##### 









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31, 2006                                                 
|  
|or
|  
|o  |  | 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 Registered
|                                       |  |                                     
|Common 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


S-K 10-K 10-K. o


12b-2


| |                                                                                                | 
| | ---------------------------------------------------------------------------------------------- | 
| | Large accelerated
    filer      o     Accelerated
    filer þ     Non-accelerated
    filer o | 

12b-2 o þ




Documents Incorporated by Reference












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##### 



MEADOWBROOK INSURANCE GROUP, INC.


PART I




|        |         
|------- | --------
|Item 1. | Business

The Company








Significant Acquisitions




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | November 1, 2005, we acquired Insurance & Benefit
    Consultants (IBC) of Sarasota, Florida. IBC is a
    retail 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., and approximately ninety-four
    percent of the outstanding stock of Preferred Insurance Company,
    Ltd. (PICL) (collectively, TPA). TPA is
    a program-oriented risk management company that provides risk
    management services to self-insured clients, manages alternative
    risk management programs, and performs underwriting, policy
    issuance and loss control services for an unaffiliated insurance
    company. In January 2002, we purchased the remaining six percent
    minority interest of PICL.
|
| |  | In July 1998, we acquired Florida Preferred Administrators, Inc.
    (Florida Preferred), a third party administrator,
    and Southeastern Holding Corporation, a holding company for
    Ameritrust Insurance Corporation (Ameritrust), both
    of which are domiciled in Sarasota, Florida. In December 2002,
    Southeastern Holding Corporation was dissolved and Ameritrust
    became a wholly owned subsidiary of Star. Florida Preferred
    provides a broad range of risk management services for
    Ameritrust.                                                                                                                                                                       
|
| |  | In July 1997, we acquired Crest Financial Corporation
    (Crest), a California-based holding company, which
    formerly owned Williamsburg National Insurance Company
    (Williamsburg). Crest provides risk management
    services primarily to Williamsburg. On December 31, 1999,
    Williamsburg became a wholly owned subsidiary of Star.                                                                                                                                                                                                                                                                                                                                                  
|
| |  | In November 1996, we acquired Association Self Insurance
    Services, Inc. (ASI) of Montgomery, Alabama, which
    is a full service risk management operation focused on insurance
    pools and trust funds whose services include claims
    administration and handling, loss control and prevention, managed                                                                                                                                                                                                                                                                                                                                                                                     

2



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |   | care, and policy issuance. ASIs operations were
    consolidated with Meadowbrooks existing operations in
    Montgomery, Alabama.
|
| |  | In July 1990, we acquired Savers Property and Casualty Insurance
    Company (Savers).                                            

Employees


Insurance Operations


Overview








Accounting
and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts.


3



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##### 



MEADOWBROOK INSURANCE GROUP, INC.






| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | program and product design;                                                                                                                                                        
|
| |  | underwriting, risk selection, and policy issuance;                                                                                                                                 
|
| |  | sales, marketing, and public relations to members of groups;                                                                                                                       
|
| |  | administration of risk-bearing entities, such as mutual
    insurance companies, captives, rent-a-captives, public entity
    pools, and risk retention and risk purchasing groups;
|
| |  | claims handling and administration;                                                                                                                                                
|
| |  | loss prevention and control;                                                                                                                                                       
|
| |  | reinsurance placement;                                                                                                                                                             
|
| |  | risk analysis and identification;                                                                                                                                                  
|
| |  | actuarial and loss reserve analysis;                                                                                                                                               
|
| |  | information technology and processing;                                                                                                                                             
|
| |  | feasibility studies;                                                                                                                                                               
|
| |  | litigation management;                                                                                                                                                             
|
| |  | accounting and financial statement preparation;                                                                                                                                    
|
| |  | regulatory compliance; and                                                                                                                                                         
|
| |  | audit support.                                                                                                                                                                     



Company Segments




| |                  
| | -----------------
| | Agency Operations





4



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




| |                                     
| | ------------------------------------
| | Specialty Risk Management Operations







| |   |                          
| | - | -------------------------
| |  | Workers Compensation    
|
| |  | Commercial Multiple Peril
|
| |  | General Liability        









| |   |                               
| | - | ------------------------------
| |  | Employment Practices Liability
|
| |  | Professional Liability        









| |   |                    
| | - | -------------------
| |  | Inland Marine      
|
| |  | Product Liability  
|
| |  | Excess Reinsurance 
|
| |  | Commercial Property



| |                                                  
| | -------------------------------------------------
| | Description of Specialty Risk Management Programs



| |                  
| | -----------------
| | Managed Programs:







| |   |                                
| | - | -------------------------------
| |  | program design and development;
|
| |  | underwriting;                  

5



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




| |   |                                                 
| | - | ------------------------------------------------
| |  | reinsurance placement;                          
|
| |  | policy administration;                          
|
| |  | loss prevention and control;                    
|
| |  | claims administration and handling;             
|
| |  | litigation management;                          
|
| |  | information technology and processing;          
|
| |  | accounting functions; and                       
|
| |  | general management and oversight of the program.







| |                       
| | ----------------------
| | Risk-Sharing Programs:

Client Risk-Sharing. Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts.






6



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




CAPTIVE RISK-SHARING STRUCTURE










|    |                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We account for transactions with these risk-sharing clients as
    reinsurance under the provisions of SFAS No. 113
    Accounting and Reporting for Reinsurance of
    Short-Duration and Long-Duration Clients.









7



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




Related Party Disclosures,




excess-of






| |                        
| | -----------------------
| | Fully-Insured Programs:





| |                                                            
| | -----------------------------------------------------------
| | Description of Major Specialty Risk Management
    Services



Program and Product Design.


Underwriting Risk Selection and Policy Issuance.


8



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




Claims Administration and Handling.


Loss Prevention and Control.


Administration of Risk-Bearing Entities.


Reinsurance Placement. excess-of


Sales, Marketing, and Public Relations.






Insurance Operations


small-to


9



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##### 



MEADOWBROOK INSURANCE GROUP, INC.














10



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |         |         |  |   |         |         | 
|------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|Gross Written Premiums          |       | 2006 |         |         | 2005 |   |         | 2004    |  |   | 2003    |         |  | 2002 |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        
|Workers Compensation           |       | $    | 118,794 |         |      | $ | 133,732 |         |  | $ | 146,982 |         |  | $    | 141,456 |         |  | $ | 104,822 |        
|Commercial Multiple Peril       |       |      | 94,355  |         |      |   | 85,978  |         |  |   | 71,715  |         |  |      | 48,091  |         |  |   | 33,072  |        
|Inland Marine                   |       |      | 12,837  |         |      |   | 12,467  |         |  |   | 10,925  |         |  |      | 9,758   |         |  |   | 8,886   |        
|Other Liability                 |       |      | 20,001  |         |      |   | 16,167  |         |  |   | 15,248  |         |  |      | 10,473  |         |  |   | 10,442  |        
|Other Commercial Auto Liability |       |      | 59,308  |         |      |   | 59,144  |         |  |   | 48,070  |         |  |      | 26,902  |         |  |   | 9,894   |        
|Surety Bonds                    |       |      | 80      |         |      |   | 89      |         |  |   | 42      |         |  |      | 5       |         |  |   | 2,998   |        
|All Other Lines                 |       |      | 25,497  |         |      |   | 24,632  |         |  |   | 20,511  |         |  |      | 16,595  |         |  |   | 13,523  |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        
|                                | Total |      | $       | 330,872 |      |   | $       | 332,209 |  |   | $       | 313,493 |  |      | $       | 253,280 |  |   | $       | 183,637 | 
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        

|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |         |         |  |   |        |         | 
|------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ------- | ------- |  | - | ------ | ------- | 
|Net Written Premiums            |       | 2006 |         |         | 2005 |   |         | 2004    |  |   | 2003    |         |  | 2002 |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        
|Workers Compensation           |       | $    | 104,846 |         |      | $ | 117,287 |         |  | $ | 122,896 |         |  | $    | 111,572 |         |  | $ | 90,979 |        
|Commercial Multiple Peril       |       |      | 67,504  |         |      |   | 59,870  |         |  |   | 46,351  |         |  |      | 36,628  |         |  |   | 22,375 |        
|Inland Marine                   |       |      | 1,271   |         |      |   | 1,690   |         |  |   | 1,630   |         |  |      | 1,500   |         |  |   | 1,587  |        
|Other Liability                 |       |      | 12,384  |         |      |   | 8,004   |         |  |   | 7,568   |         |  |      | 6,278   |         |  |   | 4,296  |        
|Other Commercial Auto Liability |       |      | 52,950  |         |      |   | 49,122  |         |  |   | 37,762  |         |  |      | 19,599  |         |  |   | 9,125  |        
|Surety Bonds                    |       |      |        |         |      |   | 30      |         |  |   | 11      |         |  |      | 73      |         |  |   | 119    |        
|All Other Lines                 |       |      | 23,713  |         |      |   | 22,131  |         |  |   | 17,743  |         |  |      | 14,177  |         |  |   | 11,314 |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        
|                                | Total |      | $       | 262,668 |      |   | $       | 258,134 |  |   | $       | 233,961 |  |      | $       | 189,827 |  |   | $      | 139,795 | 
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        

|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        |         |  |   |        |         | 
|------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ------ | ------- |  | - | ------ | ------- | 
|Net Earned Premiums             |       | 2006 |         |         | 2005 |   |         | 2004    |  |   | 2003    |         |  | 2002 |       
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |       
|Workers Compensation           |       | $    | 108,085 |         |      | $ | 119,423 |         |  | $ | 117,914 |         |  | $    | 93,324 |         |  | $ | 80,795 |        
|Commercial Multiple Peril       |       |      | 63,138  |         |      |   | 54,829  |         |  |   | 43,701  |         |  |      | 26,075 |         |  |   | 23,462 |        
|Inland Marine                   |       |      | 1,528   |         |      |   | 1,727   |         |  |   | 1,628   |         |  |      | 1,556  |         |  |   | 1,716  |        
|Other Liability                 |       |      | 10,433  |         |      |   | 8,072   |         |  |   | 6,416   |         |  |      | 4,849  |         |  |   | 9,325  |        
|Other Commercial Auto Liability |       |      | 49,341  |         |      |   | 45,373  |         |  |   | 29,274  |         |  |      | 12,940 |         |  |   | 17,548 |        
|Surety Bonds                    |       |      | 6       |         |      |   | 5       |         |  |   | 38      |         |  |      | 73     |         |  |   | 97     |        
|All Other Lines                 |       |      | 22,389  |         |      |   | 20,530  |         |  |   | 15,522  |         |  |      | 12,388 |         |  |   | 12,440 |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |       
|                                | Total |      | $       | 254,920 |      |   | $       | 249,959 |  |   | $       | 214,493 |  |      | $      | 151,205 |  |   | $      | 145,383 | 
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |       

Reserves


Losses and Loss Adjustment Expenses and
Reinsurance Recoverables Summary of Significant Accounting Policies Liability for Losses and Loss
Adjustment Expenses Critical Accounting
Estimates Reserves


11



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##### 



MEADOWBROOK INSURANCE GROUP, INC.






Analysis of Loss and Loss Adjustment Expense
Development(1)


|                                                      |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|----------------------------------------------------- | ------------- | ------------------------ | ------- | ------- | ---- | - | ------- | ------- | -- | -------------- | -------- | ------- | -- | ---- | -------- | ------- | ---- | - | -------- | ------- | -- | - | ------- | ------- | -- | ---- | -------- | ------- | ---- | - | ------- | ------- | -- | - | ------- | ------- | - | - | ------- |  | 
|                                                      |               | Years Ended December 31, |        
|                                                      |               |                          |        
|                                                      |               | 1997                     |         |         | 1998 |   |         | 1999    |    |                | 2000     |         |    | 2001 |          |         | 2002 |   |          | 2003    |    |   | 2004    |         |    | 2005 |          |         | 2006 |  
|                                                      |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |  
|                                                      |               |                          |         |         |      |   |         |         |    | (In thousands) |          |         |    |      |          |         |      |   |         
|Reserves for losses and LAE at end of period          |               | $                        | 60,786  |         |      | $ | 84,254  |         |    | $              | 127,500  |         |    | $    | 172,862  |         |      | $ | 198,653  |         |    | $ | 193,116 |         |    | $    | 192,019  |         |      | $ | 226,996 |         |    | $ | 271,423 |         |   | $ | 302,655 | 
|Deconsolidation of subsidiary                         |               |                          |         |         |      |   | (147    | )       |    |                | (1,425   | )       |    |      | (3,744   | )       |      |   | (5,572   | )       |    |   | (2,973  | )       |    |      | (2,989   | )       |      |   |         |         |    |   |         |         |   |   |         | 
|Adjusted reserves for losses and LAE at end of period |               | $                        | 60,786  |         |      | $ | 84,107  |         |    | $              | 126,075  |         |    | $    | 169,118  |         |      | $ | 193,081  |         |    | $ | 190,143 |         |    | $    | 189,030  |         |      | $ | 226,996 |         |    | $ | 271,423 |         |   | $ | 302,655 | 
|Cumulative paid as of                                 |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         | 
|                                                      | 1 year        |                          |         | 31,368  |      |   |         | 39,195  |    |                |          | 54,928  |    |      |          | 70,952  |      |   |          | 77,038  |    |   |         | 78,023  |    |      |          | 71,427  |      |   |         | 79,056  |    |   |         | 83,271  |   |   |         |  | 
|                                                      | 2 years later |                          |         | 47,313  |      |   |         | 56,763  |    |                |          | 90,416  |    |      |          | 115,669 |      |   |          | 130,816 |    |   |         | 122,180 |    |      |          | 118,729 |      |   |         | 124,685 |    |   |         |         |   |   |         |  | 
|                                                      | 3 years later |                          |         | 56,848  |      |   |         | 76,776  |    |                |          | 116,001 |    |      |          | 146,548 |      |   |          | 157,663 |    |   |         | 151,720 |    |      |          | 145,279 |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 4 years later |                          |         | 65,517  |      |   |         | 85,447  |    |                |          | 132,995 |    |      |          | 160,673 |      |   |          | 176,172 |    |   |         | 167,288 |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 5 years later |                          |         | 68,138  |      |   |         | 93,009  |    |                |          | 139,939 |    |      |          | 171,992 |      |   |          | 186,847 |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 6 years later |                          |         | 72,063  |      |   |         | 96,739  |    |                |          | 146,997 |    |      |          | 179,010 |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 7 years later |                          |         | 74,002  |      |   |         | 101,433 |    |                |          | 150,514 |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 8 years later |                          |         | 76,421  |      |   |         | 104,225 |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 9 years later |                          |         | 78,363  |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|Reserves re-estimated as of end of year:              |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         | 
|                                                      | 1 year        |                          |         | 69,012  |      |   |         | 98,587  |    |                |          | 146,213 |    |      |          | 182,976 |      |   |          | 199,171 |    |   |         | 193,532 |    |      |          | 193,559 |      |   |         | 231,880 |    |   |         | 268,704 |   |   |         |  | 
|                                                      | 2 years later |                          |         | 73,591  |      |   |         | 106,487 |    |                |          | 144,453 |    |      |          | 186,191 |      |   |          | 205,017 |    |   |         | 196,448 |    |      |          | 203,394 |      |   |         | 227,462 |    |   |         |         |   |   |         |  | 
|                                                      | 3 years later |                          |         | 74,009  |      |   |         | 102,075 |    |                |          | 152,630 |    |      |          | 189,632 |      |   |          | 207,379 |    |   |         | 202,126 |    |      |          | 205,650 |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 4 years later |                          |         | 77,771  |      |   |         | 104,017 |    |                |          | 156,997 |    |      |          | 190,305 |      |   |          | 211,394 |    |   |         | 203,738 |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 5 years later |                          |         | 78,490  |      |   |         | 106,668 |    |                |          | 158,287 |    |      |          | 196,158 |      |   |          | 213,802 |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 6 years later |                          |         | 80,084  |      |   |         | 109,038 |    |                |          | 159,449 |    |      |          | 199,520 |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 7 years later |                          |         | 80,626  |      |   |         | 110,541 |    |                |          | 161,376 |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 8 years later |                          |         | 81,282  |      |   |         | 112,340 |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|                                                      | 9 years later |                          |         | 82,299  |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         |  | 
|Net cumulative deficiency:                            |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |   |         |         |    |   |         |         |   |   |         | 
|                                                      | Dollars       |                          | $       | (21,513 | )    |   | $       | (28,233 | )  |                | $        | (35,301 | )  |      | $        | (30,402 | )    |   | $        | (20,721 | )  |   | $       | (13,595 | )  |      | $        | (16,620 | )    |   | $       | (466    | )  |   | $       | 2,719   |   |   |         |  | 
|                                                      | Percentage    |                          |         | (35.4   | )%   |   |         | (33.6   | )% |                |          | (28.0   | )% |      |          | (18.0   | )%   |   |          | (10.7   | )% |   |         | (7.1    | )% |      |          | (8.8    | )%   |   |         | (0.2    | )% |   |         | 1.0     | % |   |         |  | 
|Net reserves                                          |               |                          | 60,786  |         |      |   | 84,107  |         |    |                | 126,075  |         |    |      | 169,118  |         |      |   | 193,081  |         |    |   | 190,143 |         |    |      | 189,030  |         |      |   | 226,996 |         |    |   | 271,423 |         |   |   | 302,655 | 
|Ceded reserves                                        |               |                          | 38,193  |         |      |   | 64,590  |         |    |                | 101,744  |         |    |      | 168,962  |         |      |   | 195,943  |         |    |   | 181,817 |         |    |      | 147,446  |         |      |   | 151,161 |         |    |   | 187,254 |         |   |   | 198,422 | 
|Gross reserves                                        |               |                          | 98,979  |         |      |   | 148,697 |         |    |                | 227,819  |         |    |      | 338,080  |         |      |   | 389,024  |         |    |   | 371,960 |         |    |      | 336,476  |         |      |   | 378,157 |         |    |   | 458,677 |         |   |   | 501,077 | 
|                                                      |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |  
|Net re-estimated                                      |               |                          | 82,299  |         |      |   | 112,340 |         |    |                | 161,376  |         |    |      | 199,520  |         |      |   | 213,802  |         |    |   | 203,738 |         |    |      | 205,650  |         |      |   | 227,462 |         |    |   | 268,704 |         |   |   |         | 
|Ceded re-estimated                                    |               |                          | 62,366  |         |      |   | 108,578 |         |    |                | 178,470  |         |    |      | 260,673  |         |      |   | 284,885  |         |    |   | 254,290 |         |    |      | 243,502  |         |      |   | 205,843 |         |    |   | 205,476 |         |   |   |         | 
|Gross re-estimated                                    |               |                          | 144,665 |         |      |   | 220,918 |         |    |                | 339,846  |         |    |      | 460,193  |         |      |   | 498,687  |         |    |   | 458,028 |         |    |      | 449,152  |         |      |   | 433,305 |         |    |   | 474,180 |         |   |   |         | 
|                                                      |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |  
|Gross cumulative deficiency                           |               | $                        | (45,686 | )       |      | $ | (72,221 | )       |    | $              | (112,027 | )       |    | $    | (122,113 | )       |      | $ | (109,663 | )       |    | $ | (86,068 | )       |    | $    | (112,676 | )       |      | $ | (55,148 | )       |    | $ | (15,503 | )       |   |   |         | 
|                                                      |               |                          |         |         |      |   |         |         |    |                |          |         |    |      |          |         |      |   |          |         |    |   |         |         |    |      |          |         |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In accordance with FIN 46(R), 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,
    effective January 1, 2004, we deconsolidated American
    Indemnity on a prospective basis in accordance with the
    provisions of FIN 46(R). Accordingly, we have adjusted the
    reserves and development within the above table. The adoption of
    FIN 46(R) and the deconsolidation of American Indemnity did
    not have a material impact on our consolidated balance sheet or
    consolidated statement of income.

12



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




|                                                    |  |      |          |   |      |   |          |  
|--------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                    |  | 2006 |          |   | 2005 |  
|                                                    |  |      |          |   |      |  
|GAAP reserves for losses and LAE                    |  | $    | 501,077  |   |      | $ | 458,677  |  
|Reinsurance recoverables for unpaid losses          |  |      | (198,422 | ) |      |   | (187,254 | )
|Allowances against reinsurance recoverables**       |  |      | (1,041   | ) |      |   | (1,080   | )
|Non-regulated foreign insurance subsidiary; PICL*** |  |      | (1,273   | ) |      |   | (1,230   | )
|                                                    |  |      |          |   |      |  
|Statutory reserves for losses and LAE               |  | $    | 300,341  |   |      | $ | 269,113  |  
|                                                    |  |      |          |   |      |  






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | For the year ended December 31, 2006, we reported an
    increase of $15.5 million in gross ultimate loss estimates
    for accident years 2005 and prior, or 3.4% of
    $458.7 million of gross losses and LAE reserves at
    January 1, 2006. We reported a $2.7 million decrease
    in net ultimate losses and LAE estimates for accident years 2005
    and prior, or 1.0% of $271.4 million. The change in gross
    ultimate loss estimates for accident years 2005 and prior is
    greater than the change in net ultimate loss estimates as a
    result of gross development on a small number of large
    workers compensation claims.



|   |                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------
|** | The GAAP allowance for reinsurance recoverables is reported as a
    Schedule F penalty or a non-admitted asset for statutory
    accounting.



|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*** | PICL offers clients captive or rent-a-captive options. It is not
    a domestic insurance company and, therefore, is not included in
    the combined statutory financial statements filed with the
    National Association of Insurance Commissioners and state
    regulators.



Investments


Investments Investments


Competition and Pricing






13



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##### 



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
    which 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;                                                                                      
|
| |  | 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.                                             





| |                                
| | -------------------------------
| | Holding Company Regulatory Acts





| |                                     
| | ------------------------------------
| | Various State and Federal Regulation



14



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##### 



MEADOWBROOK INSURANCE GROUP, INC.






| |                         
| | ------------------------
| | Reinsurance Intermediary





| |                               
| | ------------------------------
| | Licensing and Agency Contracts





Insurance Regulation Concerning Change or Acquisition of
Control








Membership in Insolvency Funds and Associations and Mandatory
Pools




15



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##### 



MEADOWBROOK INSURANCE GROUP, INC.






Restrictions on Dividends and Risk-Based Capital


Regulatory Matters and
Rating Issues Regulatory and Rating Issues


Effect of Federal Legislation




NAIC-IRIS Ratios


Regulatory and
Rating Issues


Available Information


www.meadowbrook.com 10-K, 10-Q, 8-K, 1-800-SEC-0330. www.sec.gov


16



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




Corporate Governance Listing Standards






|         |             
|-------- | ------------
|Item 1A. | Risk Factors



| |                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our 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, and
    statutory surplus, along with ability to pay dividends.





| |   |                                              
| | - | ---------------------------------------------
| |  | the amounts of claims settlements and awards;
|
| |  | legislative activity; and                    
|
| |  | changes in inflation and economic conditions.





| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | Our performance is dependent on the continued services and
    performance of our senior management and other key
    personnel.





