##### Table of Contents





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

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934For the fiscal year ended December 31, 2007oro

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

38-2626206(State of
    Incorporation)

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

48034-6112(Address of principal executive
    offices)

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

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

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o o
  Rule 12b-2 o þ
    Documents
    Incorporated by Reference




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##### Table of Contents





MEADOWBROOK
    INSURANCE GROUP, INC.
  PART I
  Item 1.
    Business  The
    Company
        Significant
    Acquisitions
  
    On April 16, 2007, we acquired the business of
    U.S. Specialty Underwriters, Inc. (USSU). USSU
    is a specialty program manager that produces fee based income by
    underwriting excess workers compensation coverage for a
    select group of insurance companies.
    In November 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 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.
    As previously indicated, PICL was dissolved effective
    January 31, 2008.
    In July 1998, we acquired Florida Preferred Administrators, Inc.
    (Florida Preferred), a third party administrator and
    Ameritrust Insurance Corporation (Ameritrust). In
    December 2002, Ameritrust became a wholly owned subsidiary of
    Star. Florida Preferred provides a broad range of risk
    management services for Ameritrust and other third parties.
    In July 1997, we acquired Crest Financial Corporation
    (Crest), a California-based holding company, which
    formerly owned Williamsburg National Insurance Company
    (Williamsburg). Crest provides 2




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MEADOWBROOK
    INSURANCE GROUP, INC.
    
    In July 1990, we acquired Savers Property and Casualty Insurance
    Company (Savers).  Proposed
    Merger with ProCentury Corporation
        Employees
  Insurance Operations
  Overview
  fee-for-service
       3




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  rent-a-captive. rent-a-captive Accounting
    and Reporting for Reinsurance of Short-Duration and
    Long-Duration Contracts. fee-for-service
    
    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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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
      Specialty
    Risk Management Operations
  fee-for-service
    
    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
  Fee-for-Service
    Specialty Programs:
  fee-for-service
 5




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
      
    program design and development;
    underwriting;
    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.      Insurance
    Company Programs:
  rent-a-captive. rent-a-captive rent-a-captive, rent-a-captive rent-a-captive Accounting and Reporting for
    Reinsurance of Short-Duration and Long-Duration
    Contracts.
   6




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##### Table of Contents



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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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
        and/or Related Party
    Disclosures
    excess-of-loss excess-of-loss
      Description
    of Major Specialty Risk Management Services
  fee-for-service
  Program and Product Design.
  Underwriting Risk Selection and Policy
    Issuance.
 8




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
    Claims Administration and Handling.
  Loss Prevention and Control.
  Administration of Risk-Bearing Entities. and/or rent-a-captives
  Reinsurance Placement. excess-of-loss
  Sales, Marketing, and Public Relations.
      Insurance
    Company Subsidiaries
  small-to-medium
 9




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  rent-a-captive
                Gross Written Premium

2007


%


2006


%


2005


%


2004


%


2003


%Workers Compensation

$
116,717



33.69
%

$
118,794



35.90
%

$
133,732



40.26
%

$
146,982



46.89
%

$
141,456



55.85
%Commercial Multi-Peril


100,364



28.97
%


94,355



28.52
%


85,978



25.88
%


71,715



22.88
%


48,091



18.99
%Inland Marine


11,629



3.36
%


12,837



3.88
%


12,467



3.75
%


10,925



3.48
%


9,758



3.85
%Other Liability


28,550



8.24
%


20,001



6.04
%


16,167



4.87
%


15,248



4.86
%


10,473



4.13
%Other Commercial Auto Liability


61,119



17.64
%


59,308



17.92
%


59,144



17.80
%


48,070



15.33
%


26,902



10.62
%All Other Lines


28,072



8.10
%


25,577



7.73
%


24,721



7.44
%


20,553



6.56
%


16,600



6.55
%Total

$
346,451



100.00
%

$
330,872



100.00
%

$
332,209



100.00
%

$
313,493



100.00
%

$
253,280



100.00
%   10




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Net Earned Premium

2007


%


2006


%


2005


%


2004


%


2003


%Workers Compensation

$
102,256



38.13
%

$
108,085



42.40
%

$
119,423



47.78
%

$
117,914



54.97
%

$
93,324



61.72
%Commercial Multi-Peril


71,049



26.49
%


63,138



24.77
%


54,829



21.94
%


43,701



20.37
%


26,075



17.24
%Inland Marine


1,165



0.43
%


1,528



0.60
%


1,727



0.69
%


1,628



0.76
%


1,556



1.03
%Other Liability


15,571



5.81
%


10,433



4.09
%


8,072



3.23
%


6,416



2.99
%


4,849



3.21
%Other Commercial Auto Liability


53,469



19.94
%


49,341



19.36
%


45,374



18.15
%


29,274



13.65
%


12,940



8.56
%All Other Lines


24,687



9.20
%


22,395



8.79
%


20,534



8.21
%


15,560



7.25
%


12,461



8.24
%Total

$
268,197



100.00
%

$
254,920



100.00
%

$
249,959



100.00
%

$
214,493



100.00
%

$
151,205



100.00
%   Net Written Premium

2007


%


2006


%


2005


%


2004


%


2003


%Workers Compensation

$
105,003



37.47
%

$
104,846



39.92
%

$
117,287



45.44
%

$
122,896



52.53
%

$
111,572



58.78
%Commercial Multi-Peril


76,280



27.22
%


67,504



25.70
%


59,870



23.19
%


46,351



19.81
%


36,628



19.30
%Inland Marine


1,212



0.43
%


1,271



0.48
%


1,690



0.65
%


1,630



0.70
%


1,500



0.79
%Other Liability


18,915



6.75
%


12,384



4.71
%


8,004



3.10
%


7,568



3.23
%


6,278



3.31
%Other Commercial Auto Liability


52,798



18.84
%


52,950



20.16
%


49,122



19.03
%


37,762



16.14
%


19,599



10.32
%All Other Lines


26,003



9.28
%


23,713



9.03
%


22,161



8.59
%


17,754



7.59
%


14,250



7.51
%Total

$
280,211



100.00
%

$
262,668



100.00
%

$
258,134



100.00
%

$
233,961



100.00
%

$
189,827



100.00
%       Reserves
      Losses and Loss Adjustment Expenses and
    Reinsurance Recoverables Summary of Significant Accounting Policies Liability for Losses and Loss
    Adjustment Expenses
 11




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MEADOWBROOK
    INSURANCE GROUP, INC.
  Critical Accounting Policies Reserves Managements Discussion and Analysis
  Analysis
    of Loss and Loss Adjustment Expense Development(1)
  Years Ended December 31,1998


1999


2000


2001


2002


2003


2004


2005


2006


2007(In thousands)Reserves for losses and LAE at end of period

$
84,254


$
127,500


$
172,862


$
198,653


$
193,116


$
192,019


$
226,996


$
271,423


$
302,655


$
341,541Deconsolidation of subsidiary(1)


(147
)


(1,425
)


(3,744
)


(5,572
)


(2,973
)


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

$
84,107


$
126,075


$
169,118


$
193,081


$
190,143


$
189,030


$
226,996


$
271,423


$
302,655


$
341,541Cumulative paid as of1 year later


39,195



54,928



70,952



77,038



78,023



71,427



79,056



83,271



81,7792 years later


56,763



90,416



115,669



130,816



122,180



118,729



124,685



133,8093 years later


76,776



116,001



146,548



157,663



151,720



145,279



153,7804 years later


85,447



132,995



160,673



176,172



167,288



159,2205 years later


93,009



139,939



171,992



186,847



174,7786 years later


96,739



146,997



179,010



191,9367 years later


101,433



150,514



182,9548 years later


104,225



152,5449 years later


105,569Reserves re-estimated as of end of year:1 year later


98,587



146,213



182,976



199,171



193,532



193,559



231,880



268,704



295,5632 years later


106,487



144,453



186,191



205,017



196,448



203,394



227,462



263,0693 years later


102,075



152,630



189,632



207,379



202,126



205,650



226,4374 years later


104,017



156,997



190,305



211,394



203,738



202,7485 years later


106,668



158,287



196,158



213,802



202,0286 years later


109,038



159,449



199,520



212,2747 years later


110,541



161,376



198,5008 years later


112,340



161,0239 years later


111,935Net cumulative deficiency:Dollars

$
(27,828
)

$
(34,948
)

$
(29,382
)

$
(19,193
)

$
(11,885
)

$
(13,718
)

$
559


$
8,354


$
7,092Percentage


33.1
%


27.7
%


17.4
%


9.9
%


6.3
%


7.3
%


0.2
%


3.1
%


2.3
%Net reserves


84,107



126,075



169,118



193,081



190,143



189,030



226,996



271,423



302,655



341,541Ceded reserves


64,590



101,744



168,962



195,943



181,817



147,446



151,161



187,254



198,422



198,461Gross reserves


148,697



227,819



338,080



389,024



371,960



336,476



378,157



458,677



501,077



540,002Net re-estimated


111,935



161,023



198,500



212,274



202,028



202,748



226,437



263,069



295,563Ceded re-estimated


107,654



178,143



260,841



286,528



255,523



244,468



205,638



205,037



196,575Gross re-estimated


219,589



339,166



459,341



498,802



457,551



447,216



432,075



468,106



492,138Gross cumulative (deficiency) redundancy

$
(70,892
)

$
(111,347
)

$
(121,261
)

$
(109,778
)

$
(85,591
)

$
(110,740
)

$
(53,918
)

$
(9,429
)

$
8,939     (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.
     2007


2006GAAP reserves for losses and LAE

$
540,002


$
501,077Reinsurance recoverables for unpaid losses


(198,461
)


(198,422
)Allowances against reinsurance recoverables*


(833
)


(1,041
)Non-regulated foreign insurance subsidiary; PICL**






(1,273
)Statutory reserves for losses and LAE

$
340,708


$
300,341     *
    
    The GAAP allowance for reinsurance
    recoverables is reported as a Schedule F penalty or a
    non-admitted asset for statutory accounting.**
    
    PICL offered clients captive or
    rent-a-captive
    options. It was a foreign insurance company and, therefore, was
    not included in the combined statutory financial statements
    filed with the National Association of Insurance Commissioners
    and state regulators. Effective September 30, 2007, Star
    entered into a novation agreement with PICL in which Star
    assumed a portion of PICLs assets and liabilities. PICL
    was dissolved effective January 31, 2008.      Investments
  Investments Investments
  Competition
    and Pricing
     13




