##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31, 2004                                                 
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-14094





Meadowbrook Insurance Group, Inc.


(Exact name of registrant as specified in its charter)


|                                         |  |                                  
|---------------------------------------- |  | ---------------------------------
|Michigan                                 |  | 38-2626206                       
|(State of Incorporation)                 |  | (IRS Employer Identification No.)
|                                        
|26255 American Drive, Southfield, MI     |  | 48034-6112                       
|(Address of principal executive offices) |  | (Zip Code)                       

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


Securities registered pursuant to Section 12(b) of the
Act:


|                                       |  |                                     
|-------------------------------------- |  | ------------------------------------
|Title of Each Class                    |  | Name of Exchange on Which Registered
|                                       |  |                                     
|Common Stock, $.01 par value per share |  | New York Stock Exchange             

þ o


o


þ o






Documents Incorporated by Reference












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TABLE OF CONTENTS



|                                                                                                        |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                                                                 
|Item 1. Business                                                                                       
|CAPTIVE RISK-SHARING STRUCTURE                                                                         
|Item 2. Properties                                                                                     
|Item 3. Legal Proceedings                                                                              
|Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                                                                                
|Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|Item 6. Selected Financial Data                                                                        
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|Item 7A. Qualitative and Quantitative Disclosures About Market Risk                                    
|Item 8. Financial Statements and Supplementary Data                                                    
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|Item 9A. Controls and Procedures                                                                       
|Item 9B. Other Information                                                                             
|PART III                                                                                               
|Item 10. Directors and Executive Officers of the Registrant                                            
|Item 11. Executive Compensation                                                                        
|Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|Item 13. Certain Relationships and Related Transactions                                                
|Item 14. Principal Accountant Fees and Services                                                        
|PART IV                                                                                                
|Item 15. Exhibits, Financial Statement Schedules                                                       
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                             
|Loan Agreement                                                                                         
|Nonqualified Stock Option Agreement                                                                    
|Lease between Meadowbrook Insurance Group & Meadowbrook, Inc.                                          
|LaSalle National Leasing Corporation                                                                   
|Promissory Note                                                                                        
|Commercial Mortgage                                                                                    
|Assignment of Leases & Rents                                                                           
|At-Will Employment & Severance Agreement                                                               
|Amendment to Demand Note Addendum                                                                      
|Amendment to Employment Agreement                                                                      
|Meadowbrook Insurance Group Compliance Program                                                         
|List of Subsidiaries                                                                                   
|Consent                                                                                                
|Power of Attorney                                                                                      
|302 Certification of Chief Executive Officer                                                           
|302 Certification of Chief Financial Officer                                                           
|906 Certification of Chief Executive Officer                                                           
|906 Certification of Chief Financial Officer                                                           



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.







