political subs


499,384



520,134



520,134Corporate securities


257,187



267,145



267,145Redeemable preferred stocks


2,689



4,000



4,000Residential mortgage-backed securities


214,562



225,212



225,212Commercial mortgage-backed securities


24,015



23,728



23,728Asset-backed securities


21,440



21,181



21,181Total debt securities available for sale


1,045,454



1,088,554



1,088,554Equity Securities:Perpetual preferred stock


12,131



13,313



13,313Common stock


14,788



15,029



15,029Total equity securities available for sale


26,919



28,342



28,342Total securities available for sale

$
1,072,373


$
1,116,896


$
1,116,896  128




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLYBALANCE SHEET December 31,2009


2008(In thousands)ASSETSInvestments

$



$
45Investment in subsidiaries


561,533



501,533Cash and cash equivalents


2,763



182Goodwill


62,328



62,514Other assets


43,576



40,277Total assets

$
670,200


$
604,551LIABILITIESOther liabilities


2,825



3,747Payable to subsidiaries


58,689



46,454Debt


49,875



60,250Debentures


55,930



55,930Total liabilities


167,319



166,381SHAREHOLDERS EQUITYCommon stock


555



573Additional paid-in capital


304,930



314,641Retained earnings


172,441



127,157Note receivable from officer


(825
)


(852
)Accumulated other comprehensive loss


25,780



(3,349
)Total shareholders equity


502,881



438,170Total liabilities and shareholders equity

$
670,200


$
604,551  129




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLYINCOME STATEMENT
  For the Years Ended December 31,2009


2008


2007Revenue

$
2,011


$
2,636


$
3,318Operating expenses:Interest expense


8,968



7,298



6,558Other expenses


7,250



5,386



4,332Total operating expenses


16,218



12,684



10,890Loss before income taxes and subsidiary equity


(14,207
)


(10,048
)


(7,572
)Federal and state income tax benefit


(8,095
)


(3,561
)


(2,878
)Loss before subsidiary equity earnings


(6,112
)


(6,487
)


(4,694
)Subsidiary equity earnings


58,762



33,884



32,686Net income

$
52,650


$
27,397


$
27,992  130




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLYSTATEMENT OF COMPREHENSIVE INCOME
  For the Years Ended December 31,2009


2008


2007Net income

$
52,650


$
27,397


$
27,992Other comprehensive income, net of tax:Unrealized gains (losses) on securities:


26,951



(12,960
)


4,810Losses on non-credit
    other-than-temporary
    impairments on securities


(178
)






Net deferred derivative gain (loss)  hedging activity


1,958



(5,457
)


(484
)Less: reclassification adjustment for investment losses included
    in net income


398



11,569



10Other comprehensive income (loss)


29,129



(6,848
)


4,336Comprehensive income

$
81,779


$
20,549


$
32,328  131




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    STATEMENT OF CASH FLOWS
  For the Years Ended December 31,2009


2008


2007Net cash provided by (used in) operating activities:

$
4,205


$
4,278


$
1,320Cash Flow from Investing Activities:Net purchase of investments






(32,979
)


(32,643
)Dividends from subsidiaries


27,179



18,862



1,729Investment in subsidiaries






(42,004
)


(19,350
)Other investing activities


(174
)Net cash provided by (used in) by investing activities


27,005



(56,121
)


(50,264
)Cash Flow from Financing Activities:Proceeds from borrowings






73,000



19,025Principal payments on borrowings


(10,375
)


(12,750
)


(26,025
)Stock options exercised






4



(374
)Dividends paid on common stock


(5,162
)


(3,797
)


Share repurchases of common stock


(12,790
)


(4,942
)


Payroll taxes associated with long-term incentive plan stock
    issuance


(330
)






(1,841
)Net proceeds from public equity offering










58,585Other financing activities


27



18



1Net cash (used in) provided by financing activities


(28,630
)


51,533



49,371Increase (decrease) in cash and cash equivalents


2,580



(310
)


428Cash and cash equivalents, beginning of year


182



492



64Cash and cash equivalents, end of year

$
2,763


$
182


$
492Supplemental Disclosure for Non-cash Investing and Financing
    ActivitiesCommon stock portion of purchase price for acquisition of U.S.
    SpecialtyUnderwriters, Inc.