17



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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




| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot guarantee that our reinsurers will pay in a
    timely fashion, if at all, and as a result, could adversely
    affect our business, results of operations and financial
    condition.





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | 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      
|
| |  | increase in medical costs beyond historic or expected annual
    inflationary levels.                                                                                                                              





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | We face competitive pressures in our business that could
    cause demand for our products to fall and adversely affect our
    profitability.



18



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##### 



MEADOWBROOK INSURANCE GROUP, INC.






| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 or other alternative market
    types of coverage; and                             
|
| |  | changing practices created by the internet, which has increased
    competition within the insurance business.                                                                          





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | 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;                                                                                                                                                                            
|
| |  | reserves for unearned premiums, losses and other
    purposes; and                                                                                                                                         
|
| |  | potential 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.





| |                                                                               
| | ------------------------------------------------------------------------------
| | We could be forced to sell investments to meet our
    liquidity requirements.



19



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##### 



MEADOWBROOK INSURANCE GROUP, INC.






| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because our investment portfolio consists primarily of
    fixed income securities, our investment income could suffer as a
    result of fluctuations in interest rates and market
    conditions.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to credit risk with respect to the
    obligations of our reinsurers and the payment of claims by our
    clients captive, rent-a-captive, large deductible
    programs, indemnification agreements, or on the portion of risk
    either ceded to the captives, or retained by our clients. The
    inability of our risk-sharing partners to meet their obligations
    could adversely affect our profitability.

excess-of






| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of the Michigan Business Corporation Act, our
    articles of incorporation and other corporate governing
    documents and the insurance laws of Michigan, Missouri,
    California, and Florida may discourage takeover attempts.





20



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##### 



MEADOWBROOK INSURANCE GROUP, INC.








| |                                                                                 
| | --------------------------------------------------------------------------------
| | If our financial strength ratings are reduced, we may be
    adversely impacted.







| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | Most states assess our Insurance Company Subsidiaries to
    provide funds for failing insurance companies and those
    assessments could be material.





| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | We rely on our information technology and
    telecommunications systems to conduct our business.



21



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##### 



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


Accounting for
Contingencies,


22



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##### 



MEADOWBROOK INSURANCE GROUP, INC.




Item 4.  Submission of Matters to a Vote of
Security Holders




23



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


PART II


Item 5.  Market for 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, P.C.
    Bloomfield Hills, MI |  | Transfer Agent & RegistrarLaSalle Bank National Association
    Corporate Trust Shareholder Services
    P.O. Box 3319
    South Hackensack, NJ 07606-1919Stock ListingNew York Stock Exchange
    Symbol: MIG |  | Annual MeetingThe Annual Meeting of
    Meadowbrook Shareholders
    will be held at:2:00 p.m.
    May 9, 2007Corporate Headquarters26255 American Drive
    Southfield, MI

Shareholder Relations and
Form 10-K


10-K,




| |                                                                  
| | -----------------------------------------------------------------
| | Karen M. Spaun, Senior Vice President and Chief Financial Officer
| | (248) 204-8178     karen.spaun@meadowbrook.com                   
|
| | Holly A. Moltane, Director of External Financial Reporting       
| | (248) 204-8590     holly.moltane@meadowbrook.com                 

Direct Investment Plan




1-800


Share Price and Dividend Information




|                  |  |      |       |  |     |   |      |           |  |  |   | 
|----------------- |  | ---- | ----- |  | --- | - | ---- | --------- |  |  | - | 
|December 31, 2006 |  | High |       |  | Low |   |      | Dividends | 
|                  |  |      |       |  |     |   |      |           | 
|First Quarter     |  | $    | 7.00  |  |     | $ | 5.63 |           |  |  |  | 
|Second Quarter    |  |      | 8.91  |  |     |   | 6.68 |           |  |  |  | 
|Third Quarter     |  |      | 11.83 |  |     |   | 8.32 |           |  |  |  | 
|Fourth Quarter    |  |      | 12.48 |  |     |   | 8.78 |           |  |  |  | 

|                  |  |      |      |  |     |   |      |           |  |  |   | 
|----------------- |  | ---- | ---- |  | --- | - | ---- | --------- |  |  | - | 
|December 31, 2005 |  | High |      |  | Low |   |      | Dividends | 
|                  |  |      |      |  |     |   |      |           | 
|First Quarter     |  | $    | 5.89 |  |     | $ | 4.98 |           |  |  |  | 
|Second Quarter    |  |      | 5.53 |  |     |   | 5.02 |           |  |  |  | 
|Third Quarter     |  |      | 5.72 |  |     |   | 5.05 |           |  |  |  | 
|Fourth Quarter    |  |      | 6.77 |  |     |   | 5.31 |           |  |  |  | 

24



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


Liquidity and Capital Resources




Shareholders of Record




Issuer Repurchases of Common Stock




25



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


Performance Graph






Comparison of Five Year Cumulative Total Return





|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        |  |  |  |  |        |  | 
|---------------------------------------- |  |  | ------------- | ------ |  | -------- |  |  | -------- |  |  | -------- |  | ------ | -------- |  |  | -------- | ------ |  |  |  |  | ------ |  |  |  |  | ------ |  | 
|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        | 
|                                         |  |  | Period Ending |        | 
|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        | 
|Index                                    |  |  | 12/31/01      |        |  | 12/31/02 |  |  | 12/31/03 |  |  | 12/31/04 |  |        | 12/31/05 |  |  | 12/31/06 |       
|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        | 
|Meadowbrook Insurance Group, Inc.        |  |  |               | 100.00 |  |          |  |  | 124.62   |  |  |          |  | 212.56 |          |  |  |          | 250.75 |  |  |  |  | 293.47 |  |  |  |  | 496.98 |  | 
|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        | 
|Russell 2000                             |  |  |               | 100.00 |  |          |  |  | 79.52    |  |  |          |  | 117.09 |          |  |  |          | 138.55 |  |  |  |  | 144.86 |  |  |  |  | 171.47 |  | 
|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        | 
|SNL $500M-$1B Insurance Asset-Size Index |  |  |               | 100.00 |  |          |  |  | 108.29   |  |  |          |  | 150.14 |          |  |  |          | 182.54 |  |  |  |  | 165.27 |  |  |  |  | 180.87 |  | 
|                                         |  |  |               |        |  |          |  |  |          |  |  |          |  |        |          |  |  |          |        |  |  |  |  |        | 



26



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


Item 6.  Selected Financial Data


MEADOWBROOK INSURANCE GROUP, INC.


SELECTED CONSOLIDATED FINANCIAL DATA


|                                                      |                        |                                  |         |                                     |      |   |         |      |   |   |         |       |   |      |         |       |   |   |         |       |  
|----------------------------------------------------- | ---------------------- | -------------------------------- | ------- | ----------------------------------- | ---- | - | ------- | ---- | - | - | ------- | ----- | - | ---- | ------- | ----- | - | - | ------- | ----- | -
|                                                      |                        | For the Years Ended December 31, |        
|                                                      |                        |                                  |        
|                                                      |                        | 2006                             |         |                                     | 2005 |   |         | 2004 |   |   | 2003    |       |   | 2002 |        
|                                                      |                        |                                  |         |                                     |      |   |         |      |   |   |         |       |   |      |        
|                                                      |                        |                                  |         | (In thousands, except per share and |      |   |        
|                                                      |                        |                                  |         | ratio data)                         |      |   |        
|Income Statement Data:                                |                        |                                  |         |                                     |      |   |         |      |   |   |         |       |   |      |         |       |   |   |         |      
|Gross written premiums                                |                        | $                                | 330,872 |                                     |      | $ | 332,209 |      |   | $ | 313,493 |       |   | $    | 253,280 |       |   | $ | 183,637 |      
|Net written premiums                                  |                        |                                  | 262,668 |                                     |      |   | 258,134 |      |   |   | 233,961 |       |   |      | 189,827 |       |   |   | 139,795 |      
|Net earned premiums                                   |                        |                                  | 254,920 |                                     |      |   | 249,959 |      |   |   | 214,493 |       |   |      | 151,205 |       |   |   | 145,383 |      
|Net commissions and fees                              |                        |                                  | 41,172  |                                     |      |   | 35,916  |      |   |   | 40,535  |       |   |      | 45,291  |       |   |   | 37,581  |      
|Net investment income                                 |                        |                                  | 22,075  |                                     |      |   | 17,975  |      |   |   | 14,911  |       |   |      | 13,484  |       |   |   | 13,958  |      
|Net realized gains                                    |                        |                                  | 69      |                                     |      |   | 167     |      |   |   | 339     |       |   |      | 823     |       |   |   | 666     |      
|Gain on sale of subsidiary                            |                        |                                  |        |                                     |      |   |        |      |   |   |        |       |   |      |        |       |   |   | 199     |      
|Total revenue                                         |                        |                                  | 318,236 |                                     |      |   | 304,017 |      |   |   | 270,278 |       |   |      | 210,803 |       |   |   | 197,787 |      
|Net losses and LAE(1)                                 |                        |                                  | 146,293 |                                     |      |   | 151,542 |      |   |   | 135,938 |       |   |      | 98,472  |       |   |   | 98,734  |      
|Policy acquisition and other underwriting expenses(1) |                        |                                  | 50,479  |                                     |      |   | 44,439  |      |   |   | 33,424  |       |   |      | 23,606  |       |   |   | 33,573  |      
|Other administrative expenses                         |                        |                                  | 29,414  |                                     |      |   | 27,183  |      |   |   | 25,964  |       |   |      | 23,232  |       |   |   | 22,612  |      
|Salaries and employee benefits                        |                        |                                  | 54,569  |                                     |      |   | 51,331  |      |   |   | 52,297  |       |   |      | 48,238  |       |   |   | 37,659  |      
|Interest expense                                      |                        |                                  | 5,976   |                                     |      |   | 3,856   |      |   |   | 2,281   |       |   |      | 977     |       |   |   | 3,021   |      
|Gain on debt reduction                                |                        |                                  |        |                                     |      |   |        |      |   |   |        |       |   |      |        |       |   |   | (359    | )    
|Income before income taxes and equity earnings        |                        |                                  | 31,505  |                                     |      |   | 25,666  |      |   |   | 20,374  |       |   |      | 16,278  |       |   |   | 2,547   |      
|Equity earnings of affiliates                         |                        |                                  | 128     |                                     |      |   | 1       |      |   |   | 39      |       |   |      | 3       |       |   |   |        |      
|Net income                                            |                        |                                  | 22,034  |                                     |      |   | 17,910  |      |   |   | 14,061  |       |   |      | 10,099  |       |   |   | 1,650   |      
|Earnings per share  Diluted                          |                        | $                                | 0.75    |                                     |      | $ | 0.60    |      |   | $ | 0.48    |       |   | $    | 0.35    |       |   | $ | 0.08    |      
|Balance Sheet Data:                                   |                        |                                  |         |                                     |      |   |         |      |   |   |         |       |   |      |         |       |   |   |         |      
|Total investments and cash and cash equivalents       |                        | $                                | 527,600 |                                     |      | $ | 460,233 |      |   | $ | 402,156 |       |   | $    | 324,235 |       |   | $ | 286,050 |      
|Total assets                                          |                        |                                  | 969,000 |                                     |      |   | 901,344 |      |   |   | 801,696 |       |   |      | 692,266 |       |   |   | 674,839 |      
|Loss and LAE reserves                                 |                        |                                  | 501,077 |                                     |      |   | 458,677 |      |   |   | 378,157 |       |   |      | 339,465 |       |   |   | 374,933 |      
|Debt                                                  |                        |                                  | 7,000   |                                     |      |   | 7,000   |      |   |   | 12,144  |       |   |      | 17,506  |       |   |   | 32,497  |      
|Debentures                                            |                        |                                  | 55,930  |                                     |      |   | 55,930  |      |   |   | 35,310  |       |   |      | 10,310  |       |   |   |        |      
|Shareholders equity                                  |                        |                                  | 201,693 |                                     |      |   | 177,365 |      |   |   | 167,510 |       |   |      | 155,113 |       |   |   | 147,395 |      
|Book value per share                                  |                        | $                                | 6.93    |                                     |      | $ | 6.19    |      |   | $ | 5.76    |       |   | $    | 5.34    |       |   | $ | 4.98    |      
|Other Data:                                           |                        |                                  |         |                                     |      |   |         |      |   |   |         |       |   |      |         |       |   |   |         |      
|GAAP ratios (insurance companies only):               |                        |                                  |         |                                     |      |   |         |      |   |   |         |       |   |      |         |       |   |   |         |      
|                                                      | Net loss and LAE ratio |                                  |         | 62.3                                | %    |   |         | 65.2 | % |   |         | 67.9  | % |      |         | 70.1  | % |   |         | 72.1  | %
|                                                      | Expense ratio          |                                  |         | 34.5                                | %    |   |         | 33.5 | % |   |         | 33.5  | % |      |         | 34.3  | % |   |         | 36.5  | %
|                                                      | Combined ratio         |                                  |         | 96.8                                | %    |   |         | 98.7 | % |   |         | 101.4 | % |      |         | 104.4 | % |   |         | 108.6 | %
|Statutory combined ratio                              |                        |                                  | 96.3    | %                                   |      |   | 97.9    | %    |   |   | 101.2   | %     |   |      | 101.9   | %     |   |   | 109.7   | %    






|    |                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Both the loss and loss adjustment expense ratios are calculated
    based upon unconsolidated insurance company operations. The
    following table sets forth the intercompany fees, which are
    eliminated upon consolidation.

27



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


Unconsolidated GAAP data  Ratio Calculation
Table:


|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |         |      |   |   |         |      |  
|----------------------------------------------------------------- | --------------------------- | -------------------------------- | ------- | ---- | ---- | - | ------- | ---- | - | - | ------- | ---- | - | ---- | ------- | ---- | - | - | ------- | ---- | -
|                                                                  |                             | For the Years Ended December 31, |        
|                                                                  |                             |                                  |        
|                                                                  |                             | 2006                             |         |      | 2005 |   |         | 2004 |   |   | 2003    |      |   | 2002 |        
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|Net earned premiums                                               |                             | $                                | 254,920 |      |      | $ | 249,959 |      |   | $ | 214,493 |      |   | $    | 151,205 |      |   | $ | 145,383 |     
|Consolidated net losses and LAE                                   |                             | $                                | 146,293 |      |      | $ | 151,542 |      |   | $ | 135,938 |      |   | $    | 98,472  |      |   | $ | 98,734  |     
|Intercompany claim fees                                           |                             |                                  | 12,553  |      |      |   | 11,523  |      |   |   | 9,691   |      |   |      | 7,514   |      |   |   | 6,154   |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|Unconsolidated net losses and LAE                                 |                             | $                                | 158,846 |      |      | $ | 163,065 |      |   | $ | 145,629 |      |   | $    | 105,986 |      |   | $ | 104,888 |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|                                                                  | GAAP net loss and LAE ratio |                                  |         | 62.3 | %    |   |         | 65.2 | % |   |         | 67.9 | % |      |         | 70.1 | % |   |         | 72.1 | %
|Consolidated policy acquisition and other underwriting expenses   |                             | $                                | 50,479  |      |      | $ | 44,439  |      |   | $ | 33,424  |      |   | $    | 23,606  |      |   | $ | 33,573  |     
|Intercompany administrative and other underwriting fees           |                             |                                  | 37,442  |      |      |   | 39,231  |      |   |   | 38,359  |      |   |      | 28,296  |      |   |   | 19,445  |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|Unconsolidated policy acquisition and other underwriting expenses |                             | $                                | 87,921  |      |      | $ | 83,670  |      |   | $ | 71,783  |      |   | $    | 51,902  |      |   | $ | 53,018  |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|                                                                  | GAAP expense ratio          |                                  |         | 34.5 | %    |   |         | 33.5 | % |   |         | 33.5 | % |      |         | 34.3 | % |   |         | 36.5 | %
|GAAP combined ratio                                               |                             |                                  | 96.8    | %    |      |   | 98.7    | %    |   |   | 101.4   | %    |   |      | 104.4   | %    |   |   | 108.6   | %   







28



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##### 



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; obtainment of certain rate increases in
current market conditions; investment rate of return; changes in
and adherence to insurance regulation; actions taken by
regulators, rating agencies or lenders; obtainment of certain
processing efficiencies; changing rates of inflation; general
economic conditions and other risks identified in our reports
and registration statements filed with the Securities and
Exchange Commission. We are not under any obligation to (and
expressly disclaim any such obligation to) update or alter our
forward-looking statements whether as a result of new
information, future events or otherwise.


Description of Business








29



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




| |                                     
| | ------------------------------------
| | Specialty Risk Management Operations



Accounting and Reporting for Reinsurance
of Short-Duration and Long-Duration Contracts.




| |                  
| | -----------------
| | Agency Operations



30



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|         |                         |                                  |                      |         |         |         |   |         |         |         |   |         |         |         | 
|-------- | ----------------------- | -------------------------------- | -------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|         |                         | For the Years Ended December 31, |                     
|         |                         |                                  |                     
|         |                         | 2006                             |                      |         | 2005    |         |   | 2004    |        
|         |                         |                                  |                      |         |         |         |   |         |        
|Revenues |                         |                                  |                      |         |         |         |   |         |         |         |   |        
|         | Net earned premiums     |                                  | $                    | 254,920 |         |         | $ | 249,959 |         |         | $ | 214,493 |        
|         | Management fees         |                                  |                      | 18,714  |         |         |   | 16,741  |         |         |   | 16,253  |        
|         | Claims fees(1)          |                                  |                      | 8,776   |         |         |   | 7,113   |         |         |   | 13,207  |        
|         | Loss control fees       |                                  |                      | 2,216   |         |         |   | 2,260   |         |         |   | 2,174   |        
|         | Reinsurance placement   |                                  |                      | 735     |         |         |   | 660     |         |         |   | 420     |        
|         | Investment income       |                                  |                      | 21,115  |         |         |   | 17,692  |         |         |   | 14,887  |        
|         | Net realized gains      |                                  |                      | 69      |         |         |   | 85      |         |         |   | 339     |        
|         |                         |                                  |                      |         |         |         |   |         |        
|         |                         | Specialty risk management        |                      |         | 306,545 |         |   |         | 294,510 |         |   |         | 261,773 |        
|         | Agency operations       |                                  |                      | 12,285  |         |         |   | 11,304  |         |         |   | 9,805   |        
|         | Miscellaneous income(2) |                                  |                      | 960     |         |         |   | 365     |         |         |   | 24      |        
|         | Intersegment revenue    |                                  |                      | (1,554  | )       |         |   | (2,162  | )       |         |   | (1,324  | )      
|         |                         |                                  |                      |         |         |         |   |         |        
|         |                         |                                  | Consolidated revenue |         | $       | 318,236 |   |         | $       | 304,017 |   |         | $       | 270,278 | 
|         |                         |                                  |                      |         |         |         |   |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During 2004, we accelerated the recognition of $3.5 million
    in deferred claim revenue, as a result of an earlier than
    anticipated termination of two limited duration administrative
    services and multi-state claims run-off contracts. These
    contracts had been terminated by the liquidator for the
    companies during the third quarter of 2004. Had the contract not
    been terminated, we would have received additional claims fee
    revenue for continued claims handling services.
|   
|(2) | The miscellaneous income included in the revenue relates to
    interest income within the holding company.                                                                                                                                                                                                                                                                                                                                                                                                     

Critical Accounting Estimates




| |        
| | -------
| | General





| |                                    
| | -----------------------------------
| | Losses and Loss Adjustment Expenses





31



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                            |  |      |         |  |      |   |         |       |  |   |         | 
|--------------------------- |  | ---- | ------- |  | ---- | - | ------- | ----- |  | - | ------- | 
|                            |  | Case |         |  | IBNR |   |         | Total | 
|                            |  |      |         |  |      |   |         |       | 
|Direct                      |  | $    | 181,884 |  |      | $ | 227,864 |       |  | $ | 409,748 | 
|Assumed-Directly Managed(1) |  |      | 17,777  |  |      |   | 41,264  |       |  |   | 59,041  | 
|Assumed-Residual Markets(2) |  |      | 9,242   |  |      |   | 16,855  |       |  |   | 26,097  | 
|Assumed-Retroceded          |  |      | 1,281   |  |      |   | 227     |       |  |   | 1,508   | 
|Assumed-Other               |  |      | 3,031   |  |      |   | 1,652   |       |  |   | 4,683   | 
|                            |  |      |         |  |      |   |         |       | 
|Gross                       |  |      | 213,215 |  |      |   | 287,862 |       |  |   | 501,077 | 
|Less Ceded                  |  |      | 90,038  |  |      |   | 108,384 |       |  |   | 198,422 | 
|                            |  |      |         |  |      |   |         |       | 
|Net                         |  | $    | 123,177 |  |      | $ | 179,478 |       |  | $ | 302,655 | 
|                            |  |      |         |  |      |   |         |       | 






|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 based upon an individual companys
    market share by state.                                      







|                                             |  |          |         |  |          |   |         |       |  |   |         | 
|-------------------------------------------- |  | -------- | ------- |  | -------- | - | ------- | ----- |  | - | ------- | 
|                                             |  | Net Case |         |  | Net IBNR |   |         | Total | 
|                                             |  |          |         |  |          |   |         |       | 
|Workers Compensation                        |  | $        | 60,882  |  |          | $ | 76,231  |       |  | $ | 137,113 | 
|Residual Markets                             |  |          | 9,242   |  |          |   | 16,856  |       |  |   | 26,098  | 
|Commercial Multiple Peril/ General Liability |  |          | 21,340  |  |          |   | 41,716  |       |  |   | 63,056  | 
|Commercial Automobile                        |  |          | 24,555  |  |          |   | 30,087  |       |  |   | 54,642  | 
|Other                                        |  |          | 7,158   |  |          |   | 14,588  |       |  |   | 21,746  | 
|                                             |  |          |         |  |          |   |         |       | 
|Total                                        |  | $        | 123,177 |  |          | $ | 179,478 |       |  | $ | 302,655 | 
|                                             |  |          |         |  |          |   |         |       | 



32



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued












| |                         
| | ------------------------
| | Reinsurance Recoverables





33



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Investments and Other Than Temporary Impairments of
    Securities and Unrealized Losses on Investments









| |                    
| | -------------------
| | Revenue Recognition







34



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued














| |                    
| | -------------------
| | Legal Contingencies

Accounting for
Contingencies,




| |         
| | --------
| | Goodwill

Goodwill and Other Intangible
Assets,


35



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




Results of Operations




| |                   
| | ------------------
| | Executive Overview





year-to


2006 compared to 2005:






36



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




2005 compared to 2004:






37



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




| |                                     
| | ------------------------------------
| | Specialty Risk Management Operations



|               |                                      |                                  |   |         |      |  |   |         |  |  |   |         | 
|-------------- | ------------------------------------ | -------------------------------- | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|               |                                      | For the Years Ended December 31, |  
|               |                                      |                                  |  
|               |                                      | 2006                             |   |         | 2005 |  |   | 2004    | 
|               |                                      |                                  |   |         |      |  |   |         | 
|Revenue:       |                                      |                                  |   |         |      |  |   |         |  |  |   |        
|               | Net earned premiums                  |                                  | $ | 254,920 |      |  | $ | 249,959 |  |  | $ | 214,493 | 
|               | Management fees                      |                                  |   | 18,714  |      |  |   | 16,741  |  |  |   | 16,253  | 
|               | Claims fees(1)                       |                                  |   | 8,776   |      |  |   | 7,113   |  |  |   | 13,207  | 
|               | Loss control fees                    |                                  |   | 2,216   |      |  |   | 2,260   |  |  |   | 2,174   | 
|               | Reinsurance placement                |                                  |   | 735     |      |  |   | 660     |  |  |   | 420     | 
|               | Investment income                    |                                  |   | 21,115  |      |  |   | 17,692  |  |  |   | 14,887  | 
|               | Net realized gains                   |                                  |   | 69      |      |  |   | 85      |  |  |   | 339     | 
|               |                                      |                                  |   |         |      |  |   |         | 
|               | Total revenue                        |                                  | $ | 306,545 |      |  | $ | 294,510 |  |  | $ | 261,773 | 
|               |                                      |                                  |   |         |      |  |   |         | 
|Pre-tax income |                                      |                                  |   |         |      |  |   |         |  |  |   |        
|               | Specialty risk management operations |                                  | $ | 37,950  |      |  | $ | 29,444  |  |  | $ | 23,205  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During 2004, we accelerated the recognition of $3.5 million
    in deferred claim revenue, as a result of an earlier than
    anticipated termination of two limited duration administrative
    services and multi-state claims run-off contracts. These
    contracts had been terminated by the liquidator for the
    companies during the third quarter of 2004. Had the contract not
    been terminated, we would have received additional claims fee
    revenue for continued claims handling services.