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##### Table of Contents



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;
    underwriting and claims settlement practices;
    restrictions on the size of risks that may be insured by a
    single company;
    licensing of insurers and agents;
    deposits of securities for the benefit of policyholders; and
    the filing of periodic reports with respect to financial
    condition and other matters.    Holding
    Company Regulatory Acts
    Various
    State and Federal Regulation
   14




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##### Table of Contents



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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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
      Restrictions
    on Dividends and Risk-Based Capital
  Regulatory Matters and Rating Issues Regulatory and
    Rating Issues
  NAIC-IRIS
    Ratios
  Regulatory and
    Rating Issues
  Effect of
    Federal Legislation
     16




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Available
    Information
  www.meadowbrook.com. Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov
  Corporate
    Governance Listing Standards
    Item 1A.
    Risk
    Factors  We
    face risks related to our proposed merger with ProCentury
    Corporation
    If our
    estimates of reserves for losses and loss adjustment expenses
    are not adequate, we will have to increase our reserves, which
    would result in reductions in net income, retained earnings,
    statutory surplus, liquidity, and may limit our ability to pay
    future dividends.
    
    the amounts of claims settlements and awards
    legislative activity
    changes in inflation and economic conditions
    accuracy and timely reporting of claim information 17




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
     If our
    financial strength ratings are reduced, we may be adversely
    impacted.
      If
    market conditions cause our reinsurance to be more costly or
    unavailable, we may be required to bear increased risks or
    reduce the level of our underwriting commitments.
  excess-of-loss
  We are
    subject to credit risk with respect to the obligations of our
    reinsurers and risk-sharing partners. The inability of our
    reinsurers or risk-sharing partners to meet their obligations
    could adversely affect our profitability.
  excess-of-loss
  rent-a-captive,
 18




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
    We
    face competitive pressures in our business that could cause our
    revenues to decline and adversely affect our
    profitability.
      
    the formation of new insurers and an influx of new capital in
    the marketplace as existing companies attempt to expand their
    business as a result of better pricing
    and/or terms
    programs in which state-sponsored entities provide property
    insurance in catastrophe-prone areas or other alternative market
    types of coverage
    changing practices created by the internet, which has increased
    competition within the insurance business    Our
    results may fluctuate as a result of many factors, including
    cyclical changes in the insurance industry.
    
    rising levels of actual costs that are not known by companies at
    the time they price their products
    volatile and unpredictable developments, including man-made,
    weather-related and other natural catastrophes or terrorist
    attacks
    changes in loss reserves resulting from the general claims and
    legal environments as different types of claims arise and
    judicial interpretations relating to the scope of insurers
    liability develop
    fluctuations in interest rates, inflationary pressures and other
    changes in the investment environment, which affect returns on
    invested assets and may impact the ultimate payout of losses
    increases in medical costs beyond historic or expected annual
    inflationary levels   19




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
    Negative
    developments within the workers compensation insurance
    industry may adversely affect our financial condition and
    results of operations.
    The
    failure of any of the loss limitation methods we employ could
    have a material adverse effect on our results of operations and
    financial condition.
  excess-of-loss Excess-of-loss
  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.
     20




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  We
    could be forced to sell investments to meet our liquidity
    requirements.
    Because
    we are heavily regulated by the states in which we operate, we
    may be limited in the way we operate.
    
    standards of solvency, including risk-based capital measurements
    restrictions on the nature, quality and concentration of
    investments
    restrictions on the types of terms that we can include in the
    insurance policies we offer
    required methods of accounting
    required reserves for unearned premiums, losses and other
    purposes
    permissible underwriting and claims settlement practices
    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     21




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Our
    reliance on producers subjects us to their credit
    risk.
    Provisions
    of the Michigan Business Corporation Act, our articles of
    incorporation and other corporate governing documents and the
    insurance laws of Michigan and Missouri may discourage takeover
    attempts.
      1 3
 22




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
      Most
    states assess our Insurance Company Subsidiaries to provide
    funds for failing insurance companies and those assessments
    could be material.
    We may
    require additional capital in the future, which may not be
    available or may only be available on unfavorable
    terms.
  and/or
  Our
    performance is dependent on the continued services and
    performance of our senior management and other key
    personnel.
     23




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
    We
    rely on our information technology and telecommunications
    systems to conduct our business.
    Managing
    technology initiatives and obtaining the efficiencies
    anticipated with technology implementation may present
    significant challenges.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties         24




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Item 3.
    Legal
    Proceedings  Accounting for
    Contingencies,
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   25




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##### Table of Contents



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, 2008Corporate Headquarters26255 American Drive
    Southfield,  MI   Shareholder
    Relations and
    Form 10-K
  Form 10-K,
   (248) 204-8178
   (248) 204-8590
  Direct
    Investment Plan
    1-800-442-8134
  Share
    Price and Dividend Information
    December 31, 2007

High


Low


DividendsFirst Quarter

$
11.68


$
9.10


Second Quarter


12.45



9.94


Third Quarter


11.57



8.02


Fourth Quarter


10.00



8.40


   26




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  December 31, 2006

High


Low


DividendsFirst Quarter

$
7.00


$
5.63


Second Quarter


8.91



6.68


Third Quarter


11.83



8.32


Fourth Quarter


12.48



8.78


   Liquidity and Capital Resources
    Shareholders
    of Record
    Recent
    Sales of Unregistered Securities and Use of Proceeds from
    Registered Securities
  Form S-3 No. 333-143244),
  Purchase
    of Equity Securities by the Issuer
   27




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##### Table of Contents



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


12/31/2002


12/31/2003


12/31/2004


12/31/2005


12/31/2006


12/31/2007Meadowbrook Insurance Group, Inc.



100.00




170.56




201.21




235.48




398.79




379.44Russell 2000



100.00




147.25




174.24




182.18




215.64




212.26SNL Insurance $500M-$1B Index



100.00




138.64




168.56




152.61




167.02




159.80  28




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Item 6.
    Selected
    Financial Data  MEADOWBROOK
    INSURANCE GROUP, INC.
    SELECTED CONSOLIDATED FINANCIAL DATA
  For the Years Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share and ratio data)Income Statement Data:Gross written premiums

$
346,451


$
330,872


$
332,209


$
313,493


$
253,280Net written premiums


280,211



262,668



258,134



233,961



189,827Net earned premiums


268,197



254,920



249,959



214,493



151,205Net commissions and fees


45,988



41,172



35,916



40,535



45,291Net investment income


26,400



22,075



17,975



14,911



13,484Net realized gains


150



69



167



339



823Total revenue


340,735



318,236



304,017



270,278



210,803Net losses and LAE


150,969



146,293



151,542



135,938



98,472Policy acquisition and other underwriting expenses


53,717



50,479



44,439



33,424



23,606Other administrative expenses


32,269



28,824



26,810



25,588



22,879Salaries and employee benefits


56,433



54,569



51,331



52,297



48,238Amortization expense


1,930



590



373



376



353Interest expense


6,030



5,976



3,856



2,281



977Income before income taxes and equity earnings of affiliates


39,387



31,505



25,666



20,374



16,278Equity earnings of affiliates


331



128



1



39



3Net income


27,992



22,034



17,910



14,061



10,099Earnings per share  Diluted

$
0.85


$
0.75


$
0.60


$
0.48


$
0.35Balance Sheet Data:Total investments and cash and cash equivalents

$
651,601


$
527,600


$
460,233


$
402,156


$
324,235Total assets


1,113,966



969,000



901,344



801,696



692,266Loss and LAE reserves


540,002



501,077



458,677



378,157



339,465Debt






7,000



7,000



12,144



17,506Debentures


55,930



55,930



55,930



35,310



10,310Shareholders equity


301,894



201,693



177,365



167,510



155,113Book value per share

$
8.16


$
6.93


$
6.19


$
5.76


$
5.34Other Data:GAAP ratios (insurance companies only):Net loss and LAE ratio(1)


61.2
%


62.3
%


65.2
%


67.9
%


70.1
%Expense ratio(1)


34.2
%


34.5
%


33.5
%


33.5
%


34.3
%Combined ratio


95.4
%


96.8
%


98.7
%


101.4
%


104.4
%     (1)
    
    Both the GAAP loss and loss adjustment expense ratio and the
    GAAP expense ratio are calculated based upon unconsolidated
    insurance company operations. The following table sets forth the
    intercompany fees, which are eliminated upon onsolidation. 29




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
   Unconsolidated
    GAAP data  Ratio Calculation Table:
  For the Years Ended December 31,2007


2006


2005


2004


2003Net earned premiums

$
268,197


$
254,920


$
249,959


$
214,493


$
151,205Consolidated net losses and LAE

$
150,969


$
146,293


$
151,542


$
135,938


$
98,472Intercompany claim fees


13,058



12,553



11,523



9,691



7,514Unconsolidated net losses and LAE

$
164,027


$
158,846


$
163,065


$
145,629


$
105,986GAAP net loss and LAE ratio


61.2
%


62.3
%


65.2
%


67.9
%


70.1
%Consolidated policy acquisition and other underwriting expenses

$
53,717


$
50,479


$
44,439


$
33,424


$
23,606Intercompany administrative and other underwriting fees


37,890



37,442



39,231



38,359



28,296Unconsolidated policy acquisition and other underwriting expenses

$
91,607


$
87,921


$
83,670


$
71,783


$
51,902GAAP expense ratio


34.2
%


34.5
%


33.5
%


33.5
%


34.3
%GAAP combined ratio


95.4
%


96.8
%


98.7
%


101.4
%


104.4
%      30




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  This
    Form 10-K
    may provide information including certain statements which
    constitute forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. These include statements regarding the intent, belief,
    or current expectations of management, including, but not
    limited to, those statements that use the words
    believes, expects,
    anticipates, estimates, or similar
    expressions. You are cautioned that any such forward-looking
    statements are not guarantees of future performance and involve
    a number of risks and uncertainties, and results could differ
    materially from those indicated by such forward-looking
    statements. Among the important factors that could cause actual
    results to differ materially from those indicated by such
    forward-looking statements are: the frequency and severity of
    claims; uncertainties inherent in reserve estimates;
    catastrophic events; a change in the demand for, pricing of,
    availability or collectibility of reinsurance; increased rate
    pressure on premiums; ability to obtain rate increases in
    current market conditions; investment rate of return; changes in
    and adherence to insurance regulation; actions taken by
    regulators, rating agencies or lenders; attainment of certain
    processing efficiencies; changing rates of inflation; general
    economic conditions and other risks identified in our reports
    and registration statements filed with the Securities and
    Exchange Commission. We are not under any obligation to (and
    expressly disclaim any such obligation to) update or alter our
    forward-looking statements whether as a result of new
    information, future events or otherwise.
  Description
    of Business
         31