PART I







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

The Company








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Effective January 1, 2004, American Indemnity, which was
    acquired in 1994, was deconsolidated due to the adoption of
    Financial Accounting Standards Board Interpretation Number
    (FIN) 46(R)  discussed further under the
    heading Recent Accounting Pronouncements,in
    Managements Discussion and Analysis. The consolidated
    financial statements, however, include the equity earnings of
    American Indemnity. The deconsolidation was done on a
    prospective basis. Therefore, prior year financials have not
    been adjusted for the deconsolidation.                                                                                                                                               
|
| |  | September 30, 2003, Meadowbrook Capital Trust I
    (Trust), a Delaware trust, was formed. The Trust
    issued $10.0 million of mandatorily redeemable trust
    preferred securities (TPS) to a trust formed by an
    institutional investor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | January 31, 2002, Meadowbrook International, Ltd. was sold.
    This sale resulted in a reduction of annualized reinsurance
    commission of approximately $450,000, which did not have a
    material impact on our overall results of operations. In
    conjunction with the sale, we recorded a gain of approximately
    $199,000.                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | August 6, 1999, we acquired the assets of TPA Associates,
    Inc., all the outstanding stock of TPA Insurance Agency, Inc.,
    and Preferred Insurance Agency, Inc., and approximately
    ninety-four percent of the outstanding stock of Preferred
    Insurance Company, Ltd. (PICL) (collectively,
    TPA). TPA is a program-oriented risk management
    company that provides risk management services to self-insured
    clients, manages alternative risk management programs, and
    performs underwriting, policy issuance and loss control services
    for a non-related and unaffiliated insurance company. In January
    2002, we purchased the remaining six percent minority interest
    of PICL for $288,000.
|
| |  | July 31, 1998, we acquired Florida Preferred
    Administrators, Inc. (Florida Preferred), a
    third party administrator, and Southeastern Holding
    Corporation, a holding company for Ameritrust Insurance
    Corporation (Ameritrust), both of which are
    domiciled in Sarasota, Florida. In December 2002, Southeastern
    Holding Corporation was dissolved and Ameritrust became a wholly
    owned subsidiary of Star. Florida Preferred provides a broad
    range of risk management services for Ameritrust.                                                                                                                                                                                                      
|
| |  | July 1, 1997, we acquired Crest Financial Corporation
    (Crest), a California-based holding company, which
    formerly owned Williamsburg National Insurance Company
    (Williamsburg). Crest provides risk management
    services primarily to Williamsburg. On December 31, 1999,
    Williamsburg became a wholly owned subsidiary of Star.                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | In November 1996, we acquired Association Self Insurance
    Services, Inc. (ASI) of Montgomery, Alabama, which
    is a full service risk management operation focused on insurance
    pools and trust funds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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MEADOWBROOK INSURANCE GROUP, INC.




| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | whose services include claims administration and handling, loss
    control and prevention, managed care, and policy issuance.
    ASIs operations were consolidated with Meadowbrooks
    existing operations in Montgomery, Alabama.
|
| |  | In July 1990, we acquired Savers Property and Casualty Insurance
    Company (Savers).                                                                                                                                                

Employees


Insurance Operations


Overview










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






| |   |                                                   
| | - | --------------------------------------------------
| |  | program and product design;                       
|
| |  | underwriting, risk selection, and policy issuance;

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MEADOWBROOK INSURANCE GROUP, INC.




| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | sales, marketing, and public relations to members of groups;                                                                                                                                 
|
| |  | formation and management 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







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







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



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MEADOWBROOK INSURANCE GROUP, INC.








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









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



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

Managed
Programs:






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





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MEADOWBROOK INSURANCE GROUP, INC.




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

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











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 Contracts.



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MEADOWBROOK INSURANCE GROUP, INC.








Agent Risk-Sharing.








Fully-Insured Programs:




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

Program and Product Design.


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MEADOWBROOK INSURANCE GROUP, INC.




Underwriting Risk Selection and Policy Issuance.


Formation and Management of Risk-Bearing Entities.


Claims Administration and Handling.


Loss Prevention and Control.


Reinsurance Placement.


Sales, Marketing, and Public Relations.


tm


tm tm


Insurance Operations




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MEADOWBROOK INSURANCE GROUP, INC.
















| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | Risk-taking in the surety line of business;                                                                                   
|
| |  | Programs with aggregate stop loss provisions, where the
    clients risk-sharing is capped at a specified loss ratio;
    and
|
| |  | Programs which lack adequate capital contributed by the
    risk-sharing partner or proven profitable experience.             