$



$



$
10,000Common stock portion of purchase price for merger with
    ProCentury Corporation

$



$
122,725


$
  132




---



##### 



Schedule III
    Meadowbrook Insurance Group, Inc.
    Supplementary Insurance Information
    December 31, 2009
    (In thousands) FuturePolicyBenefits,





OtherDeferred


Losses,





PolicyPolicy


Claims &





Claims &Acquisition


Loss


Unearned


Benefits


PremiumCosts


Expenses


Premium


Payable


RevenueSpecialty Risk Management Operations

$
68,787


$
949,177


$
325,915






$
539,602Agency Operations


















Other


















$
68,787


$
949,177


$
325,915






$
539,602   Benefits,


AmortizationClaims,


of DeferredNet


Losses &


Policy


OtherInvestment


Settlement


Acquisition


Operating


PremiumIncome


Expenses


Costs


Expenses


WrittenSpecialty Risk Management Operations

$
49,910


$
307,087


$
101,770


$
113,663


$
580,018Agency Operations














10,571



Other


456











21,424



$
50,366


$
307,087


$
101,770


$
145,658


$
580,018  133




---



##### 



Schedule III
    Meadowbrook Insurance Group, Inc.
    Supplementary Insurance Information
    December 31, 2008
    (In thousands)
  FuturePolicyBenefits,





OtherDeferred


Losses,





PolicyPolicy


Claims &





Claims &Acquisition


Loss


Unearned


Benefits


PremiumCosts


Expenses


Premium


Payable


RevenueSpecialty Risk Management Operations

$
56,454


$
885,697


$
282,086






$
369,721Agency Operations


















Other


















$
56,454


$
885,697


$
282,086






$
369,721   Benefits,


AmortizationClaims,


of DeferredNet


Losses &


Policy


OtherInvestment


Settlement


Acquisition


Operating


PremiumIncome


Expenses


Costs


Expenses


WrittenSpecialty Risk Management Operations

$
35,888


$
212,885


$
52,560


$
100,689


$
375,194Agency Operations














9,922



Other


736











17,976



$
36,624


$
212,885


$
52,560


$
128,587


$
375,194  134




---



##### 



Schedule III
    Meadowbrook Insurance Group, Inc.
    Supplementary Insurance Information
    December 31, 2007
    (In thousands)
  FuturePolicyBenefits,





OtherDeferred


Losses,





PolicyPolicy


Claims &





Claims &Acquisition


Loss


Unearned


Benefits


PremiumCosts


Expenses


Premium


Payable


RevenueSpecialty Risk Management Operations

$
26,926


$
540,002


$
153,927






$
268,197Agency Operations


















Other


















$
26,926


$
540,002


$
153,927






$
268,197   Benefits,


AmortizationClaims,


of DeferredNet


Losses &


Policy


OtherInvestment


Settlement


Acquisition


Operating


PremiumIncome


Expenses


Costs


Expenses


WrittenSpecialty Risk Management Operations

$
25,487


$
150,969


$
38,371


$
92,664


$
280,211Agency Operations














9,229



Other


913











10,115



$
26,400


$
150,969


$
38,371


$
112,008


$
280,211  135




---



##### 



Schedule IV
    Meadowbrook Insurance Group, Inc.
    Reinsurance
    For the Years Ended December 31, 2009 PercentageCeded

Assumed



of AmountGross

to Other

from Other

Net

Assumed toProperty and Liability Insurance

Amount

Companies

Companies

Amount

Net(In thousands)2009

$
637,043


$
105,256


$
7,815


$
539,602



1.45
%2008

$
441,709


$
86,061


$
14,073


$
369,721



3.81
%2007

$
266,049


$
68,902


$
71,050


$
268,197



26.49
%  136




---



##### 



Schedule V
    Meadowbrook Insurance Group, Inc.
    Valuation and Qualifying Accounts
    For the Years Ended December 31, 2009 Additions

DeductionsBalance at

Charged to

Charged to

from

Balance atBeginning of

Costs and

Other

Allowance

End ofAllowance for Doubtful Accounts

Period

Expense

Accounts

Account

Period(In thousands)2009

$
2,945


$
1,740






$
1,239


$
3,4462008

$
2,747


$
772






$
574


$
2,9452007

$
2,948


$
716






$
917


$
2,747  137




---



##### 



Schedule VI
    Meadowbrook Insurance Group, Inc.
    Supplemental Information Concerning Property and Casualty
    Insurance Operations
    For the Years Ended December 31, 2009
    (In thousands) Discount, IfReserves for