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Specialty
    Risk Management Operations
  fee-for-service
  fee-for-service fee-for-service
  rent-a-captive. rent-a-captive rent-a-captive, rent-a-captive rent-a-captive Accounting and Reporting for
    Reinsurance of Short-Duration and Long-Duration
    Contracts.
   32




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Agency
    Operations
      For the Years Ended December 31,2007


2006


2005RevenuesNet earned premiums

$
268,197


$
254,920


$
249,959Management fees


23,963



18,714



16,741Claims fees


9,025



8,776



7,113Loss control fees


2,151



2,216



2,260Reinsurance placement


929



735



660Investment income


25,487



21,115



17,692Net realized gains


150



69



85Specialty risk management


329,902



306,545



294,510Agency operations


11,316



12,285



11,304Holding Company interest income earned


913



960



365Intersegment revenue


(1,396
)


(1,554
)


(2,162
)Consolidated revenue

$
340,735


$
318,236


$
304,017   Critical
    Accounting Policies
  General
    Losses
    and Loss Adjustment Expenses
     33




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##### Table of Contents



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


IBNR


TotalDirect

$
168,979


$
252,186


$
421,165Assumed-Directly Managed(1)


25,313



61,123



86,436Assumed-Residual Markets(2)


9,697



15,730



25,427Assumed-Retroceded


1,372



356



1,728Assumed-Other


3,272



1,974



5,246Gross


208,633



331,369



540,002Less Ceded


79,412



119,049



198,461Net

$
129,221


$
212,320


$
341,541     (1)
    
    Directly managed represents
    business managed and processed by our underwriting, claims, and
    loss control departments, utilizing our internal systems and
    related controls.(2)
    
    Residual markets represent
    mandatory pooled workers compensation business allocated
    to individual insurance company writers based on the
    insurers market share in a given state.     34




---



##### Table of Contents



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


Net IBNR


TotalWorkers Compensation

$
58,665


$
82,694


$
141,359Residual Markets


9,697



15,731



25,428Commercial Multiple Peril/General Liability


25,972



61,840



87,812Commercial Automobile


30,081



39,345



69,426Other


4,806



12,710



17,516Total

$
129,221


$
212,320


$
341,541   Claim
    Reserving Process and Methodology
  case-by-case
             35




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
         Paid Development Method.
    Incurred Development Method.
    Paid Bornhuetter-Ferguson Method.
   36




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Reported Bornhuetter-Ferguson Method.
    Initial Expected Loss Method.
    Paid Roll-forward Method.
  Incurred Roll-forward Method.
         37




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          Variability
    of Claim Reserve Estimates
     38




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Analysis of
    Loss and Loss Adjustment Expense Development
    Pre-tax Impact on Earnings from a Variance in Future Loss
    Payments and Case Reserves as of December 31, 2007(in thousands)Line of Business

Minimum Reserve Range


Maximum Reserve RangeWorkers Compensation (including Residual Markets)

$
(10,959
)


(6.6
)%

$
5,672



3.4
%Commercial Multiple Peril/General Liability


(8,894
)


(10.1
)%


9,694



11.0
%Commercial Automobile


(4,892
)


(7.0
)%


3,116



4.5
%Other


(2,057
)


(11.7
)%


2,368



13.5
%Total

$
(26,802
)


(7.8
)%

$
20,850



6.1
%      39




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Reinsurance
    Recoverables
    rent-a-captive,
  Investments
    and Other Than Temporary Impairments of Securities and
    Unrealized Losses on Investments
     40




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    sub-prime sub-prime
    Revenue
    Recognition
           41




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    sub-producer
    Legal
    Contingencies
  Accounting for
    Contingencies,
  Goodwill
  Goodwill and Other Intangible
    Assets,
 42




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Results
    of Operations
  Executive
    Overview
      year-to-date
     43




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
              2007
    compared to 2006:
    fee-for-service
 44




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  2006
    compared to 2005:
  fee-for-service
  fee-for-service
  Specialty
    Risk Management Operations
    For the Years Ended December 31,2007


2006


2005Revenue:Net earned premiums

$
268,197


$
254,920


$
249,959Management fees


23,963



18,714



16,741Claims fees


9,025



8,776



7,113Loss control fees


2,151



2,216



2,260Reinsurance placement


929



735



660Investment income


25,487



21,115



17,692Net realized gains


150



69



85Total revenue

$
329,902


$
306,545


$
294,510Pre-tax income Specialty risk management operations

$
47,898


$
38,292


$
29,546   2007
    compared to 2006:
     45




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          Other Items 
    Reserves
    2006
    compared to 2005:
     46




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
             47




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
      Agency
    Operations
    For the Years Ended December 31,2007

2006

2005Net commission

$
11,316


$
12,285


$
11,304Pre-tax income(1)

$
2,087


$
2,609


$
3,241     (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, 2007, 2006, and 2005, the
    allocation of corporate overhead to the agency operations
    segment was $2.8 million, $3.3 million, and
    $3.2 million, respectively. These balances include an
    allocation to our Insurance & Benefit Consultants
    agency business that was previously allocated to specialty risk
    management operations. For the years ended December 31,
    2006 and 2005, pre-tax income for agency operations was
    overstated and specialty risk management was understated by
    $342,000 and $102,000, respectively.  2007
    compared to 2006:
      2006
    compared to 2005:
   48




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Other
    Items
  Reserves
    Minimum Reserve


Maximum ReserveLine of Business

Range


Range


Selected ReservesWorkers Compensation(1)

$
155,828


$
172,459


$
166,787Commercial Multiple Peril / General Liability


78,918



97,506



87,812Commercial Automobile


64,534



72,542



69,426Other


15,459



19,884



17,516Total Net Reserves

$
314,739


$
362,391


$
341,541     (1)
    
    Includes Residual Markets       49




---



##### Table of Contents



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


Incurred Losses


Paid Losses


Reserves atDecember 31,


Current


Prior


Total


Current


Prior


Total


December 31,Line of Business

2006


Year


Years


Incurred


Year


Years


Paid


2007Workers Compensation

$
137,113


$
58,965


$
(11,428
)

$
47,537


$
8,150


$
35,141


$
43,291


$
141,359Residual Markets


26,098



9,678



(3,053
)


6,625



3,451



3,844



7,295



25,428Commercial Multiple Peril/General Liability


63,056



28,721



12,509



41,230



683



15,791



16,474



87,812Commercial Automobile


54,642



45,820



847



46,667



11,691



20,192



31,883



69,426Other


21,746



14,876



(5,966
)


8,910



6,328



6,812



13,140



17,516Net Reserves


302,655


$
158,060


$
(7,091
)

$
150,969


$
30,303


$
81,780


$
112,083



341,541Reinsurance Recoverable


198,422



























198,461Consolidated

$
501,077


























$
540,002   Re-Estimated


DevelopmentReserves at


as aReserves at


December 31,


Percentage ofDecember 31,


2007


Prior YearLine of Business

2006


on Prior Years


ReservesWorkers Compensation

$
137,113


$
125,685



(8.3
)%Commercial Multiple Peril/General Liability


63,056



75,565



19.8
%Commercial Automobile


54,642



55,489



1.6
%Other


21,746



15,780



(27.4
)%Sub-total


276,557



272,519



(1.5
)%Residual Markets


26,098



23,045



(11.7
)%Total Net Reserves

$
302,655


$
295,564



(2.3
)%   Workers
    Compensation Excluding Residual Markets
    Commercial
    Multiple Peril/General Liability
   50




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Commercial
    Automobile
    Other
    Residual
    Markets
    Salaries
    and Employee Benefits
      Variable Compensation
 51




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Other
    Administrative Expenses
        Amortization
    Expense
    Interest
    Expense
  Liquidity and Capital Resources
    Income
    Taxes
   52




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Liquidity
    and Capital Resources
    For the Years Ended December 31,2007


2006


2005Net income

$
27,992


$
22,034


$
17,910Regulated Subsidiaries:Net income

$
25,595


$
19,712


$
13,508Adjustments to reconcile net income to net cash provided by
    operating activities


696



3,033



3,003Changes in operating assets and liabilities


55,533



46,915



59,784Total adjustments


56,229



49,948



62,787Net cash provided by operating activities

$
81,824


$
69,660


$
76,295Non-regulated Subsidiaries:Net income

$
2,397


$
2,322


$
4,402Depreciation


3,147



2,553



2,452Amortization


1,930



590



198Interest


6,030



5,976



3,856Net income, excluding interest, depreciation, and amortization


13,504



11,441



10,908Adjustments to reconcile net income to net cash provided by
    operating activities


5,877



3,161



4,444Changes in operating assets and liabilities


(1,491
)


(852
)


(3,194
)Total adjustments


4,386



2,309



1,250 53




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  For the Years Ended December 31,2007


2006


2005Depreciation


(3,147
)


(2,553
)


(2,452
)Amortization


(1,930
)


(590
)


(198
)Interest


(6,030
)


(5,976
)


(3,856
)Net cash provided by operating activities

$
6,783


$
4,631


$
5,652Consolidated total adjustments


60,615



52,257



64,037Consolidated net cash provided by operating activities

$
88,607


$
74,291


$
81,947     2007
    compared to 2006:
        2006
    compared to 2005:
    fee-for-service
 54




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Other
    Items
  Long-term
    Debt
    InterestYear of



Year







Rate at

PrincipalIssuance

Description

Callable


Year Due


Interest Rate Terms

12/31/07

Amount2003

Junior subordinated debentures


2008



2033


Three-month LIBOR, plus 4.05%


9.28
%

$
10,3102004

Senior debentures


2009



2034


Three-month LIBOR, plus 4.00%


8.87
%


13,0002004

Senior debentures


2009



2034


Three-month LIBOR, plus 4.20%


9.23
%


12,0002005

Junior subordinated debentures


2010



2035


Three-month LIBOR, plus 3.58%


8.57
%


20,620Total


$
55,930           Interest
    Rate Swaps
  Accounting for
    Derivative Instruments and Hedging Activities,
  non-amortizing,
 55




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    non-amortizing,
    Revolving
    Line of Credit
          Investment
    Portfolio
   56




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    sub-prime sub-prime
  Shareholders
    Equity
  year-to-date
      2004-2006 Stock Options, Long Term Incentive
    Plan, and Deferred Compensation Plan
     57