2006 compared to 2005:












38



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






Other
Items  Reserves




2005 compared to 2004:




39



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued














40



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








| |                  
| | -----------------
| | Agency Operations



|                  |  |                                  |        |  |      |   |        |      |  |   |       | 
|----------------- |  | -------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ----- | 
|                  |  | For the Years Ended December 31, |       
|                  |  |                                  |       
|                  |  | 2006                             |        |  | 2005 |   |        | 2004 | 
|                  |  |                                  |        |  |      |   |        |      | 
|Net commission    |  | $                                | 12,285 |  |      | $ | 11,304 |      |  | $ | 9,805 | 
|Pre-tax income(1) |  | $                                | 2,951  |  |      | $ | 3,343  |      |  | $ | 2,257 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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,
    2006, 2005, and 2004, the allocation of corporate overhead to
    the agency operations segment was $2.9 million,
    $3.1 million, and $3.5 million, respectively.

2006 compared to 2005:






2005 compared to 2004:






41



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




| |            
| | -----------
| | Other Items



| |         
| | --------
| | Reserves



|                                             |  |                 |         |  |                 |   |         |                   |  |   |         | 
|-------------------------------------------- |  | --------------- | ------- |  | --------------- | - | ------- | ----------------- |  | - | ------- | 
|                                             |  | Minimum Reserve |         |  | Maximum Reserve |   |         |                  
|Line of Business                             |  | Range           |         |  | Range           |   |         | Selected Reserves | 
|                                             |  |                 |         |  |                 |   |         |                   | 
|Workers Compensation(1)                     |  | $               | 154,145 |  |                 | $ | 170,385 |                   |  | $ | 163,211 | 
|Commercial Multiple Peril/ General Liability |  |                 | 57,250  |  |                 |   | 68,729  |                   |  |   | 63,056  | 
|Commercial Automobile                        |  |                 | 49,718  |  |                 |   | 56,049  |                   |  |   | 54,642  | 
|Other                                        |  |                 | 19,174  |  |                 |   | 22,940  |                   |  |   | 21,746  | 
|                                             |  |                 |         |  |                 |   |         |                   | 
|Total Net Reserves                           |  | $               | 280,287 |  |                 | $ | 318,103 |                   |  | $ | 302,655 | 
|                                             |  |                 |         |  |                 |   |         |                   | 






|    |                          
|--- | -------------------------
|(1) | Includes Residual Markets







42



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                                             |  |              |         |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        |  |  |   |         |  |  |   |         | 
|-------------------------------------------- |  | ------------ | ------- | --------------- | ------- | - | ----------- | ----- |  | - | ----------- | - |  | ------- | ------- |  | ----- | - | ------ | ---------- |  | ------------ | ------ |  |  | - | ------- |  |  | - | ------- | 
|                                             |  |              |         | Incurred Losses |         |   | Paid Losses |       |  |  
|                                             |  | Reserves at  |         |                 |         |   |             |       |  |   | Reserves at |  
|                                             |  | December 31, |         |                 | Current |   |             | Prior |  |   | Total       |   |  | Current |         |  | Prior |   |        |            |  | December 31, |       
|Line of Business                             |  | 2005         |         |                 | Year    |   |             | Years |  |   | Incurred    |   |  | Year    |         |  | Years |   |        | Total Paid |  |              | 2006   | 
|                                             |  |              |         |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        | 
|Workers Compensation                        |  | $            | 128,802 |                 |         | $ | 58,687      |       |  | $ | (920        | ) |  | $       | 57,767  |  |       | $ | 8,850  |            |  | $            | 40,606 |  |  | $ | 49,456  |  |  | $ | 137,113 | 
|Residual Markets                             |  |              | 24,440  |                 |         |   | 10,920      |       |  |   | (848        | ) |  |         | 10,072  |  |       |   | 4,248  |            |  |              | 4,166  |  |  |   | 8,414   |  |  |   | 26,098  | 
|Commercial Multiple Peril/ General Liability |  |              | 52,506  |                 |         |   | 24,985      |       |  |   | 284         |   |  |         | 25,269  |  |       |   | 2,545  |            |  |              | 12,174 |  |  |   | 14,719  |  |  |   | 63,056  | 
|Commercial Automobile                        |  |              | 44,382  |                 |         |   | 37,305      |       |  |   | 596         |   |  |         | 37,901  |  |       |   | 9,202  |            |  |              | 18,439 |  |  |   | 27,641  |  |  |   | 54,642  | 
|Other                                        |  |              | 21,293  |                 |         |   | 17,115      |       |  |   | (1,831      | ) |  |         | 15,284  |  |       |   | 6,945  |            |  |              | 7,886  |  |  |   | 14,831  |  |  |   | 21,746  | 
|                                             |  |              |         |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        | 
|Net Reserves                                 |  |              | 271,423 |                 |         | $ | 149,012     |       |  | $ | (2,719      | ) |  | $       | 146,293 |  |       | $ | 31,790 |            |  | $            | 83,271 |  |  | $ | 115,061 |  |  |   | 302,655 | 
|                                             |  |              |         |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        | 
|Reinsurance Recoverable                      |  |              | 187,254 |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        |  |  |   |         |  |  |   | 198,422 | 
|                                             |  |              |         |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        | 
|Consolidated                                 |  | $            | 458,677 |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        |  |  |   |         |  |  | $ | 501,077 | 
|                                             |  |              |         |                 |         |   |             |       |  |   |             |   |  |         |         |  |       |   |        |            |  |              |        | 

|                                             |  |              |         |              |              |   |             |               |  |  |      |   
|-------------------------------------------- |  | ------------ | ------- | ------------ | ------------ | - | ----------- | ------------- |  |  | ---- | --
|                                             |  |              |         | Re-Estimated |              |   | Development |              
|                                             |  |              |         | Reserves at  |              |   | as a        |              
|                                             |  | Reserves at  |         |              | December 31, |   |             | Percentage of | 
|                                             |  | December 31, |         |              | 2006 on      |   |             | Prior Year    | 
|Line of Business                             |  | 2005         |         |              | Prior Years  |   |             | Reserves      | 
|                                             |  |              |         |              |              |   |             |               | 
|Workers Compensation                        |  | $            | 128,802 |              |              | $ | 127,882     |               |  |  | (0.7 | )%
|Commercial Multiple Peril/ General Liability |  |              | 52,506  |              |              |   | 52,790      |               |  |  | 0.5  | % 
|Commercial Automobile                        |  |              | 44,382  |              |              |   | 44,978      |               |  |  | 1.3  | % 
|Other                                        |  |              | 21,293  |              |              |   | 19,462      |               |  |  | (8.6 | )%
|                                             |  |              |         |              |              |   |             |               | 
|Sub-total                                    |  |              | 246,983 |              |              |   | 245,112     |               |  |  | (0.8 | )%
|Residual Markets                             |  |              | 24,440  |              |              |   | 23,592      |               |  |  | (3.5 | )%
|                                             |  |              |         |              |              |   |             |               | 
|Total Net Reserves                           |  | $            | 271,423 |              |              | $ | 268,704     |               |  |  | (1.0 | )%
|                                             |  |              |         |              |              |   |             |               | 



| |                                                 
| | ------------------------------------------------
| | Workers Compensation Excluding Residual Markets





| |                                             
| | --------------------------------------------
| | Commercial Multiple Peril/ General Liability



43



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






| |                      
| | ---------------------
| | Commercial Automobile





| |      
| | -----
| | Other





| |                 
| | ----------------
| | Residual Markets



Salary and Employee Benefits






Variable Compensation.


44



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


Other Administrative Expenses








Interest Expense


Liquidity and
Capital Resources


Income Taxes




Liquidity and Capital Resources




45



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |        |   |        |        |        |  
|------------------------------------------------------ | -------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                       |                                                                | For the Years Ended December 31,                                                     |       
|                                                       |                                                                |                                                                                      |       
|                                                       |                                                                | 2006                                                                                 |        |        | 2005   |   |        | 2004   |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|Net income                                             |                                                                | $                                                                                    | 22,034 |        |        | $ | 17,910 |        |        | $ | 14,061 |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|Regulated Subsidiaries:                                |                                                                |                                                                                      |        |        |        |   |        |        |        |   |        |       
|                                                       |                                                                | Net income                                                                           |        | $      | 19,712 |   |        | $      | 13,508 |   |        | $      | 6,973  |  
|                                                       |                                                                | Adjustments to reconcile net income to net cash provided by
    operating activities |        |        | 3,033  |   |        |        | 3,003  |   |        |        | 6,866  |  
|                                                       |                                                                | Changes in operating assets and liabilities                                          |        |        | 46,915 |   |        |        | 59,784 |   |        |        | 48,270 |  
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|                                                       | Total adjustments                                              |                                                                                      |        | 49,948 |        |   |        | 62,787 |        |   |        | 55,136 |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|                                                       | Net cash provided by operating activities                      |                                                                                      | $      | 69,660 |        |   | $      | 76,295 |        |   | $      | 62,109 |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|Non-regulated Subsidiaries:                            |                                                                |                                                                                      |        |        |        |   |        |        |        |   |        |       
|                                                       |                                                                | Net income                                                                           |        | $      | 2,322  |   |        | $      | 4,402  |   |        | $      | 7,088  |  
|                                                       |                                                                | Depreciation                                                                         |        |        | 2,553  |   |        |        | 2,452  |   |        |        | 1,591  |  
|                                                       |                                                                | Amortization                                                                         |        |        | 590    |   |        |        | 198    |   |        |        | 376    |  
|                                                       |                                                                | Interest                                                                             |        |        | 5,976  |   |        |        | 3,856  |   |        |        | 2,535  |  
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|                                                       | Net income, excluding interest, depreciation, and amortization |                                                                                      |        | 11,441 |        |   |        | 10,908 |        |   |        | 11,590 |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|                                                       |                                                                | Adjustments to reconcile net income to net cash provided by
    operating activities |        |        | 3,161  |   |        |        | 4,444  |   |        |        | (1,063 | )
|                                                       |                                                                | Changes in operating assets and liabilities                                          |        |        | (852   | ) |        |        | (3,194 | ) |        |        | 2,540  |  
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|                                                       | Total adjustments                                              |                                                                                      |        | 2,309  |        |   |        | 1,250  |        |   |        | 1,477  |       
|                                                       | Depreciation                                                   |                                                                                      |        | (2,553 | )      |   |        | (2,452 | )      |   |        | (1,591 | )     
|                                                       | Amortization                                                   |                                                                                      |        | (590   | )      |   |        | (198   | )      |   |        | (376   | )     
|                                                       | Interest                                                       |                                                                                      |        | (5,976 | )      |   |        | (3,856 | )      |   |        | (2,535 | )     
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|                                                       | Net cash provided by operating activities                      |                                                                                      | $      | 4,631  |        |   | $      | 5,652  |        |   | $      | 8,565  |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|Consolidated total adjustments                         |                                                                |                                                                                      | 52,257 |        |        |   | 64,037 |        |        |   | 56,613 |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       
|Consolidated net cash provided by operating activities |                                                                | $                                                                                    | 74,291 |        |        | $ | 81,947 |        |        | $ | 70,674 |       
|                                                       |                                                                |                                                                                      |        |        |        |   |        |        |       



2006 compared to 2005:




46



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






2005 compared to 2004:








47



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


Other Items




| |               
| | --------------
| | Long-term Debt



|         |  |                                |  |          |      |  |          |  |      |                     |         |                               |  |           |        |  |  |   |        | 
|-------- |  | ------------------------------ |  | -------- | ---- |  | -------- |  | ---- | ------------------- | ------- | ----------------------------- |  | --------- | ------ |  |  | - | ------ | 
|         |  |                                |  |          |      |  |          |  |      | Interest            |         |                               | 
|Year of  |  |                                |  | Year     |      |  |          |  |      |                     | Rate at |                               |  | Principal |       
|Issuance |  | Description                    |  | Callable |      |  | Year Due |  |      | Interest Rate Terms |         | 12/31/06                      |  |           | Amount | 
|         |  |                                |  |          |      |  |          |  |      |                     |         |                               |  |           |        | 
|2003     |  | Junior subordinated debentures |  |          | 2008 |  |          |  | 2033 |                     |         | Three-month LIBOR, plus 4.05% |  |           | 9.42%  |  |  | $ | 10,310 | 
|2004     |  | Senior debentures              |  |          | 2009 |  |          |  | 2034 |                     |         | Three-month LIBOR, plus 4.00% |  |           | 9.37%  |  |  |   | 13,000 | 
|2004     |  | Senior debentures              |  |          | 2009 |  |          |  | 2034 |                     |         | Three-month LIBOR, plus 4.20% |  |           | 9.57%  |  |  |   | 12,000 | 
|2005     |  | Junior subordinated debentures |  |          | 2010 |  |          |  | 2035 |                     |         | Three-month LIBOR, plus 3.58% |  |           | 8.94%  |  |  |   | 20,620 | 
|         |  |                                |  |          |      |  |          |  |      |                     |         |                               |  |           |        | 
|         |  |                                |  |          |      |  |          |  |      |                     |         |                               |  |           | Total  |  |  | $ | 55,930 | 
|         |  |                                |  |          |      |  |          |  |      |                     |         |                               |  |           |        | 









| |                    
| | -------------------
| | Interest Rate Swaps

Accounting for
Derivative Instruments and Hedging Activities,






48



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








| |                         
| | ------------------------
| | Revolving Line of Credit













| |                     
| | --------------------
| | Investment Portfolio





| |                     
| | --------------------
| | Shareholders Equity



49



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


year-to








| |           
| | ----------
| | Regulatory

Liquidity and Capital Resources




50



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


Contractual Obligations and Commitments




|                                                      |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |        |  |  |   |         | 
|----------------------------------------------------- |  | ---------------------- | ------- | --------- | -------- | - | ------- | ----------- |  | -------- | ---------- |  | --------- | ---------- | ------ |  |  | - | ------- | 
|                                                      |  | Payments Due by Period |        
|                                                      |  |                        |        
|                                                      |  |                        |         | Less Than |          |   | One to  |             |  | Three to |            |  | More Than |           
|                                                      |  | Total                  |         |           | One Year |   |         | Three Years |  |          | Five Years |  |           | Five Years |       
|                                                      |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |       
|Non-regulated companies:                              |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |        |  |  |   |         | 
|Lines of credit(1)                                    |  | $                      | 7,000   |           |          | $ | 7,000   |             |  | $        |           |  |           | $          |       |  |  | $ |        | 
|Senior debentures, excluding interest(2)              |  |                        | 25,000  |           |          |   |        |             |  |          |           |  |           |            |       |  |  |   | 25,000  | 
|Junior subordinated debentures, excluding interest(2) |  |                        | 30,930  |           |          |   |        |             |  |          |           |  |           |            |       |  |  |   | 30,930  | 
|Operating lease obligations(3)                        |  |                        | 14,069  |           |          |   | 2,749   |             |  |          | 4,757      |  |           |            | 3,474  |  |  |   | 3,089   | 
|Regulated companies:                                  |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |        |  |  |   |         | 
|Losses and loss adjustment expenses(4)                |  |                        | 501,077 |           |          |   | 140,670 |             |  |          | 179,453    |  |           |            | 73,886 |  |  |   | 107,068 | 
|                                                      |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |       
|Total                                                 |  | $                      | 578,076 |           |          | $ | 150,419 |             |  | $        | 184,210    |  |           | $          | 77,360 |  |  | $ | 166,087 | 
|                                                      |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Relates to our revolving line of credit (excludes interest).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | Five year call feature associated with debentures, estimated
    seven year repayment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | Consists of rental obligations under real estate leases related
    to branch offices. In addition, includes amounts related to
    equipment leases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(4) | 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 $198.4 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 $33.7 million, $64.5 million,
    $34.9 million, and $65.3 million, respectively,
    resulting in net losses and loss adjustment expenses of
    $107.0 million, $115.0 million, $39.0 million,
    and $41.7 million, respectively.



Variable Compensation






51



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






Regulatory and Rating Issues












52



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                                                 |  |             |          |   |       |  |       |  
|------------------------------------------------ |  | ----------- | -------- | - | ----- |  | ----- | -
|Ratio                                            |  | Usual Range |          |   | Value | 
|                                                 |  |             |          |   |       | 
|Company: Williamsburg                            |  |             |          |   |       |  |       |  
|Gross Agents Balances to Policyholders Surplus |  |             | Under 40 | % |       |  | 44%(1 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Gross Agents Balances to Policyholders Surplus
    on Williamsburg was impacted by the Intercompany Reinsurance
    Agreement, which is described below under Intercompany
    Pooling Agreement. Williamsburgs assumed premium
    receivable increased $4.7 million as a result of
    intercompany pooling. Excluding the intercompany pooling, this
    ratio would have been within the usual range for 2006.



Reinsurance Considerations


excess-of




|                                  |  |                           |       |  |                         |   |        |           |  |  |     | 
|--------------------------------- |  | ------------------------- | ----- |  | ----------------------- | - | ------ | --------- |  |  | --- | 
|                                  |  | Reinsurance Premium Ceded |       |  | Reinsurance Recoverable |   |        | A.M. Best | 
|Reinsurer                         |  | December 31, 2006         |       |  | December 31, 2006       |   |        | Rating    | 
|                                  |  |                           |       |  |                         |   |        |           | 
|                                  |  | (In thousands)            |       |  | (In thousands)          |   |        |          
|Employers Reinsurance Corporation |  | $                         | 8,197 |  |                         | $ | 92,877 |           |  |  | A+  | 
|Munich American Reinsurance       |  |                           | 5,586 |  |                         |   | 12,062 |           |  |  | A   | 
|Aspen Insurance UK Ltd.           |  |                           | 5,313 |  |                         |   | 8,988  |           |  |  | A   | 
|Motors Insurance Company          |  |                           | 3,165 |  |                         |   | 14,566 |           |  |  | A-  | 
|General Reinsurance Company       |  |                           | 2,957 |  |                         |   | 10,805 |           |  |  | A++ | 

53



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                             |  |      |        |   |      |   |        |  
|---------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                             |  | 2006 |        |   | 2005 |  
|                             |  |      |        |   |      |  
|Gross Exposure               |  | $    | 14,815 |   |      | $ | 14,046 |  
|Collateral or other security |  |      | (3,623 | ) |      |   | (2,749 | )
|Allowance                    |  |      | (9,731 | ) |      |   | (9,662 | )
|                             |  |      |        |   |      |  
|Net Exposure                 |  | $    | 1,461  |   |      | $ | 1,635  |  
|                             |  |      |        |   |      |  

Intercompany Pooling Agreement




Convertible Note




Recent Accounting Pronouncements


Accounting
for Certain Hybrid Financial Instruments.


54



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




Accounting for Servicing of Financial Assets. Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities,


Accounting for Uncertainty in Income Taxes 
an interpretation of FASB Statement No. 109


Fair Value Measurements,


Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R).


The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB
Statement No. 115.


55



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


Related Party Transactions


 Related Party
Transaction


Item 7A.Qualitative and
Quantitative Disclosures About Market Risk










56



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                          |  |                   |         |   |                 |   |         |                 |  |   |         |  
|------------------------- |  | ----------------- | ------- | - | --------------- | - | ------- | --------------- |  | - | ------- | -
|                          |  | Rates Down 100bps |         |   | Rates Unchanged |   |         | Rates Up 100bps | 
|                          |  |                   |         |   |                 |   |         |                 | 
|Market Value              |  | $                 | 504,727 |   |                 | $ | 484,724 |                 |  | $ | 464,642 |  
|Yield to Maturity or Call |  |                   | 3.62    | % |                 |   | 4.62    | %               |  |   | 5.62    | %
|Effective Duration        |  |                   | 3.94    |   |                 |   | 4.09    |                 |  |   | 4.24    |  





Accounting for Derivative
Instruments and Hedging Activities,




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.


13a-15(e)


57



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






Managements Report on Internal Control over Financial
Reporting


13a-15(f) 15d-15(f)






Changes in Internal Control over Financial Reporting






|         |                  
|-------- | -----------------
|Item 9B. | Other Information



PART III




58



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






|         |                                                            
|-------- | -----------------------------------------------------------
|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, 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, Compensation Committee
Interlocks and Insider Participation




|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|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 Information |         |                         |                     
|                                                           |       |                                      |         |                         | Number of Securities |  
|                                                           |       |                                      |         | Remaining Available for |                     
|                                                           |       | Number of Securities to              |         |                         | Weighted-Average     |   |      | Future Issuance Under     | 
|                                                           |       | be Issued upon Exercise              |         |                         | Exercise Price of    |   |      | Equity Compensation       | 
|                                                           |       | of Outstanding Options,              |         |                         | Outstanding Options, |   |      | Plans (Excluding          | 
|                                                           |       | Warrants and Rights                  |         |                         | Warrants and Rights  |   |      | Securities in Column (a)) | 
|Plan Category                                              |       | (a)                                  |         |                         | (b)                  |   |      | (c)                       | 
|                                                           |       |                                      |         |                         |                      |   |      |                           | 
|Equity compensation plans approved by security holders     |       |                                      | 391,678 |                         |                      | $ | 7.38 |                           |  |  | 2,379,580 |          
|Equity compensation plans not approved by security holders |       |                                      |        |                         |                      |   |     |                           |  |  |          |          
|                                                           |       |                                      |         |                         |                      |   |      |                           | 
|                                                           | Total |                                      |         | 391,678                 |                      |   | $    | 7.38                      |  |  |           | 2,379,580 | 
|                                                           |       |                                      |         |                         |                      |   |      |                           | 



|         |                                                                             
|-------- | ----------------------------------------------------------------------------
|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


59



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued









MEADOWBROOK INSURANCE GROUP, INC.