Any,Deferred

Losses and

DeductedPolicy

Loss

from



Net

NetAcquisition

Adjustment

Previous

Unearned

Premiums

InvestmentAffiliation with Registrant

Costs

Expenses(2)

Column(1)

Premiums(2)

Earned

Income(a) Consolidated Property and Casualty Subsidiaries2009

$
68,787


$
949,177






$
325,915


$
539,602


$
49,9102008

$
56,454


$
885,697






$
282,086


$
369,721


$
35,8882007

$
26,926


$
540,002






$
153,927


$
268,197


$
25,487   Amortizationof Deferred

Paid LossesLosses and Loss

Policy

and Loss

NetAdjustment Expense

Acquisition

Adjustment

PremiumsCurrent Year

Prior Years

Expenses

Expenses

Written2009

$
335,757


$
(28,670
)

$
101,770


$
250,042


$
580,0182008

$
229,657


$
(16,772
)

$
52,560


$
176,834


$
375,1942007

$
158,061


$
(7,091
)

$
38,371


$
112,084


$
280,211     (1)
    
    The Company does not employ any discounting techniques.(2)
    
    Reserves for losses and loss adjustment expenses are shown gross
    of $266.8 million, $260.4 million, and
    $198.5 million of reinsurance recoverable on unpaid losses
    in 2009, 2008, and 2007 respectively. Unearned premiums are
    shown gross of ceded unearned premiums of $35.3 million,
    $31.9 million, and $17.8 million in 2009, 2008, and
    2007 respectively. 138




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Exhibit Index
  Exhibit



FilingNo.

Description

Basis3
.1

Amended and Restated Articles of Incorporation of the Company


(13)3
.2

Amended and Restated Bylaws of the Company


(14)4
.1

Junior Subordinated Indenture between Meadowbrook Insurance
    Group, Inc., and JP Morgan Chase Bank, dated September 30, 2003.


(4)4
.2

Junior Subordinated Indenture between Meadowbrook Insurance
    Group, Inc. and LaSalle Bank National Association, dated as of
    September 16, 2005


(9)4
.3

Indenture, dated as of December 4, 2002, by and between
    ProFinance Holdings Corporation and State Street Bank and Trust
    Company of Connecticut.


(19)4
.4

Amended and Restated Declaration of Trust, dated as of December
    4, 2002, by and among State Street Bank and Trust Company of
    Connecticut, and ProFinance Holdings Corporation.


(19)4
.5

Guarantee Agreement, dated as of December 4, 2002, by and
    between ProFinance Holdings Corporation and State Street Bank
    and Trust Company of Connecticut.


(19)4
.6

Indenture, dated as of May 16, 2003, by and between ProFinance
    Holdings Corporation and U.S. Bank National Association.


(19)4
.7

Amended and Restated Declaration of Trust, dated as of May 16,
    2003, by and among U.S. Bank National Association, and
    ProFinance Holdings Corporation.


(19)4
.8

Guarantee Agreement, dated as of May 16, 2003, by and between
    ProFinance Holdings Corporation and U.S. Bank National
    Association.


(19)10
.1

Meadowbrook, Inc. 401(k) and Profit Sharing Plan Trust, amended
    and restated December 31, 1994


(1)10
.2

Demand Note dated November 9, 1998 among the Company and Robert
    S. Cubbin and Kathleen D. Cubbin and Stock Pledge Agreement


(3)10
.3

Meadowbrook Insurance Group, Inc. Amended and Restated 2002
    Stock Option Plan


(5)10
.4

Purchase Agreement among Meadowbrook Insurance Group, Inc.,
    Meadowbrook Capital Trust I, and Dekania CDO I, Ltd.,
    dated September 30, 2003.


(4)10
.5

Amended and Restated Trust Agreement among Meadowbrook Insurance
    Group, Inc., JP Morgan Chase Bank, Chase Manhattan Bank USA,
    National Association, and The Administrative Trustees Named
    Herein, dated September 30, 2003.


(4)10
.6

Guaranty Agreement between Meadowbrook Insurance Group, Inc.,
    and JP Morgan Chase Bank, dated September 30, 2003.


(4)10
.7

Meadowbrook Insurance Group, Inc. Long Term Incentive Plan.