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Acquisition
        Adjusted
    Expense Ratio
  fee-for-service fee-for-service
  For the Years Ended December 31,2007


2006


2005Net earned premiums

$
268,197


$
254,920


$
249,959Less:  Consolidated net loss and LAE


150,969



146,293



151,542Intercompany claim fees


13,058



12,553



11,523Unconsolidated net loss and LAE


164,027



158,846



163,065Consolidated policy acquisition and other underwriting expenses


53,717



50,479



44,439Intercompany administrative and other underwriting fees


37,890



37,442



39,231Unconsolidated policy acquisition and other underwriting expenses


91,607



87,921



83,670Underwriting income

$
12,563


$
8,153


$
3,224 58




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  For the Years Ended December 31,2007


2006


2005GAAP combined ratio as reported


95.4
%


96.8
%


98.7
%Specialty risk management operations pre-tax income

$
47,898


$
38,292


$
29,546Less:  Underwriting income


12,563



8,153



3,224Net investment income and capital gains


26,550



22,144



18,142Fee-based operations pre-tax income


8,785



7,995



8,180Agency operations pre-tax income


2,087



2,609



3,241Total
    fee-for-service
    pre-tax income

$
10,872


$
10,604


$
11,421GAAP expense ratio as reported


34.2
%


34.5
%


33.5
%Adjustment to include pre-tax income from total
    fee-for-service
    income(1)


4.1
%


4.2
%


4.6
%GAAP expense ratio as adjusted


30.1
%


30.3
%


28.9
%GAAP loss and LAE ratio as reported


61.2
%


62.3
%


65.2
%GAAP combined ratio as adjusted


91.3
%


92.6
%


94.1
%Reconciliation of consolidated pre-tax income:Specialty risk management operations pre-tax income:Fee-based operations pre-tax income

$
8,785


$
7,995


$
8,180Underwriting income


12,563



8,153



3,224Net investment income and capital gains


26,550



22,144



18,142Total specialty risk management operations pre-tax income


47,898



38,292



29,546Agency operations pre-tax income


2,087



2,609



3,241Less:  Holding company expenses


2,638



2,830



2,892Interest expense


6,030



5,976



3,856Amortization expense


1,930



590



373Consolidated pre-tax income

$
39,387


$
31,505


$
25,666     (1)
    
    Adjustment to include pre-tax income from total
    fee-for-service
    income is calculated by dividing total
    fee-for-service
    income by net earned premiums.  Regulatory
   59




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##### Table of Contents



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


One to


Three to


More ThanTotal


One Year


Three Years


Five Years


Five YearsNon-regulated companies:Lines of Credit(1)

$



$



$



$



$
Note Payable, non-interest bearing


4,300



2,150



2,150







Long-Term Debt(2):Senior debentures due 2034; issued $13.0 million, April
    2004 with variable interest


13,000















13,000Senior debentures due 2034; issued $12.0 million, May 2004
    with variable interest


12,000















12,000Junior subordinated debentures due 2035; issued
    $20.6 million, September 2005, with variable interest


20,620















20,620Junior subordinated debentures due 2033; issued
    $10.3 million, September 2003, with variable interest


10,310















10,310Total Long-Term Debt


60,230



2,150



2,150







55,930Interest Payable(3)Interest on Lines of Credit


















Interest on Long-Term Debt:Senior debentures due 2034; issued $13.0 million, April
    2004 with variable interest


8,071



1,153



2,306



2,306



2,306Senior debentures due 2034; issued $12.0 million, May 2004
    with variable interest


7,722



1,092



2,200



2,215



2,215Junior subordinated debentures due 2035; issued
    $20.6 million, September 2005, with variable interest


12,231



1,721



3,442



3,534



3,534 60




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##### Table of Contents



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


One to


Three to


More ThanTotal


One Year


Three Years


Five Years


Five YearsJunior subordinated debentures due 2033; issued
    $10.3 million, September 2003, with variable interest


6,411



916



1,831



1,832



1,832Total Interest Payable


34,435



4,882



9,779



9,887



9,887Operating lease obligations(4)


16,797



4,904



6,892



3,444



1,557Regulated companies:Losses and loss adjustment expenses(5)


540,002



139,109



192,243



100,231



108,419Total

$
651,464


$
151,045


$
211,064


$
113,562


$
175,793     (1)
    
    Relates to our revolving line of credit.(2)
    
    Five year call feature associated with debentures, estimated
    seven year repayment.(3)
    
    For interest rate terms and actual rates on long-term debt in
    effect as of December 31, 2007, refer to the Long-term
    Debtsection within Other Itemsof the Liquidity
    and Capital Resourcessection of Managements
    Discussion and Analysis. Estimates of interest expense for
    future periods are based on the most current interest rates in
    effect: on $13.0 million senior debentures at 8.87%; on
    $12.0 million senior debentures at 9.23%; on
    $20.6 million junior subordinated debentures at 8.57%; and
    on $10.3 million junior subordinated debentures at 8.88%.
    The assumption that the loans will be repaid at the end of seven
    years is based on managements best estimate of the life of
    the debentures.    (4)
    
    Consists of rental obligations under real estate leases related
    to branch offices. In addition, includes amounts related to
    equipment leases.(5)
    
    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 $198.5 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 $31.5 million, $69.9 million,
    $46.1 million, and $51.0 million, respectively,
    resulting in net losses and loss adjustment expenses of
    $107.6 million, $122.4 million, $54.1 million,
    and $57.4 million, respectively.    Variable
    Compensation
   61




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Regulatory
    and Rating Issues
           62




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Reinsurance
    Considerations
  excess-of-loss
    excess-of-loss excess-of-loss
  Reinsurance Premium Ceded


Reinsurance Recoverable


A.M. BestReinsurer

December 31, 2007


December 31, 2007


Rating(In thousands)


(In thousands)Employers Reinsurance Corporation

$
4,582


$
84,880



A+Munich American Reinsurance


5,653



12,269



A+Aspen Insurance UK Ltd.


5,140



11,125



AMotors Insurance Company


4,213



11,948



A−Lloyds Syndicate Number 4472


3,832



5,324



A   rent-a-captive
      December 31, 2007


December 31, 2006Non Risk


Risk





Non Risk


RiskSharing(1)


Sharing(2)


Total


Sharing(1)


Sharing(2)


TotalGross exposure

$
4,959


$
7,150


$
12,109


$
6,863


$
7,952


$
14,815Collateral or other security


(1
)


(3,114
)


(3,115
)


(170
)


(3,453
)


(3,623
)Allowance


(4,873
)


(3,268
)


(8,141
)


(6,693
)


(3,038
)


(9,731
)Net exposure

$
85


$
768


$
853


$



$
1,461


$
1,461     (1)
    
    Balances related to three unaffiliated insurance companies,
    which are under regulatory liquidation or control, for which
    allowances have been established; all other admitted reinsurers
    have an A.M. Best rating of A− or better. 63




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   (2)
    
    Balances related to risk-sharing partners, which have either
    captive or
    rent-a-captive
    quota-share reinsurance contracts with us.  Intercompany
    Pooling Agreement
    Off-Balance
    Sheet Arrangements
  Regulation S-K.
  Convertible
    Note
    Recent
    Accounting Pronouncements
  Fair Value
    Measurements.
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115.
 64




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  instrument-by-instrument
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51.
  Related
    Party Transactions
  Related Party
    Transaction
  Subsequent
    Events
  U.S.
    Specialty Underwriters, Inc.
   65




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Merger
    Agreement with ProCentury Corporation
    30-day 30-day 30-day
   66




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##### Table of Contents



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


Rates Unchanged


Rates Up 100bpsMarket Value

$
637,372


$
610,682


$
582,995Yield to Maturity or Call


3.28
%


4.28
%


5.28
%Effective Duration


4.14



4.42



4.68       Accounting for Derivative
    Instruments and Hedging Activities,
 67




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
      Item 8.
    Financial
    Statements and Supplementary Data  Quarterly Financial Data (Unaudited)
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
   68




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
    Form 10-K
  Changes
    in Internal Control over Financial Reporting
    Item 9B.
    Other
    Information    PART III
    Item 10.
    Directors,
    Executive Officers, and Corporate Governance  Information about the Nominees, the Incumbent
    Directors and Other Executive Officers, Corporate
    Governance, Code of Conduct,, Report of
    the Audit Committee, d 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
  69




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Equity Compensation Plan InformationNumber of SecuritiesRemaining Available forNumber of Securities to


Weighted-Average


Future Issuance Underbe Issued Upon Exercise


Exercise Price of


Equity Compensationof Outstanding Options,


Outstanding Options,


Plans (ExcludingWarrants and Rights


Warrants and Rights


Securities in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders


132,052


$
14.51



771,468Equity compensation plans not approved by security holders










Total


132,052


$
14.51



771,468   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  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
 70




---



##### 



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


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


72Report of Independent Registered Public
    Accounting Firm on Internal Control over Financial Reporting


73Consolidated Balance Sheet 
    December 31, 2007 and 2006


74Consolidated Statement of Income  For
    Years Ended December 31, 2007, 2006, and 2005


75Consolidated Statement of Comprehensive
    Income  For Years Ended December 31, 2007, 2006,
    and 2005


76Consolidated Statement of Shareholders
    Equity  For Years Ended December 31, 2007, 2006,
    and 2005


77Consolidated Statement of Cash Flows 
    For Years Ended December 31, 2007, 2006, and 2005


78Notes to Consolidated Financial Statements


79-1092.


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


110Schedule II Condensed Financial Information
    of Registrant


111-114Schedule III Supplementary Insurance
    Information


115-117Schedule IV Reinsurance


118Schedule V Valuation and Qualifying accounts


119Schedule VI Supplemental Information Concerning
    Property and Casualty Insurance Operations


1203.


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-KManagement Services AgreementManagement Services AgreementLand Contract AmendmentCompliance Program/Code of ConductList of SubsidiariesConsent of Independent Registered Public Accounting FirmPower of AttorneyCertification of Robert S. Cubbin, Chief Executive Officer, pursuant to Rule 13a-14(a)Certification of Karen M. Spaun, Chief Financial Officer, pursuant to Rule 13-14(a)Certification pursuant to Section 906, signed by Robert S. Cubbin, Chief Executive OfficerCertification pursuant to Section 906, signed by Karen M. Spaun, Chief Financial Officer   71




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             
    72




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
    73




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.