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MEADOWBROOK INSURANCE GROUP, INC.












|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |         |         |  |   |         |         | 
|------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|Gross Written Premiums          |       | 2004 |         |         | 2003 |   |         | 2002    |  |   | 2001    |         |  | 2000 |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        
|Workers Compensation           |       | $    | 146,982 |         |      | $ | 141,456 |         |  | $ | 104,822 |         |  | $    | 147,654 |         |  | $ | 132,108 |        
|Commercial Multiple Peril       |       |      | 71,715  |         |      |   | 48,091  |         |  |   | 33,072  |         |  |      | 44,513  |         |  |   | 42,170  |        
|Inland Marine                   |       |      | 10,925  |         |      |   | 9,758   |         |  |   | 8,886   |         |  |      | 12,048  |         |  |   | 11,752  |        
|Other Liability                 |       |      | 15,248  |         |      |   | 10,473  |         |  |   | 10,442  |         |  |      | 28,856  |         |  |   | 32,173  |        
|Other Commercial Auto Liability |       |      | 48,070  |         |      |   | 26,902  |         |  |   | 9,894   |         |  |      | 38,191  |         |  |   | 44,070  |        
|Surety Bonds                    |       |      | 42      |         |      |   | 5       |         |  |   | 2,998   |         |  |      | 7,377   |         |  |   | 5,116   |        
|All Other Lines                 |       |      | 20,511  |         |      |   | 16,595  |         |  |   | 13,523  |         |  |      | 20,465  |         |  |   | 20,463  |        
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        
|                                | Total |      | $       | 313,493 |      |   | $       | 253,280 |  |   | $       | 183,637 |  |      | $       | 299,104 |  |   | $       | 287,852 | 
|                                |       |      |         |         |      |   |         |         |  |   |         |         |  |      |        

|                                |       |      |         |         |      |   |         |         |  |   |        |         |  |      |        |         |  |   |        |         | 
|------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------ | ------- |  | ---- | ------ | ------- |  | - | ------ | ------- | 
|Net Written Premiums            |       | 2004 |         |         | 2003 |   |         | 2002    |  |   | 2001   |         |  | 2000 |       
|                                |       |      |         |         |      |   |         |         |  |   |        |         |  |      |       
|Workers Compensation           |       | $    | 122,896 |         |      | $ | 111,572 |         |  | $ | 90,979 |         |  | $    | 80,232 |         |  | $ | 69,977 |        
|Commercial Multiple Peril       |       |      | 46,351  |         |      |   | 36,628  |         |  |   | 22,375 |         |  |      | 31,019 |         |  |   | 19,527 |        
|Inland Marine                   |       |      | 1,630   |         |      |   | 1,500   |         |  |   | 1,587  |         |  |      | 3,783  |         |  |   | 2,912  |        
|Other Liability                 |       |      | 7,568   |         |      |   | 6,278   |         |  |   | 4,296  |         |  |      | 19,982 |         |  |   | 22,322 |        
|Other Commercial Auto Liability |       |      | 37,762  |         |      |   | 19,599  |         |  |   | 9,125  |         |  |      | 35,502 |         |  |   | 11,237 |        
|Surety Bonds                    |       |      | 11      |         |      |   | 73      |         |  |   | 119    |         |  |      | 180    |         |  |   | (45    | )      
|All Other Lines                 |       |      | 17,743  |         |      |   | 14,177  |         |  |   | 11,314 |         |  |      | 15,385 |         |  |   | 10,394 |        
|                                |       |      |         |         |      |   |         |         |  |   |        |         |  |      |       
|                                | Total |      | $       | 233,961 |      |   | $       | 189,827 |  |   | $      | 139,795 |  |      | $      | 186,083 |  |   | $      | 136,324 | 
|                                |       |      |         |         |      |   |         |         |  |   |        |         |  |      |       

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MEADOWBROOK INSURANCE GROUP, INC.