PART IV




|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules



|   |  |                                                                                                                                                                                                            |  |      |         | 
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | 
|   |  |                                                                                                                                                                                                            |  | Page |        
|   |  |                                                                                                                                                                                                            |  |      |        
|1. |  | List of Financial Statements:                                                                                                                                                                              |  |      |         | 
|   |  | Report of Independent Registered Public
    Accounting Firm on Financial Statements                                                                                                                        |  |      | 61      | 
|   |  | Report of Independent Registered Public
    Accounting Firm on Internal Control over Financial Reporting                                                                                                   |  |      | 62      | 
|   |  | Report of Independent Registered Public
    Accounting Firm on Financial Statements                                                                                                                        |  |      | 63      | 
|   |  | Consolidated Balance Sheet 
    December 31, 2006 and 2005                                                                                                                                                |  |      | 64      | 
|   |  | Consolidated Statement of
    Income  For Years Ended December 31, 2006, 2005,
    and 2004                                                                                                               |  |      | 65      | 
|   |  | Consolidated Statement of Comprehensive
    Income  For Years Ended December 31, 2006, 2005,
    and 2004                                                                                                 |  |      | 66      | 
|   |  | Consolidated Statement of
    Shareholders Equity  For Years Ended
    December 31, 2006, 2005, and 2004                                                                                                 |  |      | 67      | 
|   |  | Consolidated Statement of Cash
    Flows  For Years Ended December 31, 2006, 2005,
    and 2004                                                                                                           |  |      | 68      | 
|   |  | Notes to Consolidated Financial
    Statements                                                                                                                                                             |  |      | 69-96   | 
|2. |  | Financial Statement Schedules                                                                                                                                                                              |  |      |         | 
|   |  | Schedule I Summary of Investments Other
    Than Investments in Related Parties                                                                                                                            |  |      | 97      | 
|   |  | Schedule II Condensed Financial
    Information of Registrant                                                                                                                                              |  |      | 98-101  | 
|   |  | Schedule III Supplementary Insurance
    Information                                                                                                                                                       |  |      | 102-104 | 
|   |  | Schedule IV Reinsurance                                                                                                                                                                                    |  |      | 105     | 
|   |  | Schedule V Valuation and qualifying
    accounts                                                                                                                                                           |  |      | 106     | 
|   |  | Schedule VI Supplemental Information
    Concerning Property and Casualty Insurance Operations                                                                                                             |  |      | 107     | 
|3. |  | 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 |  |      |         | 



60



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##### 






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





















61



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##### 






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Internal Control 
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission



















62



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM















63



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##### 






MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED BALANCE SHEET


|                                     |                                                                                                                                 |                    |                   |                                            |         |         |         |         |         |         |         | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ----------------- | ------------------------------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                     |                                                                                                                                 | December 31,       |                  
|                                     |                                                                                                                                 |                    |                  
|                                     |                                                                                                                                 | 2006               |                   |                                            | 2005    |        
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|                                     |                                                                                                                                 | (In thousands,     |                  
|                                     |                                                                                                                                 | except share data) |                  
|ASSETS                              
|Investments                          |                                                                                                                                 |                    |                   |                                            |         |         |         |        
|                                     | Debt securities available for sale, at fair value (amortized
    cost of $486,213 and $403,947 in 2006 and 2005, respectively)  |                    | $                 | 484,724                                    |         |         | $       | 402,195 |        
|                                     | Cash and cash equivalents                                                                                                       |                    |                   | 42,876                                     |         |         |         | 58,038  |        
|                                     | Accrued investment income                                                                                                       |                    |                   | 5,884                                      |         |         |         | 4,953   |        
|                                     | Premiums and agent balances receivable (net of allowance of
    $2,948 and $3,901 in 2006 and 2005, respectively)               |                    |                   | 85,578                                     |         |         |         | 84,807  |        
|                                     | Reinsurance recoverable on:                                                                                                     |                    |                   |                                            |         |         |         |         |        
|                                     |                                                                                                                                 | Paid losses        |                   |                                            | 4,257   |         |         |         | 15,327  |        
|                                     |                                                                                                                                 | Unpaid losses      |                   |                                            | 198,422 |         |         |         | 187,254 |        
|                                     | Prepaid reinsurance premiums                                                                                                    |                    |                   | 20,425                                     |         |         |         | 24,588  |        
|                                     | Deferred policy acquisition costs                                                                                               |                    |                   | 27,902                                     |         |         |         | 26,371  |        
|                                     | Deferred income taxes, net                                                                                                      |                    |                   | 15,732                                     |         |         |         | 16,630  |        
|                                     | Goodwill                                                                                                                        |                    |                   | 31,502                                     |         |         |         | 30,802  |        
|                                     | Other assets                                                                                                                    |                    |                   | 51,698                                     |         |         |         | 50,379  |        
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|                                     |                                                                                                                                 |                    | Total assets      |                                            | $       | 969,000 |         |         | $       | 901,344 |        
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY
|Liabilities                          |                                                                                                                                 |                    |                   |                                            |         |         |         |        
|                                     | Losses and loss adjustment expenses                                                                                             |                    | $                 | 501,077                                    |         |         | $       | 458,677 |        
|                                     | Unearned premiums                                                                                                               |                    |                   | 144,575                                    |         |         |         | 140,990 |        
|                                     | Debt                                                                                                                            |                    |                   | 7,000                                      |         |         |         | 7,000   |        
|                                     | Debentures                                                                                                                      |                    |                   | 55,930                                     |         |         |         | 55,930  |        
|                                     | Accounts payable and accrued expenses                                                                                           |                    |                   | 25,384                                     |         |         |         | 26,667  |        
|                                     | Reinsurance funds held and balances payable                                                                                     |                    |                   | 15,124                                     |         |         |         | 15,240  |        
|                                     | Payable to insurance companies                                                                                                  |                    |                   | 5,442                                      |         |         |         | 6,684   |        
|                                     | Other liabilities                                                                                                               |                    |                   | 12,775                                     |         |         |         | 12,791  |        
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|                                     |                                                                                                                                 |                    | Total liabilities |                                            |         | 767,307 |         |         |         | 723,979 |        
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|Shareholders Equity                 |                                                                                                                                 |                    |                   |                                            |         |         |         |        
|                                     | Common stock, $0.01 stated value; authorized
    50,000,000 shares; 29,107,818 and 28,672,009 shares
    issued and outstanding |                    |                   | 291                                        |         |         |         | 287     |        
|                                     | Additional paid-in capital                                                                                                      |                    |                   | 126,828                                    |         |         |         | 124,819 |        
|                                     | Retained earnings                                                                                                               |                    |                   | 76,282                                     |         |         |         | 54,248  |        
|                                     | Note receivable from officer                                                                                                    |                    |                   | (871                                       | )       |         |         | (859    | )      
|                                     | Accumulated other comprehensive loss                                                                                            |                    |                   | (837                                       | )       |         |         | (1,130  | )      
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|                                     |                                                                                                                                 |                    |                   | Total shareholders equity                 |         |         | 201,693 |         |         |         | 177,365 | 
|                                     |                                                                                                                                 |                    |                   |                                            |         |        
|                                     |                                                                                                                                 |                    |                   | Total liabilities and shareholders equity |         | $       | 969,000 |         |         | $       | 901,344 | 
|                                     |                                                                                                                                 |                    |                   |                                            |         |        



64



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF INCOME


|                                         |                                                    |                                                 |                |            |         |         |        |            |         |         |        |            |         |         | 
|---------------------------------------- | -------------------------------------------------- | ----------------------------------------------- | -------------- | ---------- | ------- | ------- | ------ | ---------- | ------- | ------- | ------ | ---------- | ------- | ------- | 
|                                         |                                                    | For the Years Ended December 31,                |               
|                                         |                                                    |                                                 |               
|                                         |                                                    | 2006                                            |                |            | 2005    |         |        | 2004       |        
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|                                         |                                                    | (In thousands, except share and per share data) |               
|Revenues                                 |                                                    |                                                 |                |            |         |         |        |            |         |         |        |           
|                                         | Premiums earned                                    |                                                 |                |            |         |         |        |            |         |         |        |            |        
|                                         |                                                    | Gross                                           |                | $          | 327,287 |         |        | $          | 325,522 |         |        | $          | 288,868 |        
|                                         |                                                    | Ceded                                           |                |            | (72,367 | )       |        |            | (75,563 | )       |        |            | (74,375 | )      
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|                                         | Net earned premiums                                |                                                 |                | 254,920    |         |         |        | 249,959    |         |         |        | 214,493    |        
|                                         | Net commissions and fees                           |                                                 |                | 41,172     |         |         |        | 35,916     |         |         |        | 40,535     |        
|                                         | Net investment income                              |                                                 |                | 22,075     |         |         |        | 17,975     |         |         |        | 14,911     |        
|                                         | Net realized gains                                 |                                                 |                | 69         |         |         |        | 167        |         |         |        | 339        |        
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|                                         |                                                    |                                                 | Total revenues |            |         | 318,236 |        |            |         | 304,017 |        |            |         | 270,278 | 
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|Expenses                                 |                                                    |                                                 |                |            |         |         |        |            |         |         |        |           
|                                         | Losses and loss adjustment expenses                |                                                 |                | 212,383    |         |         |        | 237,775    |         |         |        | 212,337    |        
|                                         | Reinsurance recoveries                             |                                                 |                | (66,090    | )       |         |        | (86,233    | )       |         |        | (76,399    | )      
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|                                         | Net losses and loss adjustment expenses            |                                                 |                | 146,293    |         |         |        | 151,542    |         |         |        | 135,938    |        
|                                         | Salaries and employee benefits                     |                                                 |                | 54,569     |         |         |        | 51,331     |         |         |        | 52,297     |        
|                                         | Policy acquisition and other underwriting expenses |                                                 |                | 50,479     |         |         |        | 44,439     |         |         |        | 33,424     |        
|                                         | Other administrative expenses                      |                                                 |                | 29,414     |         |         |        | 27,183     |         |         |        | 25,964     |        
|                                         | Interest expense                                   |                                                 |                | 5,976      |         |         |        | 3,856      |         |         |        | 2,281      |        
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|                                         |                                                    |                                                 | Total expenses |            |         | 286,731 |        |            |         | 278,351 |        |            |         | 249,904 | 
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|Income before taxes and equity earnings  |                                                    |                                                 | 31,505         |            |         |         | 25,666 |            |         |         | 20,374 |           
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|                                         | Federal and state income tax expense               |                                                 |                | 9,599      |         |         |        | 7,757      |         |         |        | 6,352      |        
|                                         | Equity earnings of affiliates                      |                                                 |                | 128        |         |         |        | 1          |         |         |        | 39         |        
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|Net income                               |                                                    | $                                               | 22,034         |            |         | $       | 17,910 |            |         | $       | 14,061 |           
|                                         |                                                    |                                                 |                |            |         |         |        |            |        
|Earnings Per Share                       |                                                    |                                                 |                |            |         |         |        |            |         |         |        |           
|                                         | Basic                                              |                                                 | $              | 0.76       |         |         | $      | 0.62       |         |         | $      | 0.48       |        
|                                         | Diluted                                            |                                                 | $              | 0.75       |         |         | $      | 0.60       |         |         | $      | 0.48       |        
|Weighted average number of common shares |                                                    |                                                 |                |            |         |         |        |            |         |         |        |           
|                                         | Basic                                              |                                                 |                | 28,963,228 |         |         |        | 28,961,229 |         |         |        | 29,048,069 |        
|                                         | Diluted                                            |                                                 |                | 29,566,141 |         |         |        | 29,653,067 |         |         |        | 29,420,508 |        



65



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


|                                  |                                         |                                                                                 |        |  |      |   |        |      |        |   |        |   |        |  
|--------------------------------- | --------------------------------------- | ------------------------------------------------------------------------------- | ------ |  | ---- | - | ------ | ---- | ------ | - | ------ | - | ------ | -
|                                  |                                         | For the Years Ended December 31,                                                |       
|                                  |                                         |                                                                                 |       
|                                  |                                         | 2006                                                                            |        |  | 2005 |   |        | 2004 |       
|                                  |                                         |                                                                                 |        |  |      |   |        |      |       
|                                  |                                         | (In thousands)                                                                  |       
|Net income                        |                                         | $                                                                               | 22,034 |  |      | $ | 17,910 |      |        | $ | 14,061 |  
|                                  | Other comprehensive income, net of tax: |                                                                                 |        |  |      |   |        |      |        |   |        |   |       
|                                  |                                         | Unrealized gains (losses) on securities                                         |        |  | 152  |   |        |      | (6,023 | ) |        |   | (2,364 | )
|                                  |                                         | Net deferred derivative gain  hedging activity                                 |        |  | 121  |   |        |      | 9      |   |        |   |       |  
|                                  |                                         | Deconsolidation of subsidiary                                                   |        |  |     |   |        |      |       |   |        |   | (45    | )
|                                  |                                         | Less: reclassification adjustment for gains (losses) included in
    net income |        |  | 20   |   |        |      | 56     |   |        |   | (222   | )
|                                  |                                         |                                                                                 |        |  |      |   |        |      |       
|Other comprehensive income (loss) |                                         |                                                                                 | 293    |  |      |   | (5,958 | )    |        |   | (2,631 | )
|                                  |                                         |                                                                                 |        |  |      |   |        |      |       
|Comprehensive income              |                                         | $                                                                               | 22,327 |  |      | $ | 11,952 |      |        | $ | 11,430 |  
|                                  |                                         |                                                                                 |        |  |      |   |        |      |       



66



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY


|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |               |  |        |       |   |               |   |        |   |  |   |         |  
|-------------------------------------------------------- |  | ----------------------------------------------------- | --- | ----------- | ------- | - | ------- | -------- | ---- | - | ------------ | ------------- |  | ------ | ----- | - | ------------- | - | ------ | - |  | - | ------- | -
|                                                         |  | For the Years Ended December 31, 2006, 2005, and 2004 |    
|                                                         |  |                                                       |    
|                                                         |  |                                                       |     | Accumulated |         |   |        
|                                                         |  |                                                       |     | Other       |         |   |        
|                                                         |  |                                                       |     | Additional  |         |   |         |          | Note |   |              | Comprehensive |  |        | Total |  
|                                                         |  | Common                                                |     |             | Paid-In |   |         | Retained |      |   | Receivable   |               |  | Income |       |   | Shareholders |  
|                                                         |  | Stock                                                 |     |             | Capital |   |         | Earnings |      |   | from Officer |               |  | (Loss) |       |   | Equity        |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |               |  |        |       |   |               |  
|                                                         |  | (In thousands)                                        |    
|Balances January 1, 2004                                 |  | $                                                     | 290 |             |         | $ | 125,181 |          |      | $ | 23,069       |               |  | $      | (886  | ) |               | $ | 7,459  |   |  | $ | 155,113 |  
|Unrealized depreciation on available for sale securities |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        |      |   |               |   | (2,586 | ) |  |   | (2,586  | )
|Deconsolidation of subsidiary                            |  |                                                       |    |             |         |   |        |          |      |   | 45           |               |  |        |      |   |               |   | (45    | ) |  |   |        |  
|Long term incentive plan; stock award                    |  |                                                       |    |             |         |   | 650     |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 650     |  
|Stock-based employee compensation                        |  |                                                       |    |             |         |   | 78      |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 78      |  
|Issuance of 54,500 shares of common stock                |  |                                                       |    |             |         |   | 185     |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 185     |  
|Retirement of 2,103 shares of common stock               |  |                                                       |    |             |         |   | (9      | )        |      |   |             |               |  |        |      |   |               |   |       |   |  |   | (9      | )
|Note receivable from an officer                          |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        | 18    |   |               |   |       |   |  |   | 18      |  
|Net income                                               |  |                                                       |    |             |         |   |        |          |      |   | 14,061       |               |  |        |      |   |               |   |       |   |  |   | 14,061  |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |               |  |        |       |   |               |  
|Balances December 31, 2004                               |  |                                                       | 290 |             |         |   | 126,085 |          |      |   | 37,175       |               |  |        | (868  | ) |               |   | 4,828  |   |  |   | 167,510 |  
|Unrealized depreciation on available for sale securities |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        |      |   |               |   | (5,967 | ) |  |   | (5,967  | )
|Net deferred derivative gain  hedging activity          |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        |      |   |               |   | 9      |   |  |   | 9       |  
|Long term incentive plan; stock award                    |  |                                                       |    |             |         |   | 923     |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 923     |  
|Stock-based employee compensation                        |  |                                                       |    |             |         |   | 41      |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 41      |  
|Issuance of 382,825 shares of common stock               |  |                                                       | 4   |             |         |   | 1,193   |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 1,197   |  
|Retirement of 785,648 shares of common stock             |  |                                                       | (7  | )           |         |   | (3,423  | )        |      |   | (837         | )             |  |        |      |   |               |   |       |   |  |   | (4,267  | )
|Note receivable from an officer                          |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        | 9     |   |               |   |       |   |  |   | 9       |  
|Net income                                               |  |                                                       |    |             |         |   |        |          |      |   | 17,910       |               |  |        |      |   |               |   |       |   |  |   | 17,910  |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |               |  |        |       |   |               |  
|Balances December 31, 2005                               |  |                                                       | 287 |             |         |   | 124,819 |          |      |   | 54,248       |               |  |        | (859  | ) |               |   | (1,130 | ) |  |   | 177,365 |  
|Unrealized appreciation on available for sale securities |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        |      |   |               |   | 172    |   |  |   | 172     |  
|Net deferred derivative gain  hedging activity          |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        |      |   |               |   | 121    |   |  |   | 121     |  
|Long term incentive plan; stock award                    |  |                                                       |    |             |         |   | 897     |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 897     |  
|Stock-based employee compensation                        |  |                                                       |    |             |         |   | 121     |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 121     |  
|Issuance of 791,038 shares of common stock               |  |                                                       | 8   |             |         |   | 4,153   |          |      |   |             |               |  |        |      |   |               |   |       |   |  |   | 4,161   |  
|Retirement of 355,229 shares of common stock             |  |                                                       | (4  | )           |         |   | (3,162  | )        |      |   |             |               |  |        |      |   |               |   |       |   |  |   | (3,166  | )
|Note receivable from an officer                          |  |                                                       |    |             |         |   |        |          |      |   |             |               |  |        | (12   | ) |               |   |       |   |  |   | (12     | )
|Net income                                               |  |                                                       |    |             |         |   |        |          |      |   | 22,034       |               |  |        |      |   |               |   |       |   |  |   | 22,034  |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |               |  |        |       |   |               |  
|Balances December 31, 2006                               |  | $                                                     | 291 |             |         | $ | 126,828 |          |      | $ | 76,282       |               |  | $      | (871  | ) |               | $ | (837   | ) |  | $ | 201,693 |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |               |  |        |       |   |               |  