CONSOLIDATED
    BALANCE SHEET  December 31,2007


2006(In thousands,except share data)ASSETSInvestmentsDebt securities available for sale, at fair value (amortized
    cost of $604,829 and $486,213 in 2007 and 2006, respectively)

$
610,756


$
484,724Cash and cash equivalents


40,845



42,876Accrued investment income


6,473



5,884Premiums and agent balances receivable (net of allowance of
    $2,747 and $2,948 in 2007 and 2006, respectively)


87,341



85,578Reinsurance recoverable on:Paid losses


1,053



4,257Unpaid losses


198,461



198,422Prepaid reinsurance premiums


17,763



20,425Deferred policy acquisition costs


26,926



27,902Deferred income taxes, net


14,936



15,732Goodwill


43,497



31,502Other assets


65,915



51,698Total assets

$
1,113,966


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

$
540,002


$
501,077Unearned premiums


153,927



144,575Debt






7,000Debentures


55,930



55,930Accounts payable and accrued expenses


22,604



25,384Reinsurance funds held and balances payable


16,416



15,124Payable to insurance companies


6,231



5,442Other liabilities


16,962



12,775Total liabilities


812,072



767,307Shareholders EquityCommon stock, $0.01 stated value; authorized
    75,000,000 shares; 36,996,287 and 29,107,818 shares
    issued and outstanding


370



291Additional paid-in capital


194,621



126,828Retained earnings


104,274



76,282Note receivable from officer


(870
)


(871
)Accumulated other comprehensive income (loss)


3,499



(837
)Total shareholders equity


301,894



201,693Total liabilities and shareholders equity

$
1,113,966


$
969,000    74




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.



CONSOLIDATED
    STATEMENT OF INCOME  For the Years Ended December 31,2007


2006


2005(In thousands, except share and per share data)RevenuesPremiums earnedGross

$
337,099


$
327,287


$
325,522Ceded


(68,902
)


(72,367
)


(75,563
)Net earned premiums


268,197



254,920



249,959Net commissions and fees


45,988



41,172



35,916Net investment income


26,400



22,075



17,975Net realized gains


150



69



167Total revenues


340,735



318,236



304,017ExpensesLosses and loss adjustment expenses


191,885



212,383



237,775Reinsurance recoveries


(40,916
)


(66,090
)


(86,233
)Net losses and loss adjustment expenses


150,969



146,293



151,542Salaries and employee benefits


56,433



54,569



51,331Policy acquisition and other underwriting expenses


53,717



50,479



44,439Other administrative expenses


32,269



28,824



26,810Amortization expense


1,930



590



373Interest expense


6,030



5,976



3,856Total expenses


301,348



286,731



278,351Income before taxes and equity earnings


39,387



31,505



25,666Federal and state income tax expense


11,726



9,599



7,757Equity earnings of affiliates


331



128



1Net income

$
27,992


$
22,034


$
17,910Earnings Per ShareBasic

$
0.85


$
0.76


$
0.62Diluted

$
0.85


$
0.75


$
0.60Weighted average number of common sharesBasic


33,007,200



28,963,228



28,961,229Diluted


33,101,965



29,566,141



29,653,067    75




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.



CONSOLIDATED
    STATEMENT OF COMPREHENSIVE INCOME  For the Years Ended December 31,2007


2006


2005(In thousands)Net income

$
27,992


$
22,034


$
17,910Other comprehensive income, net of tax:Unrealized gains (losses) on securities


4,810



152



(6,023
)Net deferred derivative (loss) gain  hedging activity


(484
)


121



9Less: reclassification adjustment for gains included in net
    income


10



20



56Other comprehensive income (loss)


4,336



293



(5,958
)Comprehensive income

$
32,328


$
22,327


$
11,952    76




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.



CONSOLIDATED
    STATEMENT OF SHAREHOLDERS EQUITY  For the Years Ended December 31, 2007, 2006, and 2005AccumulatedOtherAdditional





Note


Comprehensive


TotalCommon


Paid-In


Retained


Receivable


Income


ShareholdersStock


Capital


Earnings


from Officer


(Loss)


Equity(In thousands)Balances January 1, 2005

$
290


$
126,085


$
37,175


$
(868
)

$
4,828


$
167,510Unrealized depreciation on available for sale securities


















(5,967
)


(5,967
)Deconsolidation of subsidiary


















9



9Long term incentive plan; stock award






923















923Stock-based employee compensation






41















41Issuance of 382,825 shares of common stock


4



1,193















1,197Retirement of 785,648 shares of common stock


(7
)


(3,423
)


(837
)










(4,267
)Note receivable from an officer














9







9Net income










17,910











17,910Balances December 31, 2005


287



124,819



54,248



(859
)


(1,130
)


177,365Unrealized depreciation on available for sale securities


















172



172Net deferred derivative gain  hedging activity


















121



121Long term incentive plan; stock award






897















897Stock-based employee compensation






121















121Issuance of 791,038 shares of common stock


8



4,153















4,161Retirement of 355,229 shares of common stock


(4
)


(3,162
)














(3,166
)Note receivable from an officer














(12
)






(12
)Net income










22,034











22,034Balances December 31, 2006


291



126,828



76,282



(871
)


(837
)


201,693Unrealized appreciation on available for sale securities


















4,820



4,820Net deferred derivative gain  hedging activity


















(484
)


(484
)Long term incentive plan; stock award for
    2007-2009
    plan years






772















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


4



(1,845
)














(1,841
)Stock-based employee compensation






2















2Issuance of 244,574 shares of common stock


3



1,373















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


(1
)


(1,020
)














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


64



58,520















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


9



9,991















10,000Note receivable from an officer














1







1Net income










27,992











27,992Balances December 31, 2007

$
370


$
194,621


$
104,274


$
(870
)

$
3,499


$
301,894    77




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.



CONSOLIDATED
    STATEMENT OF CASH FLOWS  For the Years Ended December 31,2007


2006


2005(In thousands)Cash Flows From Operating ActivitiesNet income

$
27,992


$
22,034


$
17,910Adjustments to reconcile net income to net cash provided by
    operating activities:Amortization of other intangible assets


1,930



590



198Amortization of deferred debenture issuance costs


353



236



175Depreciation of furniture, equipment, and building


3,147



2,553



2,452Net accretion of discount and premiums on bonds


2,707



2,646



2,395Gain on sale of investments


16



30



86Gain on sale of fixed assets


(88
)


(88
)


(170
)Stock-based employee compensation


2



121



41Incremental tax benefits from stock options exercised


(728
)


(1,532
)


Long term incentive plan expense


772



897



923Deferred income tax expense


(1,538
)


741



1,347Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable


2,111



(771
)


(713
)Reinsurance recoverable on paid and unpaid losses


3,166



(98
)


(33,513
)Prepaid reinsurance premiums


2,662



4,162



1,488Deferred policy acquisition costs


976



(1,531
)


(1,204
)Other assets


13



(1,044
)


5,612Increase (decrease) in:Losses and loss adjustment expenses


38,925



42,400



80,521Unearned premiums


9,352



3,585



6,688Payable to insurance companies


789



(1,242
)


(307
)Reinsurance funds held and balances payable


1,292



(116
)


(2,591
)Other liabilities


(5,244
)


718



609Total adjustments


60,615



52,257



64,037Net cash provided by operating activities


88,607



74,291



81,947Cash Flows From Investing ActivitiesPurchase of debt securities available for sale


(393,676
)


(201,920
)


(203,789
)Proceeds from sale of equity securities available for sale










8Proceeds from sales and maturities of debt securities available
    for sale


272,337



116,978



122,317Capital expenditures


(3,109
)


(4,850
)


(15,810
)Purchase of books of business


(3,344
)


(834
)


(3,557
)Acquisition of U.S. Specialty Underwriters, Inc.


(12,644
)






Proceeds from sale of assets










633Loan receivable


(310
)


(202
)


(5,905
)Net cash deposited in funds held


344



529



501Net cash used in investing activities


(140,402
)


(90,299
)


(105,602
)Cash Flows From Financing ActivitiesProceeds from lines of credit


19,025



14,078



14,307Payment of lines of credit


(26,025
)


(14,078
)


(19,451
)Book overdrafts


(39
)


142



924Cash payment for payroll taxes associated with long-term
    incentive plan net stock issuance


(1,841
)






Net proceeds from debentures










19,400Stock options exercised


(374
)


(538
)


1,092Share repurchases of common stock










(4,191
)Incremental tax benefits from stock options exercised


728



1,532



Net proceeds received from public equity offering


58,585







Other financing activities


(295
)


(290
)


(263
)Net cash provided by financing activities


49,764



846



11,818Net decrease in cash and cash equivalents


(2,031
)


(15,162
)


(11,837
)Cash and cash equivalents, beginning of year


42,876



58,038



69,875Cash and cash equivalents, end of year

$
40,845


$
42,876


$
58,038Supplemental Disclosure of Cash Flow Information:Interest paid

$
5,894


$
5,616


$
3,428Net income taxes paid

$
11,557


$
9,159


$
6,404Supplemental Disclosure of Non Cash Investing and Financing
    Activities:Tax benefit from stock options

$
728


$
1,532


$
105Stock-based employee compensation

$
2


$
121


$
41Common stock portion of purchase price for acquisition of U.S.
    Specialty Underwriters, Inc.