|                                |       |      |         |         |      |   |        |         |  |   |        |         |  |      |        |         |  |   |        |         | 
|------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------ | ------- |  | - | ------ | ------- |  | ---- | ------ | ------- |  | - | ------ | ------- | 
|Net Earned Premiums             |       | 2004 |         |         | 2003 |   |        | 2002    |  |   | 2001   |         |  | 2000 |       
|                                |       |      |         |         |      |   |        |         |  |   |        |         |  |      |       
|Workers Compensation           |       | $    | 117,914 |         |      | $ | 93,324 |         |  | $ | 80,795 |         |  | $    | 69,360 |         |  | $ | 83,301 |        
|Commercial Multiple Peril       |       |      | 43,701  |         |      |   | 26,075 |         |  |   | 23,462 |         |  |      | 27,004 |         |  |   | 18,567 |        
|Inland Marine                   |       |      | 1,628   |         |      |   | 1,556  |         |  |   | 1,716  |         |  |      | 3,782  |         |  |   | 2,915  |        
|Other Liability                 |       |      | 6,416   |         |      |   | 4,849  |         |  |   | 9,325  |         |  |      | 22,539 |         |  |   | 22,261 |        
|Other Commercial Auto Liability |       |      | 29,274  |         |      |   | 12,940 |         |  |   | 17,548 |         |  |      | 27,535 |         |  |   | 9,725  |        
|Surety Bonds                    |       |      | 38      |         |      |   | 73     |         |  |   | 97     |         |  |      | 173    |         |  |   | 32     |        
|All Other Lines                 |       |      | 15,522  |         |      |   | 12,388 |         |  |   | 12,440 |         |  |      | 13,272 |         |  |   | 9,199  |        
|                                |       |      |         |         |      |   |        |         |  |   |        |         |  |      |       
|                                | Total |      | $       | 214,493 |      |   | $      | 151,205 |  |   | $      | 145,383 |  |      | $      | 163,665 |  |   | $      | 146,000 | 
|                                |       |      |         |         |      |   |        |         |  |   |        |         |  |      |       

Reserves








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MEADOWBROOK INSURANCE GROUP, INC.


Analysis of Loss and Loss Adjustment Expense
Development(1)