67



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |          |          |   |        |          |         |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------- | ------ | -------- | ------- | - | ------ | -------- | -------- | - | ------ | -------- | ------- | -
|                                                                            |                                                                                       | For the Years Ended December 31,                                             |                                          
|                                                                            |                                                                                       |                                                                              |                                          
|                                                                            |                                                                                       | 2006                                                                         |                                           |        | 2005     |         |   | 2004   |         
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       | (In thousands)                                                               |                                          
|Cash Flows From Operating Activities                                        |                                                                                       |                                                                              |                                           |        |          |         |   |        |          |          |   |       
|                                                                            | Net income                                                                            |                                                                              | $                                         | 22,034 |          |         | $ | 17,910 |          |          | $ | 14,061 |         
|                                                                            | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                              |                                           |        |          |         |   |        |          |          |   |        |         
|                                                                            |                                                                                       | Amortization of other intangible assets                                      |                                           |        | 590      |         |   |        | 198      |          |   |        | 376      |        
|                                                                            |                                                                                       | Amortization of deferred debenture issuance costs                            |                                           |        | 236      |         |   |        | 175      |          |   |        | 110      |        
|                                                                            |                                                                                       | Depreciation of furniture, equipment, and building                           |                                           |        | 2,553    |         |   |        | 2,452    |          |   |        | 1,591    |        
|                                                                            |                                                                                       | Net accretion of discount and premiums on bonds                              |                                           |        | 2,646    |         |   |        | 2,395    |          |   |        | 1,856    |        
|                                                                            |                                                                                       | Gain (loss) on sale of investments                                           |                                           |        | 30       |         |   |        | 86       |          |   |        | (337     | )      
|                                                                            |                                                                                       | Gain on sale of fixed assets                                                 |                                           |        | (88      | )       |   |        | (170     | )        |   |        | (98      | )      
|                                                                            |                                                                                       | Stock-based employee compensation                                            |                                           |        | 121      |         |   |        | 41       |          |   |        | 78       |        
|                                                                            |                                                                                       | Incremental tax benefits from stock options exercised                        |                                           |        | (1,532   | )       |   |        |         |          |   |        |         |        
|                                                                            |                                                                                       | Long term incentive plan expense                                             |                                           |        | 897      |         |   |        | 923      |          |   |        | 650      |        
|                                                                            |                                                                                       | Deferred income tax expense                                                  |                                           |        | 741      |         |   |        | 1,347    |          |   |        | 1,577    |        
|                                                                            | Changes in operating assets and liabilities:                                          |                                                                              |                                           |        |          |         |   |        |          |          |   |        |         
|                                                                            | Decrease (increase) in:                                                               |                                                                              |                                           |        |          |         |   |        |          |          |   |        |         
|                                                                            |                                                                                       | Premiums and agent balances receivable                                       |                                           |        | (771     | )       |   |        | (713     | )        |   |        | (6,277   | )      
|                                                                            |                                                                                       | Reinsurance recoverable on paid and unpaid losses                            |                                           |        | (98      | )       |   |        | (33,513  | )        |   |        | (2,445   | )      
|                                                                            |                                                                                       | Prepaid reinsurance premiums                                                 |                                           |        | 4,162    |         |   |        | 1,488    |          |   |        | (5,157   | )      
|                                                                            |                                                                                       | Deferred policy acquisition costs                                            |                                           |        | (1,531   | )       |   |        | (1,204   | )        |   |        | (5,773   | )      
|                                                                            |                                                                                       | Other assets                                                                 |                                           |        | (1,044   | )       |   |        | 5,612    |          |   |        | 2,772    |        
|                                                                            | Increase (decrease) in:                                                               |                                                                              |                                           |        |          |         |   |        |          |          |   |        |         
|                                                                            |                                                                                       | Losses and loss adjustment expenses                                          |                                           |        | 42,400   |         |   |        | 80,521   |          |   |        | 38,692   |        
|                                                                            |                                                                                       | Unearned premiums                                                            |                                           |        | 3,585    |         |   |        | 6,688    |          |   |        | 24,625   |        
|                                                                            |                                                                                       | Payable to insurance companies                                               |                                           |        | (1,242   | )       |   |        | (307     | )        |   |        | (863     | )      
|                                                                            |                                                                                       | Reinsurance funds held and balances payable                                  |                                           |        | (116     | )       |   |        | (2,591   | )        |   |        | 3,659    |        
|                                                                            |                                                                                       | Other liabilities                                                            |                                           |        | 718      |         |   |        | 609      |          |   |        | 1,577    |        
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       |                                                                              | Total adjustments                         |        |          | 52,257  |   |        |          | 64,037   |   |        |          | 56,613  |  
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       | Net cash provided by operating activities                                    |                                           |        | 74,291   |         |   |        | 81,947   |          |   |        | 70,674   |        
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|Cash Flows From Investing Activities                                        |                                                                                       |                                                                              |                                           |        |          |         |   |        |          |          |   |       
|                                                                            |                                                                                       | Purchase of debt securities available for sale                               |                                           |        | (201,920 | )       |   |        | (203,789 | )        |   |        | (115,954 | )      
|                                                                            |                                                                                       | Proceeds from sale of equity securities available for sale                   |                                           |        |         |         |   |        | 8        |          |   |        | 2,409    |        
|                                                                            |                                                                                       | Proceeds from sales and maturities of debt securities available
    for sale |                                           |        | 116,978  |         |   |        | 122,317  |          |   |        | 47,362   |        
|                                                                            |                                                                                       | Capital expenditures                                                         |                                           |        | (4,850   | )       |   |        | (15,810  | )        |   |        | (5,244   | )      
|                                                                            |                                                                                       | Purchase of books of business                                                |                                           |        | (834     | )       |   |        | (3,557   | )        |   |        | (446     | )      
|                                                                            |                                                                                       | Proceeds from sale of assets                                                 |                                           |        |         |         |   |        | 633      |          |   |        | 2,837    |        
|                                                                            |                                                                                       | Deconsolidation of subsidiary                                                |                                           |        |         |         |   |        |         |          |   |        | (4,218   | )      
|                                                                            |                                                                                       | Loan receivable                                                              |                                           |        | (202     | )       |   |        | (5,905   | )        |   |        | 174      |        
|                                                                            |                                                                                       | Net cash deposited in funds held                                             |                                           |        | 529      |         |   |        | 501      |          |   |        | 2,315    |        
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       |                                                                              | Net cash used in investing activities     |        |          | (90,299 | ) |        |          | (105,602 | ) |        |          | (70,765 | )
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|Cash Flows From Financing Activities                                        |                                                                                       |                                                                              |                                           |        |          |         |   |        |          |          |   |       
|                                                                            |                                                                                       | Proceeds from lines of credit                                                |                                           |        | 14,078   |         |   |        | 14,307   |          |   |        | 10,489   |        
|                                                                            |                                                                                       | Payment of lines of credit                                                   |                                           |        | (14,078  | )       |   |        | (19,451  | )        |   |        | (15,851  | )      
|                                                                            |                                                                                       | Book overdrafts                                                              |                                           |        | 142      |         |   |        | 924      |          |   |        | 268      |        
|                                                                            |                                                                                       | Net proceeds from debentures                                                 |                                           |        |         |         |   |        | 19,400   |          |   |        | 24,250   |        
|                                                                            |                                                                                       | Stock options exercised                                                      |                                           |        | (538     | )       |   |        | 1,092    |          |   |        | 145      |        
|                                                                            |                                                                                       | Share repurchases of common stock                                            |                                           |        |         |         |   |        | (4,191   | )        |   |        |         |        
|                                                                            |                                                                                       | Incremental tax benefits from stock options exercised                        |                                           |        | 1,532    |         |   |        |         |          |   |        |         |        
|                                                                            |                                                                                       | Other financing activities                                                   |                                           |        | (290     | )       |   |        | (263     | )        |   |        | 18       |        
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       |                                                                              | Net cash provided by financing activities |        |          | 846     |   |        |          | 11,818   |   |        |          | 19,319  |  
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       | Net (decrease) increase in cash and cash equivalents                         |                                           |        | (15,162  | )       |   |        | (11,837  | )        |   |        | 19,228   |        
|                                                                            |                                                                                       | Cash and cash equivalents, beginning of year                                 |                                           |        | 58,038   |         |   |        | 69,875   |          |   |        | 50,647   |        
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|                                                                            |                                                                                       | Cash and cash equivalents, end of year                                       |                                           | $      | 42,876   |         |   | $      | 58,038   |          |   | $      | 69,875   |        
|                                                                            |                                                                                       |                                                                              |                                           |        |          |         |   |        |         
|Supplemental Disclosure of Cash Flow Information:                           |                                                                                       |                                                                              |                                           |        |          |         |   |        |          |          |   |       
|                                                                            |                                                                                       | Interest paid                                                                |                                           | $      | 5,616    |         |   | $      | 3,428    |          |   | $      | 1,902    |        
|                                                                            |                                                                                       | Net income taxes paid                                                        |                                           | $      | 9,159    |         |   | $      | 6,404    |          |   | $      | 5,578    |        
|Supplemental Disclosure of Non Cash Investing and Financing
    Activities: |                                                                                       |                                                                              |                                           |        |          |         |   |        |          |          |   |       
|                                                                            |                                                                                       | Tax benefit from stock options                                               |                                           | $      | 1,532    |         |   | $      | 105      |          |   | $      | 30       |        
|                                                                            |                                                                                       | Stock-based employee compensation                                            |                                           | $      | 121      |         |   | $      | 41       |          |   | $      | 78       |        
|                                                                            |                                                                                       | Accrued liability for purchase of building(1)                                |                                           | $      |         |         |   | $      |         |          |   | $      | 11,583   |        






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On January 19, 2005, the Company closed on the purchase of
    its new headquarters in Southfield, Michigan, with a cash
    settlement of $11.6 million paid to the developer.



68



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                           
|-- | ------------------------------------------
|1. | Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation








Business




Use of Estimates




69



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Cash and Cash Equivalents




Investments






Other Than Temporary Impairments of Securities and Unrealized
Losses on Investments




Losses and Loss Adjustment Expenses and Reinsurance
Recoverables






70



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










Revenue Recognition














71



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Deferred Policy Acquisition Costs




Participating Policyholder Dividends




Furniture and Equipment




Goodwill and Other Intangible Assets


Goodwill and Other
Intangible Assets,


Income Taxes






72



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Stock Options


Share-Based Payment, Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment of FASB
Statement No. 123.








73



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                     |                       |      |        |      |      |   |        |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ---- | ------ | ---- | ---- | - | ------ | ---- | 
|                                                                                                                                                     |                       | 2005 |        |      | 2004 |  
|                                                                                                                                                     |                       |      |        |      |      |  
|Net income, as reported                                                                                                                              |                       | $    | 17,910 |      |      | $ | 14,061 |     
|Add: Stock-based employee compensation expense included in
    reported income, net of related tax effects                                           |                       |      | 27     |      |      |   | 52     |     
|Deduct: Total stock-based employee compensation expense
    determined under fair-value-based methods for all awards, net of
    related tax effects |                       |      | (108   | )    |      |   | (220   | )   
|                                                                                                                                                     |                       |      |        |      |      |  
|Pro forma net income                                                                                                                                 |                       | $    | 17,829 |      |      | $ | 13,893 |     
|                                                                                                                                                     |                       |      |        |      |      |  
|Earnings per share:                                                                                                                                  |                       |      |        |      |      |   |        |     
|                                                                                                                                                     | Basic  as reported   |      | $      | 0.62 |      |   | $      | 0.48 | 
|                                                                                                                                                     | Basic  pro forma     |      | $      | 0.62 |      |   | $      | 0.48 | 
|                                                                                                                                                     | Diluted  as reported |      | $      | 0.60 |      |   | $      | 0.48 | 
|                                                                                                                                                     | Diluted  pro forma   |      | $      | 0.60 |      |   | $      | 0.47 | 



Long Term Incentive Plan




Deferred Compensation Plan




74



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Earnings Per Share






Comprehensive Income




Derivative Instruments


Accounting for Derivative Instruments and Hedging
Activities,




Recent Accounting Pronouncements


Accounting for Certain Hybrid Financial
Instruments.


75



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Accounting for Servicing of Financial Assets. Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities,


Accounting for Uncertainty in Income Taxes 
an interpretation of FASB Statement No. 109


Fair Value Measurements,


Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R).


The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB
Statement No. 115.


76



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |            
|-- | -----------
|2. | Investments



|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |        |   |   |         |         | 
|---------------------------------------------------------- | ---------------------------------------- | ----------------- | ------- | ------- | ---------- | - | ----- | ---------- |  | - | ---------- | ------ | - | - | ------- | ------- | 
|                                                           |                                          | December 31, 2006 |        
|                                                           |                                          |                   |        
|                                                           |                                          | Cost or           |         |         | Gross      |   |       | Gross      |  |   |           
|                                                           |                                          | Amortized         |         |         | Unrealized |   |       | Unrealized |  |   | Estimated  |       
|                                                           |                                          | Cost              |         |         | Gains      |   |       | Losses     |  |   | Fair Value |       
|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |       
|Debt Securities:                                           |                                          |                   |         |         |            |   |       |            |  |   |            |        |   |   |         |        
|Debt securities issued by the U.S. government and agencies |                                          | $                 | 52,991  |         |            | $ | 282   |            |  | $ | (521       | )      |   | $ | 52,752  |        
|Obligations of states and political subdivisions           |                                          |                   | 221,296 |         |            |   | 1,840 |            |  |   | (1,460     | )      |   |   | 221,676 |        
|Corporate securities                                       |                                          |                   | 102,365 |         |            |   | 1,368 |            |  |   | (1,515     | )      |   |   | 102,218 |        
|Mortgage and asset-backed securities                       |                                          |                   | 109,561 |         |            |   | 143   |            |  |   | (1,626     | )      |   |   | 108,078 |        
|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |       
|                                                           | Total Debt Securities available for sale |                   | $       | 486,213 |            |   | $     | 3,633      |  |   | $          | (5,122 | ) |   | $       | 484,724 | 
|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |       

|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |        |   |   |         |         | 
|---------------------------------------------------------- | ---------------------------------------- | ----------------- | ------- | ------- | ---------- | - | ----- | ---------- |  | - | ---------- | ------ | - | - | ------- | ------- | 
|                                                           |                                          | December 31, 2005 |        
|                                                           |                                          |                   |        
|                                                           |                                          | Cost or           |         |         | Gross      |   |       | Gross      |  |   |           
|                                                           |                                          | Amortized         |         |         | Unrealized |   |       | Unrealized |  |   | Estimated  |       
|                                                           |                                          | Cost              |         |         | Gains      |   |       | Losses     |  |   | Fair Value |       
|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |       
|Debt Securities:                                           |                                          |                   |         |         |            |   |       |            |  |   |            |        |   |   |         |        
|Debt securities issued by the U.S. government and agencies |                                          | $                 | 57,026  |         |            | $ | 498   |            |  | $ | (720       | )      |   | $ | 56,804  |        
|Obligations of states and political subdivisions           |                                          |                   | 143,093 |         |            |   | 1,054 |            |  |   | (1,493     | )      |   |   | 142,654 |        
|Corporate securities                                       |                                          |                   | 107,761 |         |            |   | 2,106 |            |  |   | (1,722     | )      |   |   | 108,145 |        
|Mortgage and asset-backed securities                       |                                          |                   | 96,067  |         |            |   | 127   |            |  |   | (1,602     | )      |   |   | 94,592  |        
|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |       
|                                                           | Total Debt Securities available for sale |                   | $       | 403,947 |            |   | $     | 3,785      |  |   | $          | (5,537 | ) |   | $       | 402,195 | 
|                                                           |                                          |                   |         |         |            |   |       |            |  |   |            |       



|                                                                                     |  |              |        |   |      |   |        |  
|------------------------------------------------------------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                                                     |  | December 31, |       
|                                                                                     |  |              |       
|                                                                                     |  | 2006         |        |   | 2005 |  
|                                                                                     |  |              |        |   |      |  
|Unrealized appreciation                                                              |  | $            | 3,633  |   |      | $ | 3,785  |  
|Unrealized depreciation                                                              |  |              | (5,122 | ) |      |   | (5,537 | )
|                                                                                     |  |              |        |   |      |  
|Net unrealized depreciation                                                          |  |              | (1,489 | ) |      |   | (1,752 | )
|Deferred federal income tax benefit                                                  |  |              | 521    |   |      |   | 613    |  
|                                                                                     |  |              |        |   |      |  
|Net unrealized depreciation on investments, net of deferred
    federal income taxes |  | $            | (968   | ) |      | $ | (1,139 | )
|                                                                                     |  |              |        |   |      |  





77



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                       |  |                    |         |  |            |   |         | 
|-------------------------------------- |  | ------------------ | ------- |  | ---------- | - | ------- | 
|                                       |  | Available for Sale |        
|                                       |  |                    |        
|                                       |  | Amortized          |         |  | Estimated  |  
|                                       |  | Cost               |         |  | Fair Value |  
|                                       |  |                    |         |  |            |  
|Due in one year or less                |  | $                  | 36,777  |  |            | $ | 36,714  | 
|Due after one year through five years  |  |                    | 163,719 |  |            |   | 163,256 | 
|Due after five years through ten years |  |                    | 142,668 |  |            |   | 142,750 | 
|Due after ten years                    |  |                    | 33,488  |  |            |   | 33,926  | 
|Mortgage-backed securities             |  |                    | 109,561 |  |            |   | 108,078 | 
|                                       |  |                    |         |  |            |  
|                                       |  | $                  | 486,213 |  |            | $ | 484,724 | 
|                                       |  |                    |         |  |            |  



|                                   |  |      |        |  |      |   |        |      |  |   |        | 
|---------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                   |  | 2006 |        |  | 2005 |   |        | 2004 | 
|                                   |  |      |        |  |      |   |        |      | 
|Net Investment Income Earned From: |  |      |        |  |      |   |        |      |  |   |        | 
|Debt securities                    |  | $    | 19,376 |  |      | $ | 16,080 |      |  | $ | 13,559 | 
|Equity securities                  |  |      |       |  |      |   | 37     |      |  |   | 149    | 
|Cash and cash equivalents          |  |      | 3,279  |  |      |   | 2,291  |      |  |   | 1,657  | 
|                                   |  |      |        |  |      |   |        |      | 
|Total gross investment income      |  |      | 22,655 |  |      |   | 18,408 |      |  |   | 15,365 | 
|Less investment expenses           |  |      | 580    |  |      |   | 433    |      |  |   | 454    | 
|                                   |  |      |        |  |      |   |        |      | 
|Net investment income              |  | $    | 22,075 |  |      | $ | 17,975 |      |  | $ | 14,911 | 
|                                   |  |      |        |  |      |   |        |      | 



Other Than Temporary Impairments of Securities and Unrealized
Losses on Investments




78



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |               |  |            |        |        |            |   |         |         |  |   |        |        |  
|------------------------------------------------------ | ------ | ------------------- | ------ | ------ | ---------------------- | - | ------------- | ---------- | - | - | ---------- | ------------- |  | ---------- | ------ | ------ | ---------- | - | ------- | ------- |  | - | ------ | ------ | -
|                                                       |        | December 31, 2006   |       
|                                                       |        |                     |       
|                                                       |        | Less than 12 months |        |        | Greater than 12 months |   |               | Total      |  
|                                                       |        |                     |        |        |                        |   |               |            |  
|                                                       |        | Fair Value of       |        |        |                        |   | Fair Value of |            |   |   |            | Fair Value of |  |            |       
|                                                       |        | Investments         |        |        |                        |   | Investments   |            |   |   |            | Investments   |  |            |       
|                                                       |        | with                |        |        | Gross                  |   |               | with       |   |   | Gross      |               |  | with       |        |        | Gross      |  
|                                                       |        | Unrealized          |        |        | Unrealized             |   |               | Unrealized |   |   | Unrealized |               |  | Unrealized |        |        | Unrealized |  
|                                                       |        | Losses              |        |        | Losses                 |   |               | Losses     |   |   | Losses     |               |  | Losses     |        |        | Losses     |  
|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |               |  |            |        |        |            |  
|Debt Securities:                                       |        |                     |        |        |                        |   |               |            |   |   |            |               |  |            |        |        |            |   |         |         |  |   |        |       
|Debt securities issued by U.S. government and agencies |        | $                   | 14,586 |        |                        | $ | (61           | )          |   | $ | 27,076     |               |  | $          | (460   | )      |            | $ | 41,662  |         |  | $ | (521   | )     
|Obligations of states and political subdivisions       |        |                     | 45,726 |        |                        |   | (210          | )          |   |   | 68,958     |               |  |            | (1,250 | )      |            |   | 114,684 |         |  |   | (1,460 | )     
|Corporate securities                                   |        |                     | 7,646  |        |                        |   | (61           | )          |   |   | 55,520     |               |  |            | (1,454 | )      |            |   | 63,166  |         |  |   | (1,515 | )     
|Mortgage and asset backed securities                   |        |                     | 20,462 |        |                        |   | (91           | )          |   |   | 67,495     |               |  |            | (1,535 | )      |            |   | 87,957  |         |  |   | (1,626 | )     
|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |               |  |            |        |        |            |  
|                                                       | Totals |                     | $      | 88,420 |                        |   | $             | (423       | ) |   | $          | 219,049       |  |            | $      | (4,699 | )          |   | $       | 307,469 |  |   | $      | (5,122 | )
|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |               |  |            |        |        |            |  

|                                                       |        |                     |        |         |                        |   |               |            |   |   |            |               |  |            |      |        |            |   |        |         |  |   |        |        |  
|------------------------------------------------------ | ------ | ------------------- | ------ | ------- | ---------------------- | - | ------------- | ---------- | - | - | ---------- | ------------- |  | ---------- | ---- | ------ | ---------- | - | ------ | ------- |  | - | ------ | ------ | -
|                                                       |        | December 31, 2005   |       
|                                                       |        |                     |       
|                                                       |        | Less than 12 months |        |         | Greater than 12 months |   |               | Total      |  
|                                                       |        |                     |        |         |                        |   |               |            |  
|                                                       |        | Fair Value of       |        |         |                        |   | Fair Value of |            |   |   |            | Fair Value of |  |            |     
|                                                       |        | Investments         |        |         |                        |   | Investments   |            |   |   |            | Investments   |  |            |     
|                                                       |        | with                |        |         | Gross                  |   |               | with       |   |   | Gross      |               |  | with       |      |        | Gross      |  
|                                                       |        | Unrealized          |        |         | Unrealized             |   |               | Unrealized |   |   | Unrealized |               |  | Unrealized |      |        | Unrealized |  
|                                                       |        | Losses              |        |         | Losses                 |   |               | Losses     |   |   | Losses     |               |  | Losses     |      |        | Losses     |  
|                                                       |        |                     |        |         |                        |   |               |            |   |   |            |               |  |            |      |        |            |  
|Debt Securities:                                       |        |                     |        |         |                        |   |               |            |   |   |            |               |  |            |      |        |            |   |        |         |  |   |        |       
|Debt securities issued by U.S. government and agencies |        | $                   | 10,627 |         |                        | $ | (155          | )          |   | $ | 24,328     |               |  | $          | (565 | )      |            | $ | 34,955 |         |  | $ | (720   | )     
|Obligations of states and political subdivisions       |        |                     | 64,559 |         |                        |   | (877          | )          |   |   | 24,818     |               |  |            | (616 | )      |            |   | 89,377 |         |  |   | (1,493 | )     
|Corporate securities                                   |        |                     | 33,820 |         |                        |   | (769          | )          |   |   | 29,586     |               |  |            | (953 | )      |            |   | 63,406 |         |  |   | (1,722 | )     
|Mortgage and asset backed securities                   |        |                     | 58,048 |         |                        |   | (953          | )          |   |   | 20,667     |               |  |            | (649 | )      |            |   | 78,715 |         |  |   | (1,602 | )     
|                                                       |        |                     |        |         |                        |   |               |            |   |   |            |               |  |            |      |        |            |  
|                                                       | Totals |                     | $      | 167,053 |                        |   | $             | (2,754     | ) |   | $          | 99,399        |  |            | $    | (2,783 | )          |   | $      | 266,452 |  |   | $      | (5,537 | )
|                                                       |        |                     |        |         |                        |   |               |            |   |   |            |               |  |            |      |        |            |  



|   |                                                  
|-- | -------------------------------------------------
|3. | Liability for Losses and Loss Adjustment Expenses



79



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |                               |                                  |         |         |      |   |         |         |  |   |         |         | 
|----------------------------------------------- | ----------------------------- | -------------------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                |                               | For the Years Ended December 31, |        
|                                                |                               |                                  |        
|                                                |                               | 2006                             |         |         | 2005 |   |         | 2004    | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Balance, beginning of year                      |                               | $                                | 458,677 |         |      | $ | 378,157 |         |  | $ | 339,465 |        
|Adjustment for deconsolidation of subsidiary(1) |                               |                                  |        |         |      |   |        |         |  |   | (2,989  | )      
|Less reinsurance recoverables                   |                               |                                  | 187,254 |         |      |   | 151,161 |         |  |   | 147,446 |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Net balance, beginning of year                  |                               |                                  | 271,423 |         |      |   | 226,996 |         |  |   | 189,030 |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Incurred related to:                            |                               |                                  |         |         |      |   |         |         |  |   |         |        
|                                                | Current year                  |                                  |         | 149,012 |      |   |         | 146,658 |  |   |         | 131,409 | 
|                                                | Prior years                   |                                  |         | (2,719  | )    |   |         | 4,884   |  |   |         | 4,529   | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Total incurred                                  |                               |                                  | 146,293 |         |      |   | 151,542 |         |  |   | 135,938 |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Paid related to:                                |                               |                                  |         |         |      |   |         |         |  |   |         |        
|                                                | Current year                  |                                  |         | 31,790  |      |   |         | 28,059  |  |   |         | 26,534  | 
|                                                | Prior years                   |                                  |         | 83,271  |      |   |         | 79,056  |  |   |         | 71,438  | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Total paid                                      |                               |                                  | 115,061 |         |      |   | 107,115 |         |  |   | 97,972  |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Net balance, end of year                        |                               |                                  | 302,655 |         |      |   | 271,423 |         |  |   | 226,996 |        
|                                                | Plus reinsurance recoverables |                                  |         | 198,422 |      |   |         | 187,254 |  |   |         | 151,161 | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Balance, end of year                            |                               | $                                | 501,077 |         |      | $ | 458,677 |         |  | $ | 378,157 |        
|                                                |                               |                                  |         |         |      |   |         |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In accordance with FIN 46(R), the Company performed an
    evaluation of its business relationships and determined that its
    wholly owned subsidiary, American Indemnity, did not meet the
    tests for consolidation, as neither the Company, nor its
    subsidiary Star, are the primary beneficiaries of American
    Indemnity. Therefore, effective January 1, 2004, the
    Company deconsolidated American Indemnity on a prospective basis
    in accordance with the provisions of FIN 46(R). The
    adoption of FIN 46(R) and the deconsolidation of American
    Indemnity did not have a material impact on the Companys
    consolidated balance sheet or consolidated statement of income.







80



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |            
|-- | -----------
|4. | Reinsurance

excess-of Accounting and Reporting for Reinsurance for
Short-Duration and Long-Duration Contracts.