$
10,000


$



$
    78




---



##### Table of Contents



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
   79




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Reclassifications
  Segment
    Information Segment Information
  Cash and
    Cash Equivalents
    Investments
      sub-prime sub-prime
  Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
   80




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Losses
    and Loss Adjustment Expenses and Reinsurance
    Recoverables
            Revenue
    Recognition
       81




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        sub-producer
    Deferred
    Policy Acquisition Costs
    Participating
    Policyholder Dividends
    Furniture
    and Equipment
    Goodwill
    and Other Intangible Assets
  Goodwill and Other Intangible
    Assets,
 82




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income
    Taxes
      Stock
    Options
  Share-Based Payment, Accounting for Stock-Based Compensation 
    Transition and Disclosure  an amendment of FASB
    Statement No. 123.
       83




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2005Net income, as reported

$
17,910Add: Stock-based employee compensation expense included in
    reported income, net of related tax effects


27Deduct: Total stock-based employee compensation expense
    determined under fair-value-based methods for all awards, net of
    related tax effects


(108
)Pro forma net income

$
17,829Earnings per share:Basic  as reported

$
0.62Basic  pro forma

$
0.62Diluted  as reported

$
0.60Diluted  pro forma

$
0.60     Long Term
    Incentive Plan
    Deferred
    Compensation Plan
   84




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Earnings
    Per Share
      Comprehensive
    Income
  available-for-sale
  Derivative
    Instruments
  Accounting for Derivative
    Instruments and Hedging Activities,
    Recent
    Accounting Pronouncements
  Fair Value
    Measurements.
 85




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115. instrument-by-instrument
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51.
  2.
    Investments    December 31, 2007Cost or


Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueDebt Securities:Debt securities issued by the U.S. government and agencies

$
53,436


$
1,541


$
(29
)

$
54,948Obligations of states and political subdivisions


287,392



3,329



(323
)


290,398Corporate securities


116,406



1,941



(928
)


117,419Mortgage and asset-backed securities


147,595



1,011



(615
)


147,991Total Debt Securities available for sale

$
604,829


$
7,822


$
(1,895
)

$
610,756   86




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2006Cost or


Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueDebt Securities:Debt securities issued by the U.S. government and agencies

$
52,991


$
282


$
(521
)

$
52,752Obligations of states and political subdivisions


221,296



1,840



(1,460
)


221,676Corporate securities


102,365



1,368



(1,515
)


102,218Mortgage and asset-backed securities


109,561



143



(1,626
)


108,078Total Debt Securities available for sale

$
486,213


$
3,633


$
(5,122
)

$
484,724     December 31,2007


2006Unrealized appreciation

$
7,822


$
3,633Unrealized depreciation


(1,895
)


(5,122
)Net unrealized appreciation (depreciation)


5,927



(1,489
)Deferred federal income tax (expense) benefit


(2,075
)


521Net unrealized appreciation (depreciation) on investments, net
    of deferred federal income taxes

$
3,852


$
(968
)          87




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Available for SaleAmortized


EstimatedCost


Fair ValueDue in one year or less

$
35,891


$
35,893Due after one year through five years


172,396



174,508Due after five years through ten years


184,612



187,294Due after ten years


64,365



65,100Mortgage-backed securities


147,565



147,961$
604,829


$
610,756     2007


2006


2005Net Investment Income Earned From:Debt securities

$
23,746


$
19,376


$
16,080Equity securities


25







37Cash and cash equivalents


3,224



3,279



2,291Total gross investment income


26,995



22,655



18,408Less investment expenses


595



580



433Net investment income

$
26,400


$
22,075


$
17,975     Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
   88




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2007Less than 12 months


Greater than 12 months


TotalFair Value of





Fair Value of





Fair Value ofInvestments





Investments





Investmentswith


Gross


with


Gross


with


GrossUnrealized


Unrealized


Unrealized


Unrealized


Unrealized


UnrealizedLosses


Losses


Losses


Losses


Losses


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

$



$



$
5,963


$
(29
)

$
5,963


$
(29
)Obligations of states and political subdivisions


19,400



(68
)


45,177



(255
)


64,577



(323
)Corporate securities


15,564



(415
)


30,601



(513
)


46,165



(928
)Mortgage and asset backed securities


9,116



(95
)


47,963



(520
)


57,079



(615
)Totals

$
44,080


$
(578
)

$
129,704


$
(1,317
)

$
173,784


$
(1,895
)   December 31, 2006Less than 12 months


Greater than 12 months


TotalFair Value of





Fair Value of





Fair Value ofInvestments





Investments





Investmentswith


Gross


with


Gross


with


GrossUnrealized


Unrealized


Unrealized


Unrealized


Unrealized


UnrealizedLosses


Losses


Losses


Losses


Losses


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

$
14,586


$
(61
)

$
27,076


$
(460
)

$
41,662


$
(521
)Obligations of states and political subdivisions


45,726



(210
)


68,958



(1,250
)


114,684



(1,460
)Corporate securities


7,646



(61
)


55,520



(1,454
)


63,166



(1,515
)Mortgage and asset backed securities


20,462



(91
)


67,495



(1,535
)


87,957



(1,626
)Totals

$
88,420


$
(423
)

$
219,049


$
(4,699
)

$
307,469


$
(5,122
)   3.
    Liability
    for Losses and Loss Adjustment Expenses   89




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Years Ended December 31,2007


2006


2005Balance, beginning of year

$
501,077


$
458,677


$
378,157Less reinsurance recoverables


198,422



187,254



151,161Net balance, beginning of year


302,655



271,423



226,996Incurred related to:Current year


158,060



149,012



146,658Prior years


(7,091
)


(2,719
)


4,884Total incurred


150,969



146,293



151,542Paid related to:Current year


30,303



31,790



28,059Prior years


81,780



83,271



79,056Total paid


112,083



115,061



107,115Net balance, end of year


341,541



302,655



271,423Plus reinsurance recoverables


198,461



198,422



187,254Balance, end of year

$
540,002


$
501,077


$
458,677          90




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Reinsurance    excess-of-loss Accounting and Reporting for
    Reinsurance for Short-Duration and Long-Duration
    Contracts.
      excess-of-loss
  rent-a-captive
 91




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31, 2007


December 31, 2006Non Risk


Risk





Non Risk


RiskSharing(1)


Sharing(2)


Total


Sharing(1)


Sharing(2)


TotalGross exposure

$
4,959


$
7,150


$
12,109


$
6,863


$
7,952


$
14,815Collateral or other security


(1
)


(3,114
)


(3,115
)


(170
)


(3,453
)


(3,623
)Allowance


(4,873
)


(3,268
)


(8,141
)


(6,693
)


(3,038
)


(9,731
)Net exposure

$
85


$
768


$
853


$



$
1,461


$
1,461     (1)
    
    Balances related to three unaffiliated insurance companies,
    which are under regulatory liquidation or control, for which
    allowances have been established; all other admitted reinsurers
    have an A.M. Best rating of A− or better.(2)
    
    Balances related to risk-sharing partners, which have either
    captive or
    rent-a-captive
    quota-share reinsurance contracts with the Company.    excess-of-loss excess-of-loss excess-of-loss
     92




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                 93




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005Written


Earned


Written


Earned


Written


EarnedDirect

$
307,266


$
266,049


$
246,985


$
251,288


$
264,511


$
264,381Assumed(1)


39,184



71,050



83,887



75,999



67,698



61,141Ceded


(66,239
)


(68,902
)


(68,204
)


(72,367
)


(74,075
)


(75,563
)Net

$
280,211


$
268,197


$
262,668


$
254,920


$
258,134


$
249,959       (1)
    
    For the years ending December 31, 2007, 2006, and 2005,
    $31.0 million, $72.6 million, and $56.0 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    Specialty
    Risk Management Operations
  fee-for-service
  Agency
    Operations
   94




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Years Ended December 31,2007


2006


2005RevenuesNet earned premiums

$
268,197


$
254,920


$
249,959Management fees


23,963



18,714



16,741Claims fees


9,025



8,776



7,113Loss control fees


2,151



2,216



2,260Reinsurance placement


929



735



660Investment income


25,487



21,115



17,692Net realized gains


150



69



85Specialty risk management


329,902



306,545



294,510Agency operations


11,316



12,285



11,304Holding Company interest income earned


913



960



365Intersegment revenue


(1,396
)


(1,554
)


(2,162
)Consolidated revenue

$
340,735


$
318,236


$
304,017Pre-tax income:Specialty risk management

$
47,898


$
38,292


$
29,546Agency operations(1)


2,087



2,609



3,241Non-allocated expenses


(10,598
)


(9,396
)


(7,121
)Consolidated pre-tax income

$
39,387


$
31,505


$
25,666     (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, 2007,
    2006, and 2005, the allocation of corporate overhead to the
    agency operations segment was $2.8 million,
    $3.3 million, and $3.2 million, respectively. These
    balances include an allocation to our Insurance &
    Benefit Consultants agency business that was previously
    allocated to specialty risk management operations. For the years
    ended December 31, 2006 and 2005, pre-tax income for agency
    operations was overstated and specialty risk management was
    understated by $342,000 and $102,000, respectively.    For the Years Ended December 31,2007


2006


2005Holding company expenses

$
(2,638
)

$
(2,830
)

$
(2,892
)Amortization


(1,930
)


(590
)


(373
)Interest expense


(6,030
)


(5,976
)


(3,856
)$
(10,598
)

$
(9,396
)

$
(7,121
)   6.
    Debt  Lines of
    Credit
   95




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      LIBOR-based
    Senior
    Debentures
         96




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Junior
    Subordinated Debentures
  time-to-time,
      time-to-time,
            7.
    Derivative
    Instruments  Accounting for
 97




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Derivative Instruments and Hedging Activities,
    non-amortizing,
  non-amortizing,
      8.
    Regulatory
    Matters and Rating Issues   98




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2007


2006Star


Savers


Williamsburg


Ameritrust


Star


Savers


Williamsburg


AmeritrustStatutory capital and surplus

$
188,381


$
41,633


$
21,846


$
18,989


$
165,107


$
35,914


$
18,979


$
16,463RBC authorized control level


34,419



6,278



3,272



2,786



31,569



5,710



2,960



2,532Statutory net income


13,893



5,460



2,775



2,479



9,517



4,135



1,969



2,311            99




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    Deferred
    Policy Acquisition Costs    For the Years Ended December 31,2007


2006


2005Balance, beginning of period

$
27,902


$
26,371


$
25,167Acquisition costs deferred


37,395



39,201



35,367Amortized to expense during the period


(38,371
)


(37,670
)


(34,163
)Balance, end of period

$
26,926


$
27,902


$
26,371     10.
    Income
    Taxes    For the Years Ended December 31,2007


2006


2005Current tax expense

$
13,264


$
8,858


$
6,410Deferred tax (benefit) expense


(1,538
)


741



1,347Total provision for income tax expense

$
11,726


$
9,599


$
7,757     For the Years Ended December 31,2007


2006


2005Tax provision at statutory rate

$
13,760


$
11,027


$
8,982Tax effect of:Tax exempt interest


(2,832
)


(2,021
)


(1,291
)State income taxes, net of federal benefit


610



352



458Impact of increase in statutory rate relating to deferred tax
    assets at December 31, 2005










(386
)Other, net


188



241



(6
)Federal and state income tax expense

$
11,726


$
9,599


$
7,757Effective tax expense rate


29.8
%


30.5
%


30.2
%     Accounting for Income Taxes,
 100




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006Deferred


Deferred


Deferred


DeferredTax


Tax


Tax


TaxAssets


Liabilities


Assets


LiabilitiesUnpaid losses and loss adjustment expenses

$
15,487


$



$
14,557


$
Unearned premium reserves


9,540







8,701



Unrealized loss / gains on investments






1,884



451



Deferred policy acquisition expense






9,424







9,765Allowance for doubtful accounts


959







1,032



Policyholder dividends


447







348



Net operating loss


145











Goodwill






2,500







1,900Deferred revenue


76







152



Long term incentive plan


547







1,078



Amortization of intangible assets


789







352



Deferred gain on sale-leaseback transaction


200







231



Other


554







495



Total deferred taxes


28,744



13,808



27,397



11,665Net deferred tax assets

$
14,936






$
15,732   Summary of Significant Accounting Policies
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
       101