|                                                      |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|----------------------------------------------------- | ------------- | ------------------------ | ------- | ------ | ---- | - | ------- | ------- | -- | - | ------- | ------- | -- | ---- | ------- | ------- | ---- | - | -------- | ------- | -- | - | ------- | ------- | -- | ---- | ------- | ------- | ---- | - | ------- | ------- | -- | - | ------- | ------- | -- | - | ------- |  | 
|                                                      |               | Years Ended December 31, |        
|                                                      |               |                          |        
|                                                      |               | 1995                     |         |        | 1996 |   |         | 1997    |    |   | 1998    |         |    | 1999 |         |         | 2000 |   |          | 2001    |    |   | 2002    |         |    | 2003 |         |         | 2004 |  
|                                                      |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |  
|                                                      |               | (In thousands)           |        
|Reserves for losses and LAE at end of period          |               | $                        | 64,668  |        |      | $ | 65,775  |         |    | $ | 60,786  |         |    | $    | 84,254  |         |      | $ | 127,500  |         |    | $ | 172,862 |         |    | $    | 198,653 |         |      | $ | 193,116 |         |    | $ | 192,019 |         |    | $ | 226,996 | 
|Deconsolidation of subsidiary                         |               |                          |         |        |      |   |         |         |    |   |         |         |    |      | (147    | )       |      |   | (1,425   | )       |    |   | (3,744  | )       |    |      | (5,572  | )       |      |   | (2,973  | )       |    |   | (2,989  | )       |    |   |         | 
|Adjusted reserves for losses and LAE at end of period |               | $                        | 64,668  |        |      | $ | 65,775  |         |    | $ | 60,786  |         |    | $    | 84,107  |         |      | $ | 126,075  |         |    | $ | 169,118 |         |    | $    | 193,081 |         |      | $ | 190,143 |         |    | $ | 189,030 |         |    | $ | 226,996 | 
|Cumulative paid as of                                 |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         | 
|                                                      | 1 year        |                          |         | 25,659 |      |   |         | 31,626  |    |   |         | 31,368  |    |      |         | 39,195  |      |   |          | 54,928  |    |   |         | 70,952  |    |      |         | 77,038  |      |   |         | 78,023  |    |   |         | 71,427  |    |   |         |  | 
|                                                      | 2 years later |                          |         | 42,969 |      |   |         | 49,930  |    |   |         | 47,313  |    |      |         | 56,763  |      |   |          | 90,416  |    |   |         | 115,669 |    |      |         | 130,816 |      |   |         | 122,180 |    |   |         |         |    |   |         |  | 
|                                                      | 3 years later |                          |         | 52,222 |      |   |         | 58,362  |    |   |         | 56,848  |    |      |         | 76,776  |      |   |          | 116,001 |    |   |         | 146,548 |    |      |         | 157,663 |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 4 years later |                          |         | 57,443 |      |   |         | 64,018  |    |   |         | 65,517  |    |      |         | 85,447  |      |   |          | 132,995 |    |   |         | 160,673 |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 5 years later |                          |         | 59,182 |      |   |         | 67,928  |    |   |         | 68,138  |    |      |         | 93,009  |      |   |          | 139,939 |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 6 years later |                          |         | 60,653 |      |   |         | 69,503  |    |   |         | 72,063  |    |      |         | 96,739  |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 7 years later |                          |         | 60,630 |      |   |         | 72,337  |    |   |         | 74,002  |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 8 years later |                          |         | 63,348 |      |   |         | 73,992  |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 9 years later |                          |         | 64,592 |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|Reserves re-estimated as of end of year:              |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         | 
|                                                      | 1 year        |                          |         | 65,058 |      |   |         | 67,010  |    |   |         | 69,012  |    |      |         | 98,587  |      |   |          | 146,213 |    |   |         | 182,976 |    |      |         | 199,171 |      |   |         | 193,532 |    |   |         | 193,559 |    |   |         |  | 
|                                                      | 2 years later |                          |         | 65,312 |      |   |         | 69,536  |    |   |         | 73,591  |    |      |         | 106,487 |      |   |          | 144,453 |    |   |         | 186,191 |    |      |         | 205,017 |      |   |         | 196,448 |    |   |         |         |    |   |         |  | 
|                                                      | 3 years later |                          |         | 66,692 |      |   |         | 74,796  |    |   |         | 74,009  |    |      |         | 102,075 |      |   |          | 152,630 |    |   |         | 189,632 |    |      |         | 207,379 |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 4 years later |                          |         | 68,557 |      |   |         | 74,439  |    |   |         | 77,771  |    |      |         | 104,017 |      |   |          | 156,997 |    |   |         | 190,305 |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 5 years later |                          |         | 65,795 |      |   |         | 76,025  |    |   |         | 78,490  |    |      |         | 106,668 |      |   |          | 158,287 |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 6 years later |                          |         | 65,874 |      |   |         | 77,239  |    |   |         | 80,084  |    |      |         | 109,038 |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 7 years later |                          |         | 66,521 |      |   |         | 79,142  |    |   |         | 80,626  |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 8 years later |                          |         | 68,674 |      |   |         | 79,580  |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|                                                      | 9 years later |                          |         | 69,144 |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         |  | 
|Net cumulative deficiency                             |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |   |         |         |    |   |         |         |    |   |         | 
|                                                      | Dollars       |                          | $       | (4,476 | )    |   | $       | (13,805 | )  |   | $       | (19,840 | )  |      | $       | (24,931 | )    |   | $        | (32,212 | )  |   | $       | (21,187 | )  |      | $       | (14,298 | )    |   | $       | (6,305  | )  |   | $       | (4,529  | )  |   |         |  | 
|                                                      | Percentage    |                          |         | (6.9   | )%   |   |         | (21.0   | )% |   |         | (32.6   | )% |      |         | (29.6   | )%   |   |          | (25.5   | )% |   |         | (12.5   | )% |      |         | (7.4    | )%   |   |         | (3.3    | )% |   |         | (2.4    | )% |   |         |  | 
|Net reserves                                          |               |                          | 64,668  |        |      |   | 65,775  |         |    |   | 60,786  |         |    |      | 84,107  |         |      |   | 126,075  |         |    |   | 169,118 |         |    |      | 193,081 |         |      |   | 190,143 |         |    |   | 189,030 |         |    |   | 226,996 | 
|Ceded reserves                                        |               |                          | 22,318  |        |      |   | 26,615  |         |    |   | 38,193  |         |    |      | 64,590  |         |      |   | 101,744  |         |    |   | 168,962 |         |    |      | 195,943 |         |      |   | 181,817 |         |    |   | 147,446 |         |    |   | 151,161 | 
|Gross reserves                                        |               |                          | 86,986  |        |      |   | 92,390  |         |    |   | 98,979  |         |    |      | 148,697 |         |      |   | 227,819  |         |    |   | 338,080 |         |    |      | 389,024 |         |      |   | 371,960 |         |    |   | 336,476 |         |    |   | 378,157 | 
|                                                      |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |  
|Net re-estimated                                      |               |                          | 69,144  |        |      |   | 79,580  |         |    |   | 80,626  |         |    |      | 109,038 |         |      |   | 158,287  |         |    |   | 190,305 |         |    |      | 207,379 |         |      |   | 196,448 |         |    |   | 193,559 |         |    |   |         | 
|Ceded re-estimated                                    |               |                          | 38,874  |        |      |   | 41,969  |         |    |   | 59,322  |         |    |      | 102,339 |         |      |   | 171,170  |         |    |   | 244,873 |         |    |      | 261,908 |         |      |   | 228,467 |         |    |   | 174,829 |         |    |   |         | 
|Gross re-estimated                                    |               |                          | 108,018 |        |      |   | 121,549 |         |    |   | 139,948 |         |    |      | 211,377 |         |      |   | 329,457  |         |    |   | 435,178 |         |    |      | 469,287 |         |      |   | 424,915 |         |    |   | 368,388 |         |    |   |         | 
|                                                      |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |  
|Gross cumulative deficiency                           |               | $                        | (21,032 | )      |      | $ | (29,159 | )       |    | $ | (40,969 | )       |    | $    | (62,680 | )       |      | $ | (101,638 | )       |    | $ | (97,098 | )       |    | $    | (80,263 | )       |      | $ | (52,955 | )       |    | $ | (31,912 | )       |    |   |         | 
|                                                      |               |                          |         |        |      |   |         |         |    |   |         |         |    |      |         |         |      |   |          |         |    |   |         |         |    |      |         |         |      |  