(6)10
.8

Indenture between Meadowbrook Insurance Group, Inc. and JPMorgan
    Chase Bank, as Trustee, dated April 29, 2004.


(6)10
.9

Indenture between Meadowbrook Insurance Group, Inc. and
    Wilmington Trust Company, as Trustee, dated May 26, 2004.


(6)10
.10

Land Contract between Meadowbrook Insurance Group, Inc. and MB
    Center II LLC, dated July 15, 2004.


(6)10
.11

Loan Agreement by and between Ameritrust Insurance Corporation,
    Savers Property and Casualty Insurance Company, Star Insurance
    Company, Williamsburg National Insurance Company, Meadowbrook
    Insurance Group, Inc., and Meadowbrook, Inc., dated September 1,
    2004.


(7)10
.12

Form of Nonqualified Stock Option Agreement under the
    Meadowbrook Insurance Group, Inc., Stock Option Plan, dated
    February 21, 2003.


(7)10
.13

Lease Agreement between Meadowbrook Insurance Group, Inc. and
    Meadowbrook, Inc., dated December 6, 2004.


(7)10
.14

Master Lease Agreement between LaSalle National Leasing
    Corporation and Meadowbrook Insurance Group, Inc., dated
    December 30, 2004.


(7) 139




---



##### 



Exhibit



FilingNo.

Description

Basis10
.15

Promissory Note between Meadowbrook Insurance Group, Inc. and
    Star Insurance Company, dated January 1, 2005.


(7)10
.16

Commercial Mortgage between Meadowbrook Insurance Group, Inc.
    and Star Insurance Company, dated January 1, 2005.


(7)10
.17

Assignment of Leases and Rents between Meadowbrook Insurance
    Group, Inc. and Star Insurance Company, dated January 1, 2005.


(7)10
.18

Amendment to Demand Note Addendum among the Company and Robert
    S. Cubbin and Kathleen D. Cubbin, dated February 17, 2005.


(7)10
.19

Reciprocal Easement and Operation Agreement between Meadowbrook
    Insurance Group, Inc. and MB Center II, LLC, dated May 9, 2005.


(8)10
.20

First Amendment to Land Contract between MB Center II, LLC and
    Meadowbrook Insurance Group, Inc., dated May 20, 2005.


(8)10
.21

Purchase Agreement among Meadowbrook Insurance Group, Inc.,
    Meadowbrook Capital Trust II, and Merrill Lynch International,
    dated as of September 16, 2005.


(9)10
.22

Amended and Restated Trust Agreement among Meadowbrook Insurance
    Group, Inc., LaSalle Bank National Association, Christiana Bank
    & Trust Company, and The Administrative Trustees Named
    Herein, dated as of September 16, 2005.


(9)10
.23

Guarantee Agreement between Meadowbrook Insurance Group, Inc.,
    and LaSalle Bank National Association, dated as of September 16,
    2005.


(9)10
.24

Convertible Note between Meadowbrook Insurance Group, Inc. and
    Renaissance Insurance Group, LLC, dated December 20, 2005.


(10)10
.25

Executive Nonqualified Excess Plan, Plan Document, effective May
    1, 2006.


(11)10
.26

Executive Nonqualified Excess Plan Adoption Agreement, effective
    May 1, 2006.


(11)10
.27

Executive Nonqualified Excess Plan, Rabbi Trust Agreement,
    between Meadowbrook, Inc. and Delaware Charter Guarantee &
    Trust Company, conducting business as Principal Trust Company,
    dated March 30, 2006.


(12)10
.28

Amendment to Land Contract between Meadowbrook Insurance Group,
    Inc. and MB Center II, LLC, dated January 31, 2008.


(14)10
.29

Credit Agreement, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc., as the Borrower, Bank of America, N.A.,
    as Administrative Agent and L/C Issuer, KeyBank National
    Association, JPMorgan Chase Bank, N.A. and RBS Citizens N.A., as
    Co-Syndication Agents, the other lenders party hereto, and Banc
    of America Securities LLC, as Sole Lead Arranger and Sole Book
    Manager.


(15)10
.30

Revolving Credit Note, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc. and RBS Citizens, National Association,
    D/B/A Charter One.


(15)10
.31

Term Note, dated July 31, 2008, between Meadowbrook Insurance
    Group, Inc. and RBS Citizens, National Association, D/B/A
    Charter One.