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Stock
    Options, Long Term Incentive Plan, and Deferred Compensation
    Plan  Stock
    Options
      2007


2006


2005Weighted-





Weighted-





Weighted-Average





Average





AverageExercise





Exercise





ExerciseOptions


Price


Options


Price


Options


PriceOutstanding  beginning of year


391,678


$
7.38



1,605,901


$
5.42



2,121,317


$
5.53Exercised


(244,574
)

$
2.65



(791,038
)

$
3.32



(97,825
)

$
2.90Expired and/or forfeited


(15,052
)

$
21.68



(423,185
)

$
7.54



(417,591
)

$
6.57Outstanding  end of year


132,052


$
14.51



391,678


$
7.38



1,605,901


$
5.42Exercisable at end of year


106,182


$
14.51



324,704


$
7.62



1,288,296


$
5.65     Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageRange of




Remaining


Exercise





ExerciseExercise Prices

Options


Life (Years)


Price


Options


Price$2.173 to $3.507


31,745



0.9


$
2.17



31,745


$
2.17$6.48


1,500



2.7


$
6.48



1,000


$
6.48$10.91 to $24.6875


98,807



1.2


$
18.60



73,437


$
23.47132,052



1.1


$
14.51



106,182


$
14.51   Long
    Term Incentive Plan
   102




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2004-2006 2004-2006
  2007-2009 2007-2009
  2004-2006 2007-2009 2004-2006 2007-2009
  Deferred
    Compensation Plan
    12.
    Shareholders
    Equity       103




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2004-2006 Stock Options, Long Term Incentive
    Plan, and Deferred Compensation Plan
    Regulatory Matters and
    Rating Issues
  13.
    Goodwill
    and Other Intangible Assets  Goodwill
        Specialty RiskManagementAgency Operations

Operations

TotalBalance at December 31, 2007

$
6,469


$
37,028


$
43,497Balance at December 31, 2006

$
6,469


$
25,033


$
31,502  104




---



##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Intangible Assets
            2008

$
2,9512009


2,9442010


2,9002011


2,6882012


1,322Total amortization expense

$
12,805   14.
    Commitments
    and Contingencies    2008

$
4,9042009


4,6652010


2,2272011


1,8962012


1,548Thereafter


1,557Total minimum lease commitments

$
16,797      105




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Accounting for
    Contingencies,
  15.
    Sale-Leaseback
    Transaction     106




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  16.
    Related
    Party Transactions          17.
    Employee
    Benefit Plans  1 2 and/or
  18.
    Fair
    Value of Financial Instruments  Disclosures about Fair Value of
    Financial Instruments,
  Accounting for Certain Investments in Debt and Equity
    Securities, Derivative Instruments Accounting for Derivative
    Instruments and Hedging Activities,
 107




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  19.
    Quarterly
    Financial Data (Unaudited)    1st


2nd


3rd


4thQuarter


Quarter


Quarter


Quarter2007:Gross premiums written

$
89,504


$
78,000


$
90,729


$
88,218Net premiums written


71,972



65,670



73,203



69,366Net premiums earned


65,204



67,191



67,337



68,465Net commissions and fees


11,551



10,743



13,319



10,375Net investment income and realized gains/losses


6,150



6,249



6,588



7,263Net losses and LAE incurred


36,646



39,707



37,015



37,601Policy acquisition and other underwriting expenses


13,643



13,169



12,927



13,978Other administrative expenses


7,393



7,598



8,890



8,087Salaries and employee benefits


13,532



12,900



15,750



14,251Amortization expense


144



543



622



621Interest expense


1,488



1,667



1,476



1,400Net income


6,923



6,186



7,555



7,328Diluted earnings per share

$
0.23


$
0.20


$
0.21


$
0.20GAAP combined ratio(1)


96.3
%


97.4
%


93.8
%


94.0
%2006:Gross premiums written

$
89,010


$
74,261


$
85,827


$
81,774Net premiums written


69,381



59,205



68,905



65,177Net premiums earned


63,124



64,514



63,688



63,594Net commissions and fees


11,289



10,698



9,612



9,573Net investment income and realized gains/losses


5,232



5,405



5,612



5,895Net losses and LAE incurred


37,043



37,146



36,129



35,975Policy acquisition and other underwriting expenses


11,424



13,180



13,059



12,816Other administrative expenses


7,794



7,133



6,766



7,130Salaries and employee benefits


13,368



13,846



14,183



13,172Amortization expense


165



142



142



142Interest expense


1,388



1,499



1,558



1,531Net income


5,625



5,375



5,093



5,941Diluted earnings per share

$
0.19


$
0.18


$
0.17


$
0.20GAAP combined ratio(1)


96.2
%


97.2
%


97.2
%


96.6
%     (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. 108




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   20.
    Subsequent
    Events  U.S.
    Specialty Underwriters, Inc.
      Merger
    Agreement with ProCentury Corporation
    30-day 30-day 30-day
   109




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##### Table of Contents



SCHEDULE I

MEADOWBROOK INSURANCE GROUP, INC.

SUMMARY OF INVESTMENTS  OTHER THAN
    INVESTMENTS IN RELATED PARTIES



As of December 31, 2007

(In thousands)  Amount atWhichShown inthe BalanceType of Investment

Cost


Value


SheetFixed Maturities:US government and government agencies and authorities

$
53,436


$
54,948


$
54,948States and political subdivisions


287,392



290,398



290,398Corporate securities


116,406



117,419



117,419Mortgage and asset-backed securities


147,595



147,991



147,991Total Investments

$
604,829


$
610,756


$
610,756  110




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##### Table of Contents



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    BALANCE SHEET
   December 31,2007


2006(In thousands)ASSETSInvestments

$
32,643


$
Investment in subsidiaries


317,544



252,428Cash and cash equivalents


492



64Goodwill


3,024



3,024Other assets


27,811



28,137Total assets

$
381,514


$
283,653LIABILITIESOther liabilities

$
2,231


$
2,311Payable to subsidiaries


21,459



16,719Debt






7,000Debentures


55,930



55,930Total liabilities


79,620



81,960SHAREHOLDERS EQUITYCommon stock


370



291Additional paid-in capital


194,621



126,828Retained earnings


104,274



76,282Note receivable from officer


(870
)


(871
)Accumulated other comprehensive loss


3,499



(837
)Total shareholders equity


301,894



201,693Total liabilities and shareholders equity

$
381,514


$
283,653  111




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##### Table of Contents



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    INCOME STATEMENT
   For the Years Ended December 31,2007


2006


2005Revenue

$
3,318


$
2,690


$
2,198Operating expenses:Interest expense


6,558



6,375



4,233Other expenses


4,332



3,970



3,540Total operating expenses


10,890



10,345



7,773Loss before income taxes and subsidiary equity


(7,572
)


(7,654
)


(5,575
)Federal and state income tax benefit


(2,878
)


(2,878
)


(2,203
)Loss before subsidiary equity earnings


(4,694
)


(4,776
)


(3,372
)Subsidiary equity earnings


32,686



26,810



21,282Net income


27,992


$
22,034


$
17,910  112




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##### Table of Contents



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    STATEMENT OF COMPREHENSIVE INCOME
   For the Years Ended December 31,2007


2006


2005Net income

$
27,992


$
22,034


$
17,910Other comprehensive income, net of tax:Unrealized gains (losses) on securities:


4,810



152



(6,023
)Net deferred derivative (loss) gain  hedging activity


(484
)


121



9Less: reclassification adjustment for gains included in net
    income


10



20



56Other comprehensive income (loss)


4,336



293



(5,958
)Comprehensive income

$
32,328


$
22,327


$
11,952  113




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##### Table of Contents



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    STATEMENT OF CASH FLOWS
   For the Years Ended December 31,2007


2006


2005Net cash provided by (used in) operating activities:

$
1,320


$
(1,488
)

$
(8,437
)Cash Flow from Investing Activities:Net purchase of investments


(32,643
)






Dividends from subsidiaries


1,729



4,629



6,089Investment in subsidiaries


(19,350
)


(4,600
)


(15,600
)Net cash (used in) provided by investing activities


(50,264
)


29



(9,511
)Cash Flow from Financing Activities:Proceeds from borrowings


19,025



12,500



9,500Principal payments on borrowings


(26,025
)


(10,500
)


(13,544
)Net proceeds from issuance of debentures










19,400Stock options exercised


(374
)


(538
)


1,092Share repurchases of common stock










(4,191
)Payroll taxes associated with long-term incentive plan stock
    issuance


(1,841
)






Net proceeds from public equity offering


58,585







Other financing activities


1



(12
)


9Net cash provided by financing activities


49,371



1,450



12,266Increase (decrease) in cash and cash equivalents


428



(9
)


(5,682
)Cash and cash equivalents, beginning of year


64



73



5,755Cash and cash equivalents, end of year

$
492


$
64


$
73Supplemental Disclosure for Non-cash Investing and Financing
    ActivitiesCommon stock portion of purchase price for acquisition of U.S.
    Specialty Underwriters, Inc.

$
10,000


$



$
  114




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##### Table of Contents



SCHEDULE III

MEADOWBROOK INSURANCE GROUP, INC.

SUPPLEMENTARY INSURANCE INFORMATION



December 31, 2007

(In thousands)  Future PolicyBenefits, Losses,





Other PolicyDeferred Policy


Claims & Loss


Unearned


Claims &


PremiumAcquisition Costs


Expenses


Premium


Benefits Payable


RevenueSpeciality Risk Management
    Operations

$
26,926


$
540,002


$
153,927






$
268,197Agency Operations


















Other


















$
26,926


$
540,002


$
153,927






$
268,197   Benefits, Claims,Net


Losses &


Amortization of


OtherInvestment


Settlement


Deferred Policy


Operating


PremiumIncome


Expenses


Acquisition Costs


Expenses


WrittenSpeciality Risk Management
    Operations

$
25,487


$
150,969


$
38,371


$
92,664


$
280,211Agency Operations














9,229



Other


913











10,115



$
26,400


$
150,969


$
38,371


$
112,008


$
280,211  115




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##### Table of Contents



SCHEDULE III

MEADOWBROOK INSURANCE GROUP, INC.