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MEADOWBROOK INSURANCE GROUP, INC.




|                                              |         |      |          |        |      |   |          |        |  
|--------------------------------------------- | ------- | ---- | -------- | ------ | ---- | - | -------- | ------ | -
|                                              |         | 2004 |          |        | 2003 |  
|                                              |         |      |          |        |      |  
|GAAP reserves for losses and LAE              |         | $    | 378,157  |        |      | $ | 339,465  |       
|Deconsolidation of subsidiary(1)              |         |      |         |        |      |   | (2,989   | )     
|                                              |         |      |          |        |      |  
|Adjusted GAAP reserves for losses and LAE     |         |      | 378,157  |        |      |   | 336,476  |       
|Reinsurance recoverables for unpaid losses    |         |      | (151,161 | )      |      |   | (147,446 | )     
|Allowances against reinsurance recoverables** |         |      | (1,479   | )      |      |   | (1,785   | )     
|Non-regulated foreign insurance subsidiary    |         |      |          |        |      |   |          |       
|                                              | PICL*** |      |          | (1,800 | )    |   |          | (2,216 | )
|                                              |         |      |          |        |      |  
|Statutory reserves for losses and LAE         |         | $    | 223,717  |        |      | $ | 185,029  |       
|                                              |         |      |          |        |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | For the year ended December 31, 2004, we reported an
    increase of $31.9 million in gross ultimate loss estimates
    for accident years 2003 and prior, or 9.5% of
    $336.5 million of gross losses and LAE reserves at
    January 1, 2004. We reported a $4.5 million increase
    in net ultimate losses and LAE estimates for accident years 2003
    and prior, or 2.4% of $192.0 million. The change in gross
    ultimate loss estimates for accident years 2003 and prior is
    greater than the change in net ultimate loss estimates as a
    result of gross development on one program in which we retained
    less than 2.5% of the risk, also known as fronted business.                                                                    
|   
|**  | The GAAP allowance for reinsurance recoverables is reported
    as a Schedule F penalty or a non-admitted asset for
    statutory accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|*** | PICL is an offshore captive, which offers clients captive or
    rent-a-captive options. It is not a domestic insurance company
    and, therefore, is not included in the combined statutory
    financial statements filed with the National Association of
    Insurance Commissioners and state regulators.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(1) | In accordance with FIN 46(R), we performed an evaluation of
    our business relationships and determined that 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.