81



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |      |        |   |      |   |        |  
|---------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                             |  | 2006 |        |   | 2005 |  
|                             |  |      |        |   |      |  
|Gross Exposure               |  | $    | 14,815 |   |      | $ | 14,046 |  
|Collateral or other security |  |      | (3,623 | ) |      |   | (2,749 | )
|Allowance                    |  |      | (9,731 | ) |      |   | (9,662 | )
|                             |  |      |        |   |      |  
|Net Exposure                 |  | $    | 1,461  |   |      | $ | 1,635  |  
|                             |  |      |        |   |      |  

excess-of excess-of excess-of








82



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


















|           |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |   |         |   |  |   |         |  
|---------- |  | ------- | ------- | - | ------ | - | ------- | ------- |  | - | ------- | - |  | ------- | ------- | - | ------ | - | ------- | - |  | - | ------- | -
|           |  | 2006    |         |   | 2005   |   |         | 2004    | 
|           |  |         |         |   |        |   |         |         | 
|           |  | Written |         |   | Earned |   |         | Written |  |   | Earned  |   |  | Written |         |   | Earned |  
|           |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |  
|Direct     |  | $       | 246,985 |   |        | $ | 251,288 |         |  | $ | 264,511 |   |  | $       | 264,381 |   |        | $ | 261,653 |   |  | $ | 247,169 |  
|Assumed(1) |  |         | 83,887  |   |        |   | 75,999  |         |  |   | 67,698  |   |  |         | 61,141  |   |        |   | 51,840  |   |  |   | 41,699  |  
|Ceded      |  |         | (68,204 | ) |        |   | (72,367 | )       |  |   | (74,075 | ) |  |         | (75,563 | ) |        |   | (79,532 | ) |  |   | (74,375 | )
|           |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |  
|Net        |  | $       | 262,668 |   |        | $ | 254,920 |         |  | $ | 258,134 |   |  | $       | 249,959 |   |        | $ | 233,961 |   |  | $ | 214,493 |  
|           |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |  








|    |                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the years ending December 31, 2006, 2005, and 2004,
    $72.6 million, $56.0 million, and $38.2 million,
    relates to assumed business the Company manages directly,
    respectively. The related transactions of this business are
    processed through the Companys internal systems and
    related controls. In addition, the Company does not assume any
    foreign reinsurance.



|   |                    
|-- | -------------------
|5. | Segment Information



83



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Specialty Risk Management Operations




Agency Operations






|                |                           |                                  |                      |         |         |         |   |         |         |         |   |         |         |         | 
|--------------- | ------------------------- | -------------------------------- | -------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                |                           | For the Years Ended December 31, |                     
|                |                           |                                  |                     
|                |                           | 2006                             |                      |         | 2005    |         |   | 2004    |        
|                |                           |                                  |                      |         |         |         |   |         |        
|Revenues        |                           |                                  |                      |         |         |         |   |         |         |         |   |        
|                | Net earned premiums       |                                  | $                    | 254,920 |         |         | $ | 249,959 |         |         | $ | 214,493 |        
|                | Management fees           |                                  |                      | 18,714  |         |         |   | 16,741  |         |         |   | 16,253  |        
|                | Claims fees(2)            |                                  |                      | 8,776   |         |         |   | 7,113   |         |         |   | 13,207  |        
|                | Loss control fees         |                                  |                      | 2,216   |         |         |   | 2,260   |         |         |   | 2,174   |        
|                | Reinsurance placement     |                                  |                      | 735     |         |         |   | 660     |         |         |   | 420     |        
|                | Investment income         |                                  |                      | 21,115  |         |         |   | 17,692  |         |         |   | 14,887  |        
|                | Net realized gains        |                                  |                      | 69      |         |         |   | 85      |         |         |   | 339     |        
|                |                           |                                  |                      |         |         |         |   |         |        
|                |                           | Specialty risk management        |                      |         | 306,545 |         |   |         | 294,510 |         |   |         | 261,773 |        
|                | Agency operations         |                                  |                      | 12,285  |         |         |   | 11,304  |         |         |   | 9,805   |        
|                | Miscellaneous income(3)   |                                  |                      | 960     |         |         |   | 365     |         |         |   | 24      |        
|                | Intersegment revenue      |                                  |                      | (1,554  | )       |         |   | (2,162  | )       |         |   | (1,324  | )      
|                |                           |                                  |                      |         |         |         |   |         |        
|                |                           |                                  | Consolidated revenue |         | $       | 318,236 |   |         | $       | 304,017 |   |         | $       | 270,278 | 
|                |                           |                                  |                      |         |         |         |   |         |        
|Pre-tax income: |                           |                                  |                      |         |         |         |   |         |         |         |   |        
|                | Specialty risk management |                                  | $                    | 37,950  |         |         | $ | 29,444  |         |         | $ | 23,205  |        
|                | Agency operations(1)      |                                  |                      | 2,951   |         |         |   | 3,343   |         |         |   | 2,257   |        
|                | Non-allocated expenses    |                                  |                      | (9,396  | )       |         |   | (7,121  | )       |         |   | (5,088  | )      
|                |                           |                                  |                      |         |         |         |   |         |        
|                |                           | Consolidated pre-tax income      |                      | $       | 31,505  |         |   | $       | 25,666  |         |   | $       | 20,374  |        
|                |                           |                                  |                      |         |         |         |   |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Companys agency operations include an allocation of
    corporate overhead, which includes expenses associated with
    accounting, information services, legal, and other corporate
    services. The corporate overhead allocation excludes those
    expenses specific to the holding company. For the years ended
    December 31, 2006, 2005, and 2004, the allocation of
    corporate overhead to the agency operations segment was
    $2.9 million, $3.1 million, and $3.5 million,
    respectively.

84



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | During 2004, the Company accelerated the recognition of
    $3.5 million in deferred claim revenue, as a result of an
    earlier than anticipated termination of two limited duration
    administrative services and multi-state claims run-off
    contracts. These contracts had been terminated by the liquidator
    for the companies during the third quarter of 2004. Had the
    contract not been terminated, the Company would have received
    additional claims fee revenue for continued claims handling
    services.
|   
|(3) | The miscellaneous income included in the revenue relates to
    miscellaneous interest income within the holding company.                                                                                                                                                                                                                                                                                                                                                                                                             



|                         |  |                                  |        |   |      |   |        |      |  |   |        |  
|------------------------ |  | -------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                         |  | For the Years Ended December 31, |       
|                         |  |                                  |       
|                         |  | 2006                             |        |   | 2005 |   |        | 2004 | 
|                         |  |                                  |        |   |      |   |        |      | 
|Holding company expenses |  | $                                | (2,830 | ) |      | $ | (2,892 | )    |  | $ | (2,431 | )
|Amortization             |  |                                  | (590   | ) |      |   | (373   | )    |  |   | (376   | )
|Interest expense         |  |                                  | (5,976 | ) |      |   | (3,856 | )    |  |   | (2,281 | )
|                         |  |                                  |        |   |      |   |        |      | 
|                         |  | $                                | (9,396 | ) |      | $ | (7,121 | )    |  | $ | (5,088 | )
|                         |  |                                  |        |   |      |   |        |      | 



|   |     
|-- | ----
|6. | Debt

Lines of Credit












85



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Senior Debentures








Junior Subordinated Debentures


time-to






time-to




86



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














|   |                       
|-- | ----------------------
|7. | Derivative Instruments

Accounting for Derivative
Instruments and Hedging Activities,










87



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                     
|-- | ------------------------------------
|8. | Regulatory Matters and Rating Issues





|                              |  |      |         |  |        |   |        |              |  |   |            |  |  |      |        |  |        |   |         |              |  |   |            |  |  |   |        |   |  |   |        | 
|----------------------------- |  | ---- | ------- |  | ------ | - | ------ | ------------ |  | - | ---------- |  |  | ---- | ------ |  | ------ | - | ------- | ------------ |  | - | ---------- |  |  | - | ------ | - |  | - | ------ | 
|                              |  | 2006 |         |  | 2005   |  
|                              |  |      |         |  |        |  
|                              |  | Star |         |  | Savers |   |        | Williamsburg |  |   | Ameritrust |  |  | Star |        |  | Savers |   |         | Williamsburg |  |   | Ameritrust | 
|                              |  |      |         |  |        |   |        |              |  |   |            |  |  |      |        |  |        |   |         |              |  |   |            | 
|Statutory capital and surplus |  | $    | 165,107 |  |        | $ | 35,914 |              |  | $ | 18,979     |  |  | $    | 16,463 |  |        | $ | 141,136 |              |  | $ | 31,883     |  |  | $ | 16,447 |   |  | $ | 14,398 | 
|RBC authorized control level  |  |      | 31,569  |  |        |   | 5,710  |              |  |   | 2,960      |  |  |      | 2,532  |  |        |   | 37,265  |              |  |   | 7,673      |  |  |   | 4,043  |   |  |   | 3,345  | 
|Statutory net income (loss)   |  |      | 9,517   |  |        |   | 4,135  |              |  |   | 1,969      |  |  |      | 2,311  |  |        |   | 13,446  |              |  |   | 283        |  |  |   | (518   | ) |  |   | 539    | 





88



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |                                  
|-- | ---------------------------------
|9. | Deferred Policy Acquisition Costs



|                                       |  |                                  |         |   |      |   |         |      |  |   |         |  
|-------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                       |  | For the Years Ended December 31, |        
|                                       |  |                                  |        
|                                       |  | 2006                             |         |   | 2005 |   |         | 2004 | 
|                                       |  |                                  |         |   |      |   |         |      | 
|Balance, beginning of period           |  | $                                | 26,371  |   |      | $ | 25,167  |      |  | $ | 19,564  |  
|Acquisition costs deferred             |  |                                  | 39,201  |   |      |   | 35,367  |      |  |   | 30,883  |  
|Amortized to expense during the period |  |                                  | (37,670 | ) |      |   | (34,163 | )    |  |   | (25,280 | )
|                                       |  |                                  |         |   |      |   |         |      | 
|Balance, end of period                 |  | $                                | 27,902  |   |      | $ | 26,371  |      |  | $ | 25,167  |  
|                                       |  |                                  |         |   |      |   |         |      | 





|    |             
|--- | ------------
|10. | Income Taxes



|                                       |  |                                  |       |  |      |   |       |      |  |   |       | 
|-------------------------------------- |  | -------------------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                       |  | For the Years Ended December 31, |      
|                                       |  |                                  |      
|                                       |  | 2006                             |       |  | 2005 |   |       | 2004 | 
|                                       |  |                                  |       |  |      |   |       |      | 
|Current tax expense                    |  | $                                | 8,858 |  |      | $ | 6,410 |      |  | $ | 4,775 | 
|Deferred tax expense                   |  |                                  | 741   |  |      |   | 1,347 |      |  |   | 1,577 | 
|                                       |  |                                  |       |  |      |   |       |      | 
|Total provision for income tax expense |  | $                                | 9,599 |  |      | $ | 7,757 |      |  | $ | 6,352 | 
|                                       |  |                                  |       |  |      |   |       |      | 

89



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##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                |                                                                                               |                                  |        |        |      |   |       |        |   |   |       |      |  
|------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------- | ------ | ------ | ---- | - | ----- | ------ | - | - | ----- | ---- | -
|                                |                                                                                               | For the Years Ended December 31, |       
|                                |                                                                                               |                                  |       
|                                |                                                                                               | 2006                             |        |        | 2005 |   |       | 2004   |  
|                                |                                                                                               |                                  |        |        |      |   |       |        |  
|Tax provision at statutory rate |                                                                                               | $                                | 11,027 |        |      | $ | 8,982 |        |   | $ | 6,927 |     
|Tax effect of:                  |                                                                                               |                                  |        |        |      |   |       |        |   |   |       |     
|                                | Tax exempt interest                                                                           |                                  |        | (2,021 | )    |   |       | (1,291 | ) |   |       | (777 | )
|                                | State income taxes, net of federal benefit                                                    |                                  |        | 352    |      |   |       | 458    |   |   |       | 38   |  
|                                | Impact of increase in statutory rate relating to deferred tax
    assets at December 31, 2005 |                                  |        |       |      |   |       | (386   | ) |   |       |     |  
|                                | Other, net                                                                                    |                                  |        | 241    |      |   |       | (6     | ) |   |       | 164  |  
|                                |                                                                                               |                                  |        |        |      |   |       |        |  
|Federal income tax expense      |                                                                                               | $                                | 9,599  |        |      | $ | 7,757 |        |   | $ | 6,352 |     
|                                |                                                                                               |                                  |        |        |      |   |       |        |  
|Effective tax expense rate      |                                                                                               |                                  | 30.5   | %      |      |   | 30.2  | %      |   |   | 31.2  | %   
|                                |                                                                                               |                                  |        |        |      |   |       |        |  



Accounting for Income Taxes,




|                                            |                      |                         |        |        |             |   |       |          |  |   |             |        |        |   |       |        |  | 
|------------------------------------------- | -------------------- | ----------------------- | ------ | ------ | ----------- | - | ----- | -------- |  | - | ----------- | ------ | ------ | - | ----- | ------ |  | 
|                                            |                      | 2006                    |        |        | 2005        |  
|                                            |                      |                         |        |        |             |  
|                                            |                      | Deferred                |        |        | Deferred    |   |       | Deferred |  |   | Deferred    |       
|                                            |                      | Tax                     |        |        | Tax         |   |       | Tax      |  |   | Tax         |       
|                                            |                      | Assets                  |        |        | Liabilities |   |       | Assets   |  |   | Liabilities |       
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       
|Unpaid losses and loss adjustment expenses  |                      | $                       | 14,557 |        |             | $ |      |          |  | $ | 14,125      |        |        | $ |      |       
|Unearned premium reserves                   |                      |                         | 8,701  |        |             |   |      |          |  |   | 8,248       |        |        |   |      |       
|Unrealized loss/ gains on investments       |                      |                         | 451    |        |             |   |      |          |  |   | 608         |        |        |   |      |       
|Deferred policy acquisition expense         |                      |                         |       |        |             |   | 9,765 |          |  |   |            |        |        |   | 9,230 |       
|Allowance for doubtful accounts             |                      |                         | 1,032  |        |             |   |      |          |  |   | 1,330       |        |        |   |      |       
|Policyholder dividends                      |                      |                         | 348    |        |             |   |      |          |  |   | 208         |        |        |   |      |       
|Alternate minimum tax credit                |                      |                         |       |        |             |   |      |          |  |   | 637         |        |        |   |      |       
|Goodwill                                    |                      |                         |       |        |             |   | 1,900 |          |  |   |            |        |        |   | 1,529 |       
|Deferred revenue                            |                      |                         | 152    |        |             |   |      |          |  |   | 125         |        |        |   |      |       
|Long term incentive plan                    |                      |                         | 1,078  |        |             |   |      |          |  |   | 865         |        |        |   |      |       
|Amortization of intangible assets           |                      |                         | 352    |        |             |   |      |          |  |   | 227         |        |        |   |      |       
|Deferred gain on sale-leaseback transaction |                      |                         | 231    |        |             |   |      |          |  |   | 262         |        |        |   |      |       
|Other                                       |                      |                         | 495    |        |             |   |      |          |  |   | 754         |        |        |   |      |       
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       
|                                            | Total deferred taxes |                         |        | 27,397 |             |   |       | 11,665   |  |   |             | 27,389 |        |   |       | 10,759 | 
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       
|                                            |                      | Net deferred tax assets |        | $      | 15,732      |   |       |          |  |   |             | $      | 16,630 |   |       |        |  | 
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       

90



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



Summary of Significant Accounting Policies.




|    |                                                                            
|--- | ---------------------------------------------------------------------------
|11. | Stock Options, Long Term Incentive Plan, and Deferred
    Compensation Plan





|                                |  |         |           |           |       |   |      |         |           |  |           |   |  |           |      |  |       |  |           |   |  |   |      | 
|------------------------------- |  | ------- | --------- | --------- | ----- | - | ---- | ------- | --------- |  | --------- | - |  | --------- | ---- |  | ----- |  | --------- | - |  | - | ---- | 
|                                |  | 2006    |           |           | 2005  |   |      | 2004    |          
|                                |  |         |           |           |       |   |      |         |          
|                                |  |         |           | Weighted- |       |   |      |         | Weighted- |  |           |   |  | Weighted- |     
|                                |  |         |           | Average   |       |   |      |         | Average   |  |           |   |  | Average   |     
|                                |  |         |           | Exercise  |       |   |      |         | Exercise  |  |           |   |  | Exercise  |     
|                                |  | Options |           |           | Price |   |      | Options |           |  | Price     |   |  | Options   |      |  | Price | 
|                                |  |         |           |           |       |   |      |         |           |  |           |   |  |           |      |  |       | 
|Outstanding  beginning of year |  |         | 1,605,901 |           |       | $ | 5.42 |         |           |  | 2,121,317 |   |  | $         | 5.53 |  |       |  | 2,381,609 |   |  | $ | 5.80 | 
|Exercised                       |  |         | (791,038  | )         |       | $ | 3.32 |         |           |  | (97,825   | ) |  | $         | 2.90 |  |       |  | (39,500   | ) |  | $ | 2.74 | 
|Expired and/or forfeited        |  |         | (423,185  | )         |       | $ | 7.54 |         |           |  | (417,591  | ) |  | $         | 6.57 |  |       |  | (220,792  | ) |  | $ | 8.97 | 
|                                |  |         |           |           |       |   |      |         |           |  |           |   |  |           |      |  |       | 
|Outstanding  end of year       |  |         | 391,678   |           |       | $ | 7.38 |         |           |  | 1,605,901 |   |  | $         | 5.42 |  |       |  | 2,121,317 |   |  | $ | 5.53 | 
|                                |  |         |           |           |       |   |      |         |           |  |           |   |  |           |      |  |       | 
|Exercisable at end of year      |  |         | 324,704   |           |       | $ | 7.62 |         |           |  | 1,288,296 |   |  | $         | 5.65 |  |       |  | 1,451,015 |   |  | $ | 5.92 | 



|                 |  |                     |         |                     |  |           |     |         |  |           |       |  |  |  |         |  |  |   |       | 
|---------------- |  | ------------------- | ------- | ------------------- |  | --------- | --- | ------- |  | --------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|                 |  | Options Outstanding |         | Options Exercisable
|                 |  |                     |         |                    
|                 |  |                     |         | Weighted-           |  | Weighted- |     |         |  | Weighted-
|                 |  |                     |         | Average             |  | Average   |     |         |  | Average  
|Range of         |  |                     |         | Remaining           |  | Exercise  |     |         |  | Exercise 
|Exercise Prices  |  | Options             |         | Life (Years)        |  | Price     |     | Options |  | Price    
|                 |  |                     |         |                     |  |           |     |         |  |          
|$2.173 to $3.066 |  |                     | 267,219 |                     |  |           | 0.9 |         |  | $         | 2.56  |  |  |  | 219,107 |  |  | $ | 2.64  | 
|$3.507           |  |                     | 10,000  |                     |  |           | 0.4 |         |  | $         | 3.51  |  |  |  | 10,000  |  |  | $ | 3.51  | 
|$6.48            |  |                     | 1,500   |                     |  |           | 3.0 |         |  | $         | 6.48  |  |  |  | 0       |  |  | $ | 6.48  | 
|$10.91 to $30.45 |  |                     | 112,959 |                     |  |           | 1.3 |         |  | $         | 19.14 |  |  |  | 95,597  |  |  | $ | 19.46 | 
|                 |  |                     |         |                     |  |           |     |         |  |           |       |  |  |  |         |  |  |   |       | 
|                 |  |                     | 391,678 |                     |  |           | 1.0 |         |  | $         | 7.38  |  |  |  | 324,704 |  |  | $ | 7.62  | 
|                 |  |                     |         |                     |  |           |     |         |  |           |       |  |  |  |         |  |  |   |       | 



91



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                     
|--- | --------------------
|12. | Shareholders Equity





 Regulatory
Matters and Rating Issues




|    |                                     
|--- | ------------------------------------
|13. | Goodwill and Other Intangible Assets



| |         
| | --------
| | Goodwill





92



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |                   |       |                |            |   |        |       |  |   |        | 
|---------------------------- |  | ----------------- | ----- | -------------- | ---------- | - | ------ | ----- |  | - | ------ | 
|                             |  |                   |       | Specialty Risk |            |   |       
|                             |  |                   |       | Management     |            |   |       
|                             |  | Agency Operations |       |                | Operations |   |        | Total | 
|                             |  |                   |       |                |            |   |        |       | 
|Balance at December 31, 2006 |  | $                 | 6,469 |                |            | $ | 25,033 |       |  | $ | 31,502 | 
|Balance at December 31, 2005 |  | $                 | 5,769 |                |            | $ | 25,033 |       |  | $ | 30,802 | 



| |                        
| | -----------------------
| | Other Intangible Assets



Goodwill and Other Intangible
Assets.






|     |                            |   |     |       | 
|---- | -------------------------- | - | --- | ----- | 
|2007 |                            | $ | 563 |      
|2008 |                            |   | 265 |      
|2009 |                            |   | 257 |      
|2010 |                            |   | 213 |      
|2011 |                            |   | 1   |      
|     |                            |   |    
|     | Total amortization expense |   | $   | 1,299 | 
|     |                            |   |    



|    |                              
|--- | -----------------------------
|14. | Commitments and Contingencies



|           |                                 |   |       |        | 
|---------- | ------------------------------- | - | ----- | ------ | 
|2007       |                                 | $ | 2,749 |       
|2008       |                                 |   | 2,512 |       
|2009       |                                 |   | 2,245 |       
|2010       |                                 |   | 1,868 |       
|2011       |                                 |   | 1,606 |       
|Thereafter |                                 |   | 3,089 |       
|           |                                 |   |      
|           | Total minimum lease commitments |   | $     | 14,069 | 
|           |                                 |   |      

93



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Accounting for
Contingencies,




|    |                           
|--- | --------------------------
|15. | Sale-Leaseback Transaction



94



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                           
|--- | --------------------------
|16. | Related Party Transactions











|    |                       
|--- | ----------------------
|17. | Employee Benefit Plans

1 2




|    |                                    
|--- | -----------------------------------
|18. | Fair Value of Financial Instruments