SUPPLEMENTARY INSURANCE INFORMATION



December 31, 2006

(In thousands)  Future PolicyBenefits, Losses,





Other PolicyDeferred Policy


Claims & Loss


Unearned


Claims &


PremiumAcquisition Costs


Expenses


Premium


Benefits Payable


RevenueSpeciality Risk Management
    Operations

$
27,902


$
501,077


$
144,575






$
254,920Agency Operations


















Other


















$
27,902


$
501,077


$
144,575






$
254,920   Benefits, Claims,Net


Losses &


Amortization of


OtherInvestment


Settlement


Deferred Policy


Operating


PremiumIncome


Expenses


Acquisition Costs


Expenses


WrittenSpeciality Risk Management
    Operations

$
21,115


$
146,293


$
37,670


$
84,632


$
262,668Agency Operations














9,334



Other


960











8,802



$
22,075


$
146,293


$
37,670


$
102,768


$
262,668  116




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##### Table of Contents



SCHEDULE III

MEADOWBROOK INSURANCE GROUP, INC.

SUPPLEMENTARY INSURANCE INFORMATION



December 31, 2005

(In thousands)  Future PolicyBenefits, Losses,





Other PolicyDeferred Policy


Claims & Loss


Unearned


Claims &


PremiumAcquisition Costs


Expenses


Premium


Benefits Payable


RevenueSpeciality Risk Management Operations

$
26,371


$
458,677


$
140,990






$
249,959Agency Operations


















Other


















$
26,371


$
458,677


$
140,990






$
249,959   Benefits, Claims,Net


Losses &


Amortization of


OtherInvestment


Settlement


Deferred Policy


Operating


PremiumIncome


Expenses


Acquisition Costs


Expenses


WrittenSpeciality Risk Management
    Operations

$
17,692


$
151,542


$
34,163


$
79,361


$
258,134Agency Operations














7,961



Other


283











5,324



$
17,975


$
151,542


$
34,163


$
92,646


$
258,134  117




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##### Table of Contents



SCHEDULE IV
    MEADOWBROOK INSURANCE GROUP, INC.
    REINSURANCE
    For the Years Ended December 31,
    (In thousands)  Assumed





PercentageCeded to


from





of AmountGross


Other


Other


Net


AssumedAmount


Companies


Companies


Amount


to NetProperty and Liability Insurance2007

$
266,049


$
68,902


$
71,050


$
268,197



26.49
%2006

$
251,288


$
72,367


$
75,999


$
254,920



29.81
%2005

$
264,381


$
75,563


$
61,141


$
249,959



24.46
%  118




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##### Table of Contents



SCHEDULE V
    MEADOWBROOK INSURANCE GROUP, INC.
    VALUATION AND QUALIFYING ACCOUNTS
    For the Years Ended December 31,
    (In thousands)  Additions


DeductionsBalance at


Charged to


Charged to


from


Balance atBeginning


Costs and


Other


Allowance


End ofof Period


Expense


Accounts


Account


PeriodAllowance for doubtful accounts2007

$
2,948


$
716






$
917


$
2,7472006

$
3,901


$
593






$
1,546


$
2,9482005

$
4,336


$
704






$
1,139


$
3,901  119




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##### Table of Contents



SCHEDULE VI
    MEADOWBROOK INSURANCE GROUP, INC.
    SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND
    CASUALTY INSURANCE OPERATIONS   For the Years Ended December 31,(In thousands)Reserves forDeferred


Losses and


Discount, if any,Policy


Loss


deducted from





Net


NetAcquisition


Adjustment


previous


Unearned


Premiums


InvestmentAffiliation with Registrant

Costs


Expenses(2)


column(1)


Premiums(2)


Earned


Income(a) Consolidated Property and Casualty Subsidiaries2007

$
26,926


$
540,002






$
153,927


$
268,197


$
25,4872006

$
27,902


$
501,077






$
144,575


$
254,920


$
21,1152005

$
26,371


$
458,677






$
140,990


$
249,959


$
17,692   Amortization of


Paid lossesLosses and loss


deferred policy


and loss


Netadjustment expense


acquisition


adjustment


PremiumsCurrent Year


Prior Years


expenses


expenses


Written2007

$
158,061


$
(7,091
)

$
38,371


$
112,084


$
280,2112006

$
149,012


$
(2,719
)

$
37,670


$
115,061


$
262,6682005

$
146,658


$
4,884


$
34,163


$
107,115


$
258,134     (1)
    
    The Company does not employ any
    discounting techniques.(2)
    
    Reserves for losses and loss
    adjustment expenses are shown gross of $198.5 million,
    $198.4 million and $187.3 million of reinsurance
    recoverable on unpaid losses in 2007, 2006 and 2005,
    respectively. Unearned premiums are shown gross of ceded
    unearned premiums of $17.8 million, $20.4 million and
    $24.6 million in 2007, 2006 and 2005, respectively. 120




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##### Table of Contents



MEADOWBROOK
    INSURANCE GROUP, INC.
  Exhibit Index
  Exhibit



FilingNo.

Description

Basis2
.1

Agreement and Plan of Merger, between Meadowbrook Insurance
    Group, Inc., MBKPC Corp., a wholly-owned subsidiary of
    Meadowbrook, and ProCentury Corporation, dated February 20,
    2008


(21)3
.1

Amended and Restated Articles of Incorporation of the Company


(20)3
.2

Amended and Restated Bylaws of the Company4
.1

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


(6)4
.2

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


(13)10
.1

Meadowbrook Insurance Group, Inc. Amended and Restated 1995
    Stock Option Plan


(8)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


(8)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


(5)10
.6

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


(6)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


(6)10
.8

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


(6)10
.9

Employment Agreement between the Company and Robert S. Cubbin,
    dated January 1, 2004


(7)10
.10

Employment Agreement between the Company and Michael G.
    Costello, dated January 1, 2004


(7)10
.11

Meadowbrook Insurance Group, Inc. Long Term Incentive Plan


(10)10
.12

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


(10)10
.13

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


(10)10
.14

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


(10)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


(11)10
.16

Credit Agreement among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004


(9) 121




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##### Table of Contents



Exhibit



FilingNo.

Description

Basis10
.17

Revolving Note among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004


(9)10
.18

Security Agreement among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004


(9)10
.19

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


(11)10
.20

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


(11)10
.21

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


(11)10
.22

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


(11)10
.23

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


(11)10
.24

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


(11)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, 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, Steven C.
    Divine dated March 1, 2006, and James M. Mahoney and Joseph
    E. Mattingly dated August 1, 2007


(11)10
.26

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


(11)10
.27

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


(12)10
.28

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


(12)10
.29

Amendment to Credit Agreement between Meadowbrook Insurance
    Group, Inc. and Standard Federal Bank National Association,
    dated May 20, 2005


(12)10
.30

Second Amendment to Credit Agreement between Meadowbrook
    Insurance Group, Inc. and Standard Federal Bank National
    Association, dated September 8, 2005


(14)10
.31

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


(13)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


(13)10
.33

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


(13)10
.34

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


(16)10
.35

Third Amendment to Credit Agreement between Meadowbrook
    Insurance Group, Inc. and LaSalle Bank Midwest National
    Association, dated December 28, 2005


(16)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


(16)10
.37

Employment Agreement between Meadowbrook, Inc., and Meadowbrook
    Insurance Group, Inc. and Merton J. Segal, dated January 1,
    2006


(15)10
.38

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


(17)10
.39

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


(17) 122




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##### Table of Contents



Exhibit



FilingNo.

Description

Basis10
.40

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)10
.41

Fourth Amendment to Credit Agreement between Meadowbrook
    Insurance Group, Inc., Meadowbrook, Inc., Crest Financial
    Corporation, and LaSalle Bank Midwest National Association,
    dated April 10, 2007


(19)10
.42

First Amendment to Promissory Note between Meadowbrook Insurance
    Group, Inc. and LaSalle Bank Midwest National Association, dated
    April 10, 2007


(19)10
.45

Management Services Agreement by and between Meadowbrook
    Insurance Group, Inc., Meadowbrook, Inc., and Star Insurance
    Company, Williamsburg National Insurance Co., and Ameritrust
    Insurance Corporation, dated October 1, 200710
.46

Management Services Agreement by and between Savers Property and
    Casualty Insurance Company and Meadowbrook, Inc., dated
    October 1, 200710
.47

Amendment to Land Contract, between Meadowbrook Insurance Group,
    Inc., and MB Center II, LLC, dated January 31, 2008.14


Compliance Program/Code of Conduct21


List of Subsidiaries23


Consent of Independent Registered Public Accounting Firm24


Power of Attorney28
.1

Star Insurance Companys 2007 Schedule P


(2)28
.2

Savers Property & Casualty Insurance Companys
    2007 Schedule P


(2)28
.3

Williamsburg National Insurance Companys 2007
    Schedule P


(2)28
.4

Ameritrust Insurance Corporations 2007 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 Corporation32
.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 Corporation99
.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-K
    for the year ending December 31, 2002.(6)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending September 30, 2003.(7)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2003(8)
    
    Filed as Appendix to Meadowbrook
    Insurance Group, Inc. 2004 Proxy Statement.(9)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on November 18, 2004. 123




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##### Table of Contents



(10)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2004.(11)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2004.(12)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2005.(13)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on September 22, 2005.(14)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending September 30, 2005.(15)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on March 9, 2006.(16)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2005.(17)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on May 31, 2006.(18)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2006.(19)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on April 12, 2007.(20)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2007.(21)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on February 22, 2008. 124




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##### Table of Contents



SIGNATURES
    Meadowbrook Insurance
    Group, Inc
  
  Chief Executive Officer
    (Principal Executive Officer)
  
   Senior Vice President and
 Chief Financial Officer
 (Principal Financial Officer)
      Signature

Title

Date**Merton
    J. Segal

Chairman and Director

March 17, 2008-s- Robert S. CubbinRobert
    S. Cubbin

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

March 17, 2008**Joseph
    S. Dresner

Director

March 17, 2008**Hugh
    W. Greenberg

Director

March 17, 2008**Florine
    Mark

Director

March 17, 2008**Robert
    H. Naftaly

Director

March 17, 2008 125




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##### Table of Contents



Signature

Title

Date**David
    K. Page

Director

March 17, 2008**Robert
    W. Sturgis

Director

March 17, 2008**Bruce
    E. Thal

Director

March 17, 2008**Herbert
    Tyner

Director

March 17, 2008**By: -s- Robert S. CubbinRobert
    S. Cubbin
    Attorney-in-fact  126