Investments




Competition and Pricing






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MEADOWBROOK INSURANCE GROUP, INC.




Regulation




| |                             
| | ----------------------------
| | Insurance Company Regulation





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





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



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MEADOWBROOK INSURANCE GROUP, INC.




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





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





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





Insurance Regulation Concerning Change or Acquisition of
Control








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MEADOWBROOK INSURANCE GROUP, INC.




Membership in Insolvency Funds and Associations and Mandatory
Pools






Restrictions on Dividends and Risk-Based Capital




Effect of Federal Legislation




NAIC-IRIS Ratios




Available Information


www.meadowbrook.com


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MEADOWBROOK INSURANCE GROUP, INC.


www.sec.gov





Item 2.     Properties






th







Item 3.     Legal
Proceedings


Accounting for
Contingencies


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MEADOWBROOK INSURANCE GROUP, INC.









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






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) 358-1100AuditorsPricewaterhouseCoopers LLP
    Chicago, ILCorporate CounselHoward & Howard Attorneys, P.C.
    Bloomfield Hills, MI |  | Transfer Agent & RegistrarLaSalle Bank National Association
    Shareholder Services Division
    135 South LaSalle Street,
    Suite 1811
    Chicago, IL 60603Stock ListingNew York Stock Exchange
    Symbol: MIG |  | Annual MeetingThe Annual Meeting of
    Meadowbrook Shareholders
    will be held at:2:00 p.m.
    May 10, 2005Corporate Headquarters26255 American Drive
    Southfield, MI

Shareholder Relations and Form 10-K






| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Karen M. Spaun, Senior Vice President and Chief Financial
    Officer 

    (248) 204-8178      karen.spaun@meadowbrook.com
|
| | Jennifer La, Director of Financial Analysis 

    (248) 204-8159      jennifer.la@meadowbrook.com                          

Direct Investment Plan






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MEADOWBROOK INSURANCE GROUP, INC.


Share Price and Dividend Information




|                  |  |      |      |  |     |  |      |           |  |  |   | 
|----------------- |  | ---- | ---- |  | --- |  | ---- | --------- |  |  | - | 
|December 31, 2004 |  | High |      |  | Low |  |      | Dividends | 
|                  |  |      |      |  |     |  |      |           | 
|First Quarter     |  |      | 5.35 |  |     |  | 4.15 |           |  |  |  | 
|Second Quarter    |  |      | 5.86 |  |     |  | 4.90 |           |  |  |  | 
|Third Quarter     |  |      | 5.50 |  |     |  | 4.34 |           |  |  |  | 
|Fourth Quarter    |  |      | 5.24 |  |     |  | 4.32 |           |  |  |  | 