Disclosures about Fair Value of
Financial Instruments,




95



---



##### 



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Certain
Investments in Debt and Equity Securities, Derivative
Instruments, Accounting for Derivative
Instruments and Hedging Activities,




|    |                                     
|--- | ------------------------------------
|19. | Quarterly Financial Data (Unaudited)



|                                                   |  |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|-------------------------------------------------- |  | ------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | -
|                                                   |  | 1st     |        |   | 2nd     |   |        | 3rd     |  |   | 4th     |  
|                                                   |  | Quarter |        |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                                                   |  |         |        |   |         |   |        |         |  |   |         |  
|2006:                                              |  |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|Gross premiums written                             |  | $       | 89,010 |   |         | $ | 74,261 |         |  | $ | 85,827  |   |  | $ | 81,774 |  
|Net premiums written                               |  |         | 69,381 |   |         |   | 59,205 |         |  |   | 68,905  |   |  |   | 65,177 |  
|Net premiums earned                                |  |         | 63,124 |   |         |   | 64,514 |         |  |   | 63,688  |   |  |   | 63,594 |  
|Net commissions and fees                           |  |         | 11,289 |   |         |   | 10,698 |         |  |   | 9,612   |   |  |   | 9,573  |  
|Net investment income and realized gains/losses    |  |         | 5,232  |   |         |   | 5,405  |         |  |   | 5,612   |   |  |   | 5,895  |  
|Net losses and LAE incurred                        |  |         | 37,043 |   |         |   | 37,146 |         |  |   | 36,129  |   |  |   | 35,975 |  
|Policy acquisition and other underwriting expenses |  |         | 11,424 |   |         |   | 13,180 |         |  |   | 13,059  |   |  |   | 12,816 |  
|Other administrative expenses                      |  |         | 7,959  |   |         |   | 7,275  |         |  |   | 6,908   |   |  |   | 7,272  |  
|Salaries and employee benefits                     |  |         | 13,368 |   |         |   | 13,846 |         |  |   | 14,183  |   |  |   | 13,172 |  
|Interest expense                                   |  |         | 1,388  |   |         |   | 1,499  |         |  |   | 1,558   |   |  |   | 1,531  |  
|Net income                                         |  |         | 5,625  |   |         |   | 5,375  |         |  |   | 5,093   |   |  |   | 5,941  |  
|Diluted earnings per share                         |  | $       | 0.19   |   |         | $ | 0.18   |         |  | $ | 0.17    |   |  | $ | 0.20   |  
|GAAP combined ratio(1)                             |  |         | 96.2   | % |         |   | 97.2   | %       |  |   | 97.2    | % |  |   | 96.6   | %
|2005:                                              |  |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|Gross premiums written                             |  | $       | 90,992 |   |         | $ | 75,959 |         |  | $ | 86,075  |   |  | $ | 79,183 |  
|Net premiums written                               |  |         | 68,990 |   |         |   | 61,288 |         |  |   | 67,420  |   |  |   | 60,436 |  
|Net premiums earned                                |  |         | 60,787 |   |         |   | 63,364 |         |  |   | 63,205  |   |  |   | 62,603 |  
|Net commissions and fees                           |  |         | 10,099 |   |         |   | 8,034  |         |  |   | 9,200   |   |  |   | 8,583  |  
|Net investment income and realized gains/losses    |  |         | 3,977  |   |         |   | 4,581  |         |  |   | 4,632   |   |  |   | 4,952  |  
|Net losses and LAE incurred                        |  |         | 37,134 |   |         |   | 37,728 |         |  |   | 38,469  |   |  |   | 38,211 |  
|Policy acquisition and other underwriting expenses |  |         | 10,822 |   |         |   | 10,971 |         |  |   | 11,947  |   |  |   | 10,699 |  
|Other administrative expenses                      |  |         | 7,785  |   |         |   | 6,046  |         |  |   | 6,037   |   |  |   | 7,315  |  
|Salaries and employee benefits                     |  |         | 12,605 |   |         |   | 13,648 |         |  |   | 12,913  |   |  |   | 12,165 |  
|Interest expense                                   |  |         | 773    |   |         |   | 806    |         |  |   | 948     |   |  |   | 1,329  |  
|Net income                                         |  |         | 3,743  |   |         |   | 4,580  |         |  |   | 4,662   |   |  |   | 4,925  |  
|Diluted earnings per share                         |  | $       | 0.13   |   |         | $ | 0.16   |         |  | $ | 0.16    |   |  | $ | 0.17   |  
|GAAP combined ratio(1)                             |  |         | 99.3   | % |         |   | 97.1   | %       |  |   | 99.8    | % |  |   | 98.7   | %






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

96



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##### 






SCHEDULE I


MEADOWBROOK INSURANCE GROUP, INC.


SUMMARY OF INVESTMENTS  OTHER THAN
INVESTMENTS IN RELATED PARTIES


As of December 31, 2006


(In thousands)


|                                                      |                   |      |         |         |       |             |         |         |  |   |         |         | 
|----------------------------------------------------- | ----------------- | ---- | ------- | ------- | ----- | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                                      |                   |      |         |         |       | Amount at   |        
|                                                      |                   |      |         |         |       | Which       |        
|                                                      |                   |      |         |         |       | Shown in    |        
|                                                      |                   |      |         |         |       | the Balance |        
|Type of Investment                                    |                   | Cost |         |         | Value |             |         | Sheet   | 
|                                                      |                   |      |         |         |       |             |         |         | 
|Fixed Maturities:                                     |                   |      |         |         |       |             |         |         |  |   |         |        
|US government and government agencies and authorities |                   | $    | 52,991  |         |       | $           | 52,752  |         |  | $ | 52,752  |        
|States and political subdivisions                     |                   |      | 221,296 |         |       |             | 221,676 |         |  |   | 221,676 |        
|Corporate securities                                  |                   |      | 102,365 |         |       |             | 102,218 |         |  |   | 102,218 |        
|Mortgage-backed securities                            |                   |      | 109,561 |         |       |             | 108,078 |         |  |   | 108,078 |        
|                                                      |                   |      |         |         |       |             |         |         | 
|                                                      | Total Investments |      | $       | 486,213 |       |             | $       | 484,724 |  |   | $       | 484,724 | 
|                                                      |                   |      |         |         |       |             |         |         | 

97



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##### 






SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


BALANCE SHEET


|                                     |                            |                                            |         |         |         |   |         |         |         | 
|------------------------------------ | -------------------------- | ------------------------------------------ | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                     |                            | December 31,                               |        
|                                     |                            |                                            |        
|                                     |                            | 2006                                       |         |         | 2005    |  
|                                     |                            |                                            |         |         |         |  
|                                     |                            | (In thousands)                             |        
|ASSETS                              
|Cash and cash equivalents            |                            | $                                          | 64      |         |         | $ | 73      |        
|Investment in subsidiaries           |                            |                                            | 252,428 |         |         |   | 225,475 |        
|Goodwill                             |                            |                                            | 3,024   |         |         |   | 3,024   |        
|Other assets                         |                            |                                            | 28,137  |         |         |   | 25,441  |        
|                                     |                            |                                            |         |         |         |  
|                                     | Total assets               |                                            | $       | 283,653 |         |   | $       | 254,013 |        
|                                     |                            |                                            |         |         |         |  
|                                    
|LIABILITIES                         
|Other liabilities                    |                            | $                                          | 2,311   |         |         | $ | 1,448   |        
|Payable to subsidiaries              |                            |                                            | 16,719  |         |         |   | 14,270  |        
|Debt                                 |                            |                                            | 7,000   |         |         |   | 5,000   |        
|Debentures                           |                            |                                            | 55,930  |         |         |   | 55,930  |        
|                                     |                            |                                            |         |         |         |  
|                                     | Total liabilities          |                                            |         | 81,960  |         |   |         | 76,648  |        
|                                     |                            |                                            |         |         |         |  
|                                    
|SHAREHOLDERS EQUITY                
|Common stock                         |                            |                                            | 291     |         |         |   | 287     |        
|Additional paid-in capital           |                            |                                            | 126,828 |         |         |   | 124,819 |        
|Retained earnings                    |                            |                                            | 76,282  |         |         |   | 54,248  |        
|Note receivable from officer         |                            |                                            | (871    | )       |         |   | (859    | )      
|Accumulated other comprehensive loss |                            |                                            | (837    | )       |         |   | (1,130  | )      
|                                     |                            |                                            |         |         |         |  
|                                     | Total shareholders equity |                                            |         | 201,693 |         |   |         | 177,365 |        
|                                     |                            |                                            |         |         |         |  
|                                     |                            | Total liabilities and shareholders equity |         | $       | 283,653 |   |         | $       | 254,013 | 
|                                     |                            |                                            |         |         |         |  

98



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##### 



SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


INCOME STATEMENT


|                                               |                  |                                  |        |       |        |   |        |       |       |   |        |       |       | 
|---------------------------------------------- | ---------------- | -------------------------------- | ------ | ----- | ------ | - | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                                               |                  | For the Years Ended December 31, |       
|                                               |                  |                                  |       
|                                               |                  | 2006                             |        |       | 2005   |   |        | 2004  |      
|                                               |                  |                                  |        |       |        |   |        |       |      
|Revenue                                        |                  | $                                | 2,690  |       |        | $ | 2,198  |       |       | $ | 466    |      
|Operating expenses:                            |                  |                                  |        |       |        |   |        |       |       |   |        |      
|                                               | Interest expense |                                  |        | 6,375 |        |   |        | 4,233 |       |   |        | 2,369 |      
|                                               | Other expenses   |                                  |        | 3,970 |        |   |        | 3,540 |       |   |        | 2,898 |      
|                                               |                  |                                  |        |       |        |   |        |       |      
|                                               |                  | Total operating expenses         |        |       | 10,345 |   |        |       | 7,773 |   |        |       | 5,267 | 
|                                               |                  |                                  |        |       |        |   |        |       |      
|Loss before income taxes and subsidiary equity |                  |                                  | (7,654 | )     |        |   | (5,575 | )     |       |   | (4,801 | )    
|Federal and state income tax benefit           |                  |                                  | (2,878 | )     |        |   | (2,203 | )     |       |   | (1,906 | )    
|                                               |                  |                                  |        |       |        |   |        |       |      
|Loss before subsidiary equity earnings         |                  |                                  | (4,776 | )     |        |   | (3,372 | )     |       |   | (2,895 | )    
|Subsidiary equity earnings                     |                  |                                  | 26,810 |       |        |   | 21,282 |       |       |   | 16,956 |      
|                                               |                  |                                  |        |       |        |   |        |       |      
|Net income                                     |                  | $                                | 22,034 |       |        | $ | 17,910 |       |       | $ | 14,061 |      
|                                               |                  |                                  |        |       |        |   |        |       |      

99



---



##### 



SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


STATEMENT OF COMPREHENSIVE INCOME


|           |                                         |                                                                                 |        |        |      |   |        |        |        |   |        |        |        |  
|---------- | --------------------------------------- | ------------------------------------------------------------------------------- | ------ | ------ | ---- | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|           |                                         | For the Years Ended December 31,                                                |       
|           |                                         |                                                                                 |       
|           |                                         | 2006                                                                            |        |        | 2005 |   |        | 2004   |       
|           |                                         |                                                                                 |        |        |      |   |        |        |       
|Net income |                                         | $                                                                               | 22,034 |        |      | $ | 17,910 |        |        | $ | 14,061 |       
|           | Other comprehensive income, net of tax: |                                                                                 |        |        |      |   |        |        |        |   |        |        |       
|           |                                         | Unrealized gain (losses) on securities:                                         |        |        | 152  |   |        |        | (6,023 | ) |        |        | (2,364 | )
|           |                                         | Net deferred derivative gain  hedging activity                                 |        |        | 121  |   |        |        | 9      |   |        |        |        |  
|           |                                         | Deconsolidation of subsidiary                                                   |        |        |     |   |        |        |       |   |        |        | (45    | )
|           |                                         | Less: reclassification adjustment for gains (losses) included in
    net income |        |        | 20   |   |        |        | 56     |   |        |        | (222   | )
|           |                                         |                                                                                 |        |        |      |   |        |        |       
|           | Other comprehensive gain (loss)         |                                                                                 |        | 293    |      |   |        | (5,958 | )      |   |        | (2,631 | )     
|           |                                         |                                                                                 |        |        |      |   |        |        |       
|           | Comprehensive income                    |                                                                                 | $      | 22,327 |      |   | $      | 11,952 |        |   | $      | 11,430 |       
|           |                                         |                                                                                 |        |        |      |   |        |        |       

100



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##### 



SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


STATEMENT OF CASH FLOWS


|                                                 |                                          |                                                     |                                           |         |      |       |        |         |        |        |        |         |        |        | 
|------------------------------------------------ | ---------------------------------------- | --------------------------------------------------- | ----------------------------------------- | ------- | ---- | ----- | ------ | ------- | ------ | ------ | ------ | ------- | ------ | ------ | 
|                                                 |                                          | For the Years Ended December 31,                    |                                          
|                                                 |                                          |                                                     |                                          
|                                                 |                                          | 2006                                                |                                           |         | 2005 |       |        | 2004    |       
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|Net cash used in operating activities:           |                                          | $                                                   | (1,488                                    | )       |      | $     | (8,437 | )       |        | $      | (4,489 | )      
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|Cash Flow from Investing Activities:             |                                          |                                                     |                                           |         |      |       |        |         |        |        |        |        
|                                                 | Dividends from subsidiaries              |                                                     |                                           | 4,629   |      |       |        | 6,089   |        |        |        | 3,678   |       
|                                                 | Investment in subsidiaries               |                                                     |                                           | (4,600  | )    |       |        | (15,600 | )      |        |        | (13,539 | )     
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|                                                 |                                          | Net cash provided by (used in) investing activities |                                           |         | 29   |       |        |         | (9,511 | )      |        |         | (9,861 | )     
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|Cash Flow from Financing Activities:             |                                          |                                                     |                                           |         |      |       |        |         |        |        |        |        
|                                                 | Proceeds from borrowings                 |                                                     |                                           | 12,500  |      |       |        | 9,500   |        |        |        | 3,744   |       
|                                                 | Principal payments on borrowings         |                                                     |                                           | (10,500 | )    |       |        | (13,544 | )      |        |        | (8,700  | )     
|                                                 | Net proceeds from issuance of debentures |                                                     |                                           |        |      |       |        | 19,400  |        |        |        | 24,250  |       
|                                                 | Stock options exercised                  |                                                     |                                           | (538    | )    |       |        | 1,092   |        |        |        | 145     |       
|                                                 | Share repurchases of common stock        |                                                     |                                           |        |      |       |        | (4,191  | )      |        |        |        |       
|                                                 | Other financing activities               |                                                     |                                           | (12     | )    |       |        | 9       |        |        |        | 18      |       
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|                                                 |                                          |                                                     | Net cash provided by financing activities |         |      | 1,450 |        |         |        | 12,266 |        |         |        | 19,457 | 
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|(Decrease) increase in cash and cash equivalents |                                          |                                                     | (9                                        | )       |      |       | (5,682 | )       |        |        | 5,107  |        
|Cash and cash equivalents, beginning of year     |                                          |                                                     | 73                                        |         |      |       | 5,755  |         |        |        | 648    |        
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       
|Cash and cash equivalents, end of year           |                                          | $                                                   | 64                                        |         |      | $     | 73     |         |        | $      | 5,755  |        
|                                                 |                                          |                                                     |                                           |         |      |       |        |         |       

101



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##### 






SCHEDULE III


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTARY INSURANCE INFORMATION


December 31, 2006


(In thousands)


|                                      |  |                   |        |                   |               |   |         |          |              |   |                   |  |  |         |   |  |  |   |         | 
|------------------------------------- |  | ----------------- | ------ | ----------------- | ------------- | - | ------- | -------- | ------------ | - | ----------------- |  |  | ------- | - |  |  | - | ------- | 
|                                      |  |                   |        | Future Policy     |               |   |         |          |              |   |                  
|                                      |  |                   |        | Benefits, Losses, |               |   |         |          | Other Policy |   |                   | 
|                                      |  | Deferred Policy   |        |                   | Claims & Loss |   |         | Unearned |              |   | Claims & Benefits |  |  | Premium |  
|                                      |  | Acquisition Costs |        |                   | Expenses      |   |         | Premium  |              |   | Payable           |  |  | Revenue |  
|                                      |  |                   |        |                   |               |   |         |          |              |   |                   |  |  |         |  
|Speciality Risk Management Operations |  | $                 | 27,902 |                   |               | $ | 501,077 |          |              | $ | 144,575           |  |  |         |  |  |  | $ | 254,920 | 
|Agency Operations                     |  |                   |       |                   |               |   |        |          |              |   |                  |  |  |         |  |  |  |   |        | 
|Other                                 |  |                   |       |                   |               |   |        |          |              |   |                  |  |  |         |  |  |  |   |        | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                   |  |  |         |  
|                                      |  | $                 | 27,902 |                   |               | $ | 501,077 |          |              | $ | 144,575           |  |  |         |  |  |  | $ | 254,920 | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                   |  |  |         |  

|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |         |  |  |   |         | 
|------------------------------------- |  | ---------- | ------ | ----------------- | ---------- | - | ------- | ----------------- |  | - | --------- |  |  | ------- | ------- |  |  | - | ------- | 
|                                      |  |            |        | Benefits, Claims, |            |   |         |                   |  |   |          
|                                      |  | Net        |        |                   | Losses &   |   |         | Amortization of   |  |   | Other     |  |  |        
|                                      |  | Investment |        |                   | Settlement |   |         | Deferred Policy   |  |   | Operating |  |  | Premium |        
|                                      |  | Income     |        |                   | Expenses   |   |         | Acquisition Costs |  |   | Expenses  |  |  | Written |        
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |        
|Speciality Risk Management Operations |  | $          | 21,115 |                   |            | $ | 146,293 |                   |  | $ | 37,670    |  |  | $       | 84,632  |  |  | $ | 262,668 | 
|Agency Operations                     |  |            |       |                   |            |   |        |                   |  |   |          |  |  |         | 9,334   |  |  |   |        | 
|Other                                 |  |            | 960    |                   |            |   |        |                   |  |   |          |  |  |         | 8,802   |  |  |   |        | 
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |        
|                                      |  | $          | 22,075 |                   |            | $ | 146,293 |                   |  | $ | 37,670    |  |  | $       | 102,768 |  |  | $ | 262,668 | 
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |        

102



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##### 



SCHEDULE III


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTARY INSURANCE INFORMATION


December 31, 2005


(In thousands)


|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |   |  |  |   |         | 
|------------------------------------- |  | ----------------- | ------ | ----------------- | ------------- | - | ------- | -------- | ------------ | - | ---------------- |  |  | ------- | - |  |  | - | ------- | 
|                                      |  |                   |        | Future Policy     |               |   |         |          |              |   |                 
|                                      |  |                   |        | Benefits, Losses, |               |   |         |          | Other Policy |   |                  | 
|                                      |  | Deferred Policy   |        |                   | Claims & Loss |   |         | Unearned |              |   | Claims &         |  |  | Premium |  
|                                      |  | Acquisition Costs |        |                   | Expenses      |   |         | Premium  |              |   | Benefits Payable |  |  | Revenue |  
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|Speciality Risk Management Operations |  | $                 | 26,371 |                   |               | $ | 458,677 |          |              | $ | 140,990          |  |  |         |  |  |  | $ | 249,959 | 
|Agency Operations                     |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|Other                                 |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|                                      |  | $                 | 26,371 |                   |               | $ | 458,677 |          |              | $ | 140,990          |  |  |         |  |  |  | $ | 249,959 | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  

|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |        |  |  |   |         | 
|------------------------------------- |  | ---------- | ------ | ----------------- | ---------- | - | ------- | ----------------- |  | - | --------- |  |  | ------- | ------ |  |  | - | ------- | 
|                                      |  |            |        | Benefits, Claims, |            |   |         |                   |  |   |          
|                                      |  | Net        |        |                   | Losses &   |   |         | Amortization of   |  |   | Other     |  |  |        
|                                      |  | Investment |        |                   | Settlement |   |         | Deferred Policy   |  |   | Operating |  |  | Premium |       
|                                      |  | Income     |        |                   | Expenses   |   |         | Acquisition Costs |  |   | Expenses  |  |  | Written |       
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |       
|Speciality Risk Management Operations |  | $          | 17,692 |                   |            | $ | 151,542 |                   |  | $ | 34,163    |  |  | $       | 79,361 |  |  | $ | 258,134 | 
|Agency Operations                     |  |            |       |                   |            |   |        |                   |  |   |          |  |  |         | 7,961  |  |  |   |        | 
|Other                                 |  |            | 283    |                   |            |   |        |                   |  |   |          |  |  |         | 5,324  |  |  |   |        | 
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |       
|                                      |  | $          | 17,975 |                   |            | $ | 151,542 |                   |  | $ | 34,163    |  |  | $       | 92,646 |  |  | $ | 258,134 | 
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |       

103



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##### 



SCHEDULE III


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTARY INSURANCE INFORMATION


December 31, 2004


(In thousands)


|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |   |  |  |   |         | 
|------------------------------------- |  | ----------------- | ------ | ----------------- | ------------- | - | ------- | -------- | ------------ | - | ---------------- |  |  | ------- | - |  |  | - | ------- | 
|                                      |  |                   |        | Future Policy     |               |   |         |          |              |   |                 
|                                      |  |                   |        | Benefits, Losses, |               |   |         |          | Other Policy |   |                  | 
|                                      |  | Deferred Policy   |        |                   | Claims &      |   |         | Unearned |              |   | Claims &         |  |  | Premium |  
|                                      |  | Acquisition Costs |        |                   | Loss Expenses |   |         | Premium  |              |   | Benefits Payable |  |  | Revenue |  
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|Speciality Risk Management Operations |  | $                 | 25,167 |                   |               | $ | 378,157 |          |              | $ | 134,302          |  |  |         |  |  |  | $ | 214,493 | 
|Agency Operations                     |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|Other                                 |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|                                      |  | $                 | 25,167 |                   |               | $ | 378,157 |          |              | $ | 134,302          |  |  |         |  |  |  | $ | 214,493 | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  

|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |        |   |  |   |         | 
|------------------------------------- |  | ---------- | ------ | ----------------- | ---------- | - | ------- | ----------------- |  | - | --------- |  |  | ------- | ------ | - |  | - | ------- | 
|                                      |  |            |        | Benefits, Claims, |            |   |         |                   |  |   |          
|                                      |  | Net        |        |                   | Losses &   |   |         | Amortization of   |  |   | Other     |  |  |        
|                                      |  | Investment |        |                   | Settlement |   |         | Deferred Policy   |  |   | Operating |  |  | Premium |       
|                                      |  | Income     |        |                   | Expenses   |   |         | Acquisition Costs |  |   | Expenses  |  |  | Written |       
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |       
|Speciality Risk Management Operations |  | $          | 14,887 |                   |            | $ | 135,938 |                   |  | $ | 25,280    |  |  | $       | 83,978 |   |  | $ | 233,961 | 
|Agency Operations                     |  |            |       |                   |            |   |        |                   |  |   |          |  |  |         | 8,805  |   |  |   |        | 
|Other                                 |  |            | 24     |                   |            |   |        |                   |  |   |          |  |  |         | (4,097 | ) |  |   |        | 
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |       
|                                      |  | $          | 14,911 |                   |            | $ | 135,938 |                   |  | $ | 25,280    |  |  | $       | 88,686 |   |  | $ | 233,961 | 
|                                      |  |            |        |                   |            |   |         |                   |  |   |           |  |  |         |       

104



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##### 






SCHEDULE IV


MEADOWBROOK INSURANCE GROUP, INC.