(15)10
.32

Revolving Credit Note, dated July 31, 2008, between Meadowbrook
    Insurance Group, Inc. and The PrivateBank and Trust Company.


(15)10
.33

Term Note, dated July 31, 2008, between Meadowbrook Insurance
    Group, Inc. and The PrivateBank and Trust Company.


(15)10
.34

Amended and Restated Executive Employment Agreement, dated July
    31, 2008, by and between ProCentury Corporation and Christopher
    J. Timm.


(16)10
.35

Consulting Agreement, dated October 1, 2008, by and among
    Meadowbrook Insurance Group, Inc., Meadowbrook, Inc., and Merton
    J. Segal.


(17)10
.36

Employment Agreement between the Company and Robert S. Cubbin,
    dated January 1, 2009.


(18)10
.37

Employment Agreement between the Company and Michael G.
    Costello, dated January 1, 2009.


(18) 140




---



##### 



Exhibit



FilingNo.

Description

Basis10
.38

Form of senior executive Employment Agreement by and between the
    Company and Karen M. Spaun, Stephen Belden, Archie McIntyre,
    James M. Mahoney, Joseph E. Mattingly, and Robert C. Spring,
    dated January 1, 2009.


(18)10
.39

First Amendment to the Companys Long Term Incentive Plan,
    dated December 30, 2008.


(18)10
.40

2009 Equity Compensation Plan


(20)14


Code of Conduct21


List of Subsidiaries23


Consent of Independent Registered Public Accounting Firm24


Power of Attorney28
.1

Star Insurance Companys 2009 Schedule P


(2)28
.2

Savers Property & Casualty Insurance Companys 2009
    Schedule P


(2)28
.3

Williamsburg National Insurance Companys 2009 Schedule P


(2)28
.4

Ameritrust Insurance Corporations 2009 Schedule P


(2)28
.5

Century Surety Companys 2009 Schedule P


(2)28
.6

ProCentury Insurance Companys 2009 Schedule P


(2)31
.1

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

Certification of Karen M. Spaun, Chief Financial Officer of the
    Corporation,  pursuant toSecurities Exchange Act Rule 13a-14(a).32
.1

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

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002, signed by Karen M. Spaun, Chief Financial Officer of the
    Corporation.     (1)
    
    Incorporated by reference to
    Form S-1
    Registration Statement
    (No. 33-2626206)
    of Meadowbrook Insurance Group, Inc. declared effective
    November 20, 1995.(2)
    
    Submitted in paper format under
    separate cover; see Form SE filing.(3)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 1998.(4)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending September 30, 2003.(5)
    
    Filed as Appendix to Meadowbrook
    Insurance Group, Inc. 2004 Proxy Statement.(6)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2004.(7)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2004.(8)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2005.(9)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on September 22, 2005.(10)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2005.(11)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on May 31, 2006.(12)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2006.(13)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2007.(14)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2007.(15)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on July 31, 2008.(16)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    as filed by ProCentury Corporation on July 31, 2008.(17)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on September 8, 2008.(18)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on January 7, 2009.(19)
    
    Incorporated by reference to
    ProCentury Corporations Registration Statement on
    Form S-1,
    as amended.(20)
    
    Incorporated by reference from
    Appendix A to Schedule 14A filed on April 8, 2009. 141




---



##### 



SIGNATURES
      
      
           Signature

Title

Date**Merton
    J. Segal

Chairman and Director

March 15, 2010-s- Robert S. CubbinRobert
    S. Cubbin

President, Chief Executive Officer and Director (Principal
    Executive Officer)

March 15, 2010**Joseph
    S. Dresner

Director

March 15, 2010**Hugh
    W. Greenberg

Director

March 15, 2010**Florine
    Mark

Director

March 15, 2010**Robert
    H. Naftaly

Director

March 15, 2010 142




---



##### 



Signature

Title

Date**David
    K. Page

Director

March 15, 2010**Robert
    W. Sturgis

Director

March 15, 2010**Bruce
    E. Thal

Director

March 15, 2010**Herbert
    Tyner

Director

March 15, 2010**Jeffrey
    A. Maffett

Director

March 15, 2010**Robert
    F. Fix

Director

March 15, 2010**By: -s- Robert S. CubbinRobert
    S. Cubbin,
    Attorney-in-fact  143