REINSURANCE


For the Years Ended December 31,


(In thousands)


|                                 |  |        |         |          |           |         |        |           |  |   |            |           |  |         |         |  |  |  |       |  
|-------------------------------- |  | ------ | ------- | -------- | --------- | ------- | ------ | --------- |  | - | ---------- | --------- |  | ------- | ------- |  |  |  | ----- | -
|                                 |  |        |         |          |           | Assumed |        |           |  |   | Percentage |          
|                                 |  |        |         | Ceded to |           |         | from   |           |  |   |            | of Amount | 
|                                 |  | Gross  |         |          | Other     |         |        | Other     |  |   | Net        |           |  | Assumed |        
|                                 |  | Amount |         |          | Companies |         |        | Companies |  |   | Amount     |           |  | to Net  |        
|                                 |  |        |         |          |           |         |        |           |  |   |            |           |  |         |        
|Property and Liability Insurance |  |        |         |          |           |         |        |           |  |   |            |           |  |         |         |  |  |  |       |  
|2006                             |  | $      | 251,288 |          |           | $       | 72,367 |           |  | $ | 75,999     |           |  | $       | 254,920 |  |  |  | 29.81 | %
|2005                             |  | $      | 264,381 |          |           | $       | 75,563 |           |  | $ | 61,141     |           |  | $       | 249,959 |  |  |  | 24.46 | %
|2004                             |  | $      | 247,169 |          |           | $       | 74,375 |           |  | $ | 41,699     |           |  | $       | 214,493 |  |  |  | 19.44 | %

105



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##### 






SCHEDULE V


MEADOWBROOK INSURANCE GROUP, INC.


VALUATION AND QUALIFYING ACCOUNTS


For the Years Ended December 31,


(In thousands)


|                                |  |            |       |           |            |   |            |            |  |  |           |  |  |            |       |  |  |   |       | 
|------------------------------- |  | ---------- | ----- | --------- | ---------- | - | ---------- | ---------- |  |  | --------- |  |  | ---------- | ----- |  |  | - | ----- | 
|                                |  |            |       | Additions |            |   |            |            | 
|                                |  |            |       |           |            |   | Deductions |            |  | 
|                                |  | Balance at |       |           | Charged to |   |            | Charged to |  |  | from      |  |  | Balance at |      
|                                |  | Beginning  |       |           | Costs and  |   |            | Other      |  |  | Allowance |  |  | End of     |      
|                                |  | of Period  |       |           | Expense    |   |            | Accounts   |  |  | Account   |  |  | Period     |      
|                                |  |            |       |           |            |   |            |            |  |  |           |  |  |            |      
|Allowance for doubtful accounts |  |            |       |           |            |   |            |            |  |  |           |  |  |            |       |  |  |   |       | 
|2006                            |  | $          | 3,901 |           |            | $ | 593        |            |  |  |          |  |  | $          | 1,546 |  |  | $ | 2,948 | 
|2005                            |  | $          | 4,336 |           |            | $ | 704        |            |  |  |          |  |  | $          | 1,139 |  |  | $ | 3,901 | 
|2004                            |  | $          | 4,651 |           |            | $ | 822        |            |  |  |          |  |  | $          | 1,137 |  |  | $ | 4,336 | 

106



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##### 






SCHEDULE VI


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND


CASUALTY INSURANCE OPERATIONS


|                                                   |  |                                  |        |              |             |   |         |                   |  |  |             |  |     |          |         |     |            |   |         |  |  |   |        | 
|-------------------------------------------------- |  | -------------------------------- | ------ | ------------ | ----------- | - | ------- | ----------------- |  |  | ----------- |  | --- | -------- | ------- | --- | ---------- | - | ------- |  |  | - | ------ | 
|                                                   |  | For the Years Ended December 31, |       
|                                                   |  | (In thousands)                   |       
|                                                   |  |                                  |       
|                                                   |  |                                  |        | Reserves for |             |   |        
|                                                   |  | Deferred                         |        |              | Losses and  |   |         | Discount, if any, |  |  |            
|                                                   |  | Policy                           |        |              | Loss        |   |         | deducted from     |  |  |             |  | Net |          |         | Net |           
|                                                   |  | Acquisition                      |        |              | Adjustment  |   |         | previous          |  |  | Unearned    |  |     | Premiums |         |     | Investment |  
|Affiliation with Registrant                        |  | Costs                            |        |              | Expenses(2) |   |         | column(1)         |  |  | Premiums(2) |  |     | Earned   |         |     | Income     |  
|                                                   |  |                                  |        |              |             |   |         |                   |  |  |             |  |     |          |         |     |            |  
|(a)Consolidated Property and Casualty Subsidiaries |  |                                  |        |              |             |   |         |                   |  |  |             |  |     |          |         |     |            |   |         |  |  |   |        | 
|2006                                               |  | $                                | 27,902 |              |             | $ | 501,077 |                   |  |  |            |  |     | $        | 144,575 |     |            | $ | 254,920 |  |  | $ | 21,115 | 
|2005                                               |  | $                                | 26,371 |              |             | $ | 458,677 |                   |  |  |            |  |     | $        | 140,990 |     |            | $ | 249,959 |  |  | $ | 17,692 | 
|2004                                               |  | $                                | 25,167 |              |             | $ | 378,157 |                   |  |  |            |  |     | $        | 134,302 |     |            | $ | 214,493 |  |  | $ | 14,887 | 

|     |  |                    |         |  |                 |   |        |             |  |   |          |  |  |         |         |  |  |   |         | 
|---- |  | ------------------ | ------- |  | --------------- | - | ------ | ----------- |  | - | -------- |  |  | ------- | ------- |  |  | - | ------- | 
|     |  | Losses and loss    |         |  | Amortization of |   |        | Paid losses |  |   |         
|     |  | adjustment expense |         |  | deferred policy |   |        | and loss    |  |   | Net      | 
|     |  |                    |         |  | acquisition     |   |        | adjustment  |  |   | Premiums | 
|     |  | Current Year       |         |  | Prior Years     |   |        | expenses    |  |   | expenses |  |  | Written |        
|     |  |                    |         |  |                 |   |        |             |  |   |          |  |  |         |        
|2006 |  | $                  | 149,012 |  |                 | $ | (2,719 | )           |  | $ | 37,670   |  |  | $       | 115,061 |  |  | $ | 262,668 | 
|2005 |  | $                  | 146,658 |  |                 | $ | 4,884  |             |  | $ | 34,163   |  |  | $       | 107,115 |  |  | $ | 258,134 | 
|2004 |  | $                  | 131,409 |  |                 | $ | 4,529  |             |  | $ | 25,280   |  |  | $       | 97,972  |  |  | $ | 233,961 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company does not employ any discounting techniques.                                                                                                                                                                                                                                                                                                                             
|   
|(2) | Reserves for losses and loss adjustment expenses are shown gross
    of $198.4 million, $187.3 million and
    $151.2 million of reinsurance recoverable on unpaid losses
    in 2006, 2005 and 2004, respectively. Unearned premiums are
    shown gross of ceded unearned premiums of $20.4 million,
    $24.6 million and $26.1 million in 2006, 2005 and
    2004, respectively.

107



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##### 






MEADOWBROOK INSURANCE GROUP, INC.


Exhibit Index


|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  |     |  
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --- | -
|Exhibit |    |             |  | Filing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|No.     |    | Description |  | Basis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3  | .1          |  | Amended and Restated Articles of Incorporation of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  | (5  | )
|        | 3  | .2          |  | Amended and Restated Bylaws of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  | (1  | )
|        | 4  | .1          |  | Junior Subordinated Indenture between Meadowbrook Insurance
    Group, Inc., and JP Morgan Chase Bank, dated
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  | (7  | )
|        | 4  | .2          |  | Junior Subordinated Indenture between Meadowbrook Insurance
    Group, Inc. and LaSalle Bank National Association, dated as of
    September 16, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  | (14 | )
|        | 10 | .1          |  | Meadowbrook Insurance Group, Inc. Amended and Restated 1995
    Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  | (9  | )
|        | 10 | .2          |  | Meadowbrook, Inc. 401(k) and Profit Sharing Plan Trust, amended
    and restated December 31, 1994                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |  | (1  | )
|        | 10 | .3          |  | Demand Note dated November 9, 1998 among the Company and
    Robert S. Cubbin and Kathleen D. Cubbin and Stock Pledge
    Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  | (4  | )
|        | 10 | .4          |  | Meadowbrook Insurance Group, Inc. Amended and Restated 2002
    Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  | (9  | )
|        | 10 | .5          |  | Agency Agreement by and between Meadowbrook, Inc., Preferred
    Insurance Agency, Inc., TPA Insurance Agency, Inc., Preferred
    Comp Insurance Agency of New Hampshire, TPA Insurance Agency of
    New Hampshire, Inc., Meadowbrook of Nevada, Inc., d/b/a
    Meadowbrook Insurance Services, Meadowbrook of Florida, Inc.,
    Association Self-Insurance Services, Inc., Commercial Carriers
    Insurance Agency, Inc., and Star Insurance Company, Savers
    Property and Casualty Insurance Company, Williamsburg National
    Insurance Company, and Ameritrust Insurance Corporation, dated
    January 1, 2003 |  |  | (6  | )
|        | 10 | .6          |  | Purchase Agreement among Meadowbrook Insurance Group, Inc.,
    Meadowbrook Capital Trust I, and Dekania CDO I, Ltd.,
    dated September 30, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |  | (7  | )
|        | 10 | .7          |  | 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                                                                                                                                                                                                                                                                                                                                                                                       |  |  | (7  | )
|        | 10 | .8          |  | Guaranty Agreement between Meadowbrook Insurance Group, Inc.,
    and JP Morgan Chase Bank, dated September 30, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  | (7  | )
|        | 10 | .9          |  | Employment Agreement between the Company and Robert S. Cubbin,
    dated January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |  | (8  | )
|        | 10 | .10         |  | Employment Agreement between the Company and Michael G.
    Costello, dated January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  | (8  | )
|        | 10 | .11         |  | Meadowbrook Insurance Group, Inc. Long Term Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  | (11 | )
|        | 10 | .12         |  | Indenture between Meadowbrook Insurance Group, Inc. and JPMorgan
    Chase Bank, as Trustee, dated April 29, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  | (11 | )
|        | 10 | .13         |  | Indenture between Meadowbrook Insurance Group, Inc. and
    Wilmington Trust Company, as Trustee, dated May 26, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  | (11 | )
|        | 10 | .14         |  | Land Contract between Meadowbrook Insurance Group, Inc. and MB
    Center II LLC, dated July 15, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  | (11 | )
|        | 10 | .15         |  | 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                                                                                                                                                                                                                                                                                                                                           |  |  | (12 | )
|        | 10 | .16         |  | Credit Agreement among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  | (10 | )
|        | 10 | .17         |  | Revolving Note among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  | (10 | )

108



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##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                     |  |  |     |  
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --- | -
|Exhibit |    |             |  | Filing                                                                                                                                                                                                                                                                                                                                                                                             
|No.     |    | Description |  | Basis                                                                                                                                                                                                                                                                                                                                                                                              
|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .18         |  | Security Agreement among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004                                                                                                                                                                                                                                                     |  |  | (10 | )
|        | 10 | .19         |  | Form of Nonqualified Stock Option Agreement under the
    Meadowbrook Insurance Group, Inc., Stock Option Plan, dated
    February 21, 2003                                                                                                                                                                                                                                                         |  |  | (12 | )
|        | 10 | .20         |  | Lease Agreement between Meadowbrook Insurance Group, Inc. and
    Meadowbrook, Inc., dated December 6, 2004                                                                                                                                                                                                                                                                                         |  |  | (12 | )
|        | 10 | .21         |  | Master Lease Agreement between LaSalle National Leasing
    Corporation and Meadowbrook Insurance Group, Inc., dated
    December 30, 2004                                                                                                                                                                                                                                                          |  |  | (12 | )
|        | 10 | .22         |  | Promissory Note between Meadowbrook Insurance Group, Inc. and
    Star Insurance Company, dated January 1, 2005                                                                                                                                                                                                                                                                                     |  |  | (12 | )
|        | 10 | .23         |  | Commercial Mortgage between Meadowbrook Insurance Group, Inc.
    and Star Insurance Company, dated January 1, 2005                                                                                                                                                                                                                                                                                 |  |  | (12 | )
|        | 10 | .24         |  | Assignment of Leases and Rents between Meadowbrook Insurance
    Group, Inc. and Star Insurance Company, dated January 1,
    2005                                                                                                                                                                                                                                                                  |  |  | (12 | )
|        | 10 | .25         |  | Form of At-Will Employment and Severance Agreement by and among
    Meadowbrook, Inc., Meadowbrook Insurance Group, Inc., and Karen
    M. Spaun, Stephen Belden, Gregory L. Wilde, Robert C.
    Spring, Archie S. McIntyre, Arthur C. Pletz, Randolph W. Fort,
    Angelo L. Williams, Susan L. Cubbin, and Kenn R. Allen, dated
    January 1, 2005 and Steven C. Divine dated March 1,
    2006 |  |  | (12 | )
|        | 10 | .26         |  | Amendment to Demand Note Addendum among the Company and
    Robert S. Cubbin and Kathleen D. Cubbin, dated February 17,
    2005                                                                                                                                                                                                                                                                    |  |  | (12 | )
|        | 10 | .27         |  | Reciprocal Easement and Operation Agreement between Meadowbrook
    Insurance Group, Inc. and MB Center II, LLC, dated
    May 9, 2005                                                                                                                                                                                                                                                              |  |  | (13 | )
|        | 10 | .28         |  | First Amendment to Land Contract between MB Center II, LLC
    and Meadowbrook Insurance Group, Inc., dated May 20, 2005                                                                                                                                                                                                                                                                            |  |  | (13 | )
|        | 10 | .29         |  | Amendment to Credit Agreement between Meadowbrook Insurance
    Group, Inc. and Standard Federal Bank National Association,
    dated May 20, 2005                                                                                                                                                                                                                                                  |  |  | (13 | )
|        | 10 | .30         |  | Second Amendment to Credit Agreement between Meadowbrook
    Insurance Group, Inc. and Standard Federal Bank National
    Association, dated September 8, 2005                                                                                                                                                                                                                                      |  |  | (15 | )
|        | 10 | .31         |  | Purchase Agreement among Meadowbrook Insurance Group, Inc.,
    Meadowbrook Capital Trust II, and Merrill Lynch
    International, dated as of September 16, 2005                                                                                                                                                                                                                                   |  |  | (14 | )
|        | 10 | .32         |  | 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                                                                                                                                                          |  |  | (14 | )
|        | 10 | .33         |  | Guarantee Agreement between Meadowbrook Insurance Group, Inc.,
    and LaSalle Bank National Association, dated as of
    September 16, 2005                                                                                                                                                                                                                                                        |  |  | (14 | )
|        | 10 | .34         |  | Convertible Note between Meadowbrook Insurance Group, Inc. and
    Renaissance Insurance Group, LLC, dated December 20, 2005                                                                                                                                                                                                                                                                        |  |  | (17 | )
|        | 10 | .35         |  | Third Amendment to Credit Agreement between Meadowbrook
    Insurance Group, Inc. and LaSalle Bank Midwest National
    Association, dated December 28, 2005                                                                                                                                                                                                                                        |  |  | (17 | )
|        | 10 | .36         |  | Inter-Company Reinsurance Agreement by and between Star
    Insurance Company and Ameritrust Insurance Company, Savers
    Property and Casualty Insurance Company, and Williamsburg
    National Insurance Company, dated January 1, 2006                                                                                                                                                          |  |  | (17 | )
|        | 10 | .37         |  | Form of Management Services Agreement by and between Meadowbrook
    Insurance Group, Inc., Meadowbrook, Inc., and Star Insurance
    Company, Williamsburg National Insurance Co., Ameritrust
    Insurance Corporation, American Indemnity Insurance Company,
    Ltd., and Preferred Insurance Company, Ltd., respectively, each
    dated January 1, 2006                                       |  |  | (17 | )
|        | 10 | .38         |  | Management Services Agreement by and between Savers Property and
    Casualty Insurance Company and Meadowbrook, Inc., dated
    January 1, 2006                                                                                                                                                                                                                                                    |  |  | (17 | )

109



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##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                          |  |  |     |  
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | --- | -
|Exhibit |    |             |  | Filing                                                                                                                                                                                                                                                                                                                  
|No.     |    | Description |  | Basis                                                                                                                                                                                                                                                                                                                   
|        |    |             |  |                                                                                                                                                                                                                                                                                                                         
|        | 10 | .39         |  | Employment Agreement between Meadowbrook, Inc., and Meadowbrook
    Insurance Group, Inc. and Merton J. Segal, dated January 1,
    2006                                                                                                                                                                                 |  |  | (16 | )
|        | 10 | .40         |  | Executive Nonqualified Excess Plan, Plan Document, effective
    May 1, 2006, filed as Exhibit 10.1 to the
    Companys Form 8-K, filed on May 31, 2006                                                                                                                                                                 |  |  | (18 | )
|        | 10 | .41         |  | Executive Nonqualified Excess Plan Adoption Agreement, effective
    May 1, 2006, filed as Exhibit 10.2 to the
    Companys Form 8-K, filed on May 31, 2006                                                                                                                                                             |  |  | (18 | )
|        | 10 | .42         |  | 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                                                                                                    |  |  | (18 | )
|        | 14 |             |  | Compliance Program/Code of Conduct                                                                                                                                                                                                                                                                                       |  |  |     |  
|        | 16 |             |  | PricewaterhouseCoopers Letter to the Commission dated
    August 10, 2005, filed as Exhibit 16.1 to the
    Companys Form 8-K, dated August 12, 2005                                                                                                                                                                   |  |  |     |  
|        | 21 |             |  | List of Subsidiaries                                                                                                                                                                                                                                                                                                     |  |  |     |  
|        | 23 | .1          |  | Consent of Independent Registered Public Accounting Firm
    (Ernst & Young LLP)                                                                                                                                                                                                                                         |  |  |     |  
|        | 23 | .2          |  | Consent of Independent Registered Public Accounting Firm
    (PricewaterhouseCoopers LLP)                                                                                                                                                                                                                                |  |  |     |  
|        | 24 |             |  | Power of Attorney                                                                                                                                                                                                                                                                                                        |  |  |     |  
|        | 28 | .1          |  | Star Insurance Companys 2006 Schedule P                                                                                                                                                                                                                                                                                 |  |  | (2  | )
|        | 28 | .2          |  | Savers Property & Casualty Insurance Companys
    2006 Schedule P                                                                                                                                                                                                                                                       |  |  | (2  | )
|        | 28 | .3          |  | Williamsburg National Insurance Companys 2006
    Schedule P                                                                                                                                                                                                                                                            |  |  | (2  | )
|        | 28 | .4          |  | Ameritrust Insurance Corporations 2006 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 to Securities Exchange Act
    Rule 13a-14(a)                                                                                                                                                                                  |  |  |     |  
|        | 32 | .1          |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by Robert S. Cubbin, Chief Executive Officer of
    the Corporation                                                                                                               |  |  |     |  
|        | 32 | .2          |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by Karen M. Spaun, Chief Financial Officer of
    the Corporation                                                                                                                 |  |  |     |  
|        | 99 | .1          |  | Rights Agreement, dated as of September 30, 1999, by and
    between Meadowbrook Insurance Group, Inc. and First Chicago
    Trust Company of New York, including the Certificate of
    Designation, the form of Rights Certificate and the Summary of
    Rights attached thereto as Exhibits A, B and C, respectively |  |  | (3  | )






| |     |                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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) | Incorporated by reference to Exhibit 99.1 to the
    Companys
    Form 8-A filed
    with the Securities and Exchange Commission on October 12,
    1999.                  
|
| | (4) | Filed as Exhibit to
    Form 10-K for the
    year ending December 31, 1998.                                                                                                
|
| | (5) | Filed as Exhibit to
    Form 10-Q for the
    period ending March 31, 2002.                                                                                                 
|
| | (6) | Filed as Exhibit to
    Form 10-K for the
    year ending December 31, 2002.                                                                                                
|
| | (7) | Filed as Exhibit to
    Form 10-Q for the
    period ending September 30, 2003.                                                                                             
|
| | (8) | Filed as Exhibit to
    Form 10-K for the
    year ending December 31, 2003                                                                                                 
|
| | (9) | Filed as Appendix to Meadowbrook Insurance Group, Inc. 2004
    Proxy Statement.                                                                                            



|     |                                                                                   
|---- | ----------------------------------------------------------------------------------
|(10) | Filed as Exhibit to Current Report on
    Form 8-K filed on
    November 18, 2004.
|    
|(11) | Filed as Exhibit to
    Form 10-Q for the
    period ending June 30, 2004.        

110



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##### 





|     |                                                                                    
|---- | -----------------------------------------------------------------------------------
|(12) | Filed as Exhibit to
    Form 10-K for the
    year ending December 31, 2004.       
|    
|(13) | Filed as Exhibit to
    Form 10-Q for the
    period ending June 30, 2005.         
|    
|(14) | Filed as Exhibit to Current Report on
    Form 8-K filed on
    September 22, 2005.
|    
|(15) | Filed as Exhibit to
    Form 10-Q for the
    period ending September 30, 2005.    
|    
|(16) | Filed as Exhibit to Current Report on
    Form 8-K filed on
    March 9, 2006.     
|    
|(17) | Filed as Exhibit to
    Form 10-K for the
    year ending December 31, 2005.       
|    
|(18) | Filed as Exhibit to
    Form 10-Q for the
    period ending June 30, 2006.         

111



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##### 



SIGNATURES






| |                                     
| | ------------------------------------
| | Meadowbrook Insurance
    Group, Inc
|
| | By:            -s- Robert S. Cubbin 
| |                                     
| | Robert S. Cubbin                    
| | Chief Executive Officer             
| | (Principal Executive Officer)       
|
| | By:            -s- Karen M. Spaun   
| |                                     
| | Karen M. Spaun                      
| | Senior Vice President and           
| | Chief Financial Officer             
| | (Principal Financial Officer)       





|                                         |  |                                                                                   |  |               
|---------------------------------------- |  | --------------------------------------------------------------------------------- |  | --------------
|Signature                                |  | Title                                                                             |  | Date          
|                                         |  |                                                                                   |  |               
|**Merton
    J. Segal                    |  | Chairman and Director                                                             |  | March 13, 2007
|                                        
|-s- Robert S. CubbinRobert
    S. Cubbin |  | President, Chief Executive Officer and Director (Principal
    Executive Officer) |  | March 13, 2007
|                                        
|**Joseph
    S. Dresner                  |  | Director                                                                          |  | March 13, 2007
|                                        
|**Hugh
    W. Greenberg                  |  | Director                                                                          |  | March 13, 2007
|                                        
|**Florine
    Mark                       |  | Director                                                                          |  | March 13, 2007
|                                        
|**Robert
    H. Naftaly                  |  | Director                                                                          |  | March 13, 2007
|                                        
|**David
    K. Page                      |  | Director                                                                          |  | March 13, 2007
|                                        
|**Robert
    W. Sturgis                  |  | Director                                                                          |  | March 13, 2007
|                                        
|**Bruce
    E. Thal                      |  | Director                                                                          |  | March 13, 2007

112



---



##### 



|                                                                    |  |          |  |               
|------------------------------------------------------------------- |  | -------- |  | --------------
|Signature                                                           |  | Title    |  | Date          
|                                                                    |  |          |  |               
|                                                                   
|**Herbert
    Tyner                                                 |  | Director |  | March 13, 2007
|                                                                   
|**By:-s- Robert S. CubbinRobert
    S. Cubbin,
    Attorney-in-fact |  |          |  |               

113