|                  |  |      |      |  |     |  |      |           |  |  |   | 
|----------------- |  | ---- | ---- |  | --- |  | ---- | --------- |  |  | - | 
|December 31, 2003 |  | High |      |  | Low |  |      | Dividends | 
|                  |  |      |      |  |     |  |      |           | 
|First Quarter     |  |      | 2.67 |  |     |  | 2.00 |           |  |  |  | 
|Second Quarter    |  |      | 3.43 |  |     |  | 2.30 |           |  |  |  | 
|Third Quarter     |  |      | 4.18 |  |     |  | 2.90 |           |  |  |  | 
|Fourth Quarter    |  |      | 4.51 |  |     |  | 3.92 |           |  |  |  | 

Liquidity and Capital Resources






 Shareholders Equity


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MEADOWBROOK INSURANCE GROUP, INC.







Item 6.     Selected
Financial Data


Selected Consolidated Financial Data


|                                                      |                          |                                                 |         |       |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |       |  
|----------------------------------------------------- | ------------------------ | ----------------------------------------------- | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | - | ---- | ------- | ----- | - | - | ------- | ----- | -
|                                                      |                          | For the Years Ended December 31,                |        
|                                                      |                          |                                                 |        
|                                                      |                          | 2004                                            |         |       | 2003 |   |         | 2002  |   |   | 2001    |       |   | 2000 |        
|                                                      |                          |                                                 |         |       |      |   |         |       |   |   |         |       |   |      |        
|                                                      |                          | (In thousands, except per share and ratio data) |        
|Income Statement Data:                                |                          |                                                 |         |       |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|Gross written premiums                                |                          | $                                               | 313,493 |       |      | $ | 253,280 |       |   | $ | 183,637 |       |   | $    | 299,104 |       |   | $ | 287,852 |      
|Net written premiums                                  |                          |                                                 | 233,961 |       |      |   | 189,827 |       |   |   | 139,795 |       |   |      | 186,083 |       |   |   | 136,324 |      
|Net earned premiums                                   |                          |                                                 | 214,493 |       |      |   | 151,205 |       |   |   | 145,383 |       |   |      | 163,665 |       |   |   | 146,000 |      
|Net commissions and fees                              |                          |                                                 | 40,535  |       |      |   | 45,291  |       |   |   | 37,581  |       |   |      | 40,675  |       |   |   | 41,251  |      
|Net investment income                                 |                          |                                                 | 14,911  |       |      |   | 13,484  |       |   |   | 13,958  |       |   |      | 14,228  |       |   |   | 13,715  |      
|Net realized gains                                    |                          |                                                 | 339     |       |      |   | 823     |       |   |   | 666     |       |   |      | 735     |       |   |   | 540     |      
|Gain (loss) of sale of subsidiary                     |                          |                                                 |        |       |      |   |        |       |   |   | 199     |       |   |      | (1,097  | )     |   |   |        |      
|Total revenue                                         |                          |                                                 | 270,278 |       |      |   | 210,803 |       |   |   | 197,787 |       |   |      | 218,206 |       |   |   | 201,506 |      
|Net losses and LAE(1)                                 |                          |                                                 | 135,938 |       |      |   | 98,472  |       |   |   | 98,734  |       |   |      | 125,183 |       |   |   | 127,619 |      
|Policy acquisition and other underwriting expenses(1) |                          |                                                 | 33,424  |       |      |   | 23,606  |       |   |   | 33,573  |       |   |      | 31,216  |       |   |   | 25,399  |      
|Other administrative expenses                         |                          |                                                 | 25,964  |       |      |   | 23,232  |       |   |   | 22,612  |       |   |      | 23,531  |       |   |   | 27,366  |      
|Salaries and employee benefits                        |                          |                                                 | 52,297  |       |      |   | 48,238  |       |   |   | 37,659  |       |   |      | 44,179  |       |   |   | 43,038  |      
|Interest expense                                      |                          |                                                 | 2,281   |       |      |   | 977     |       |   |   | 3,021   |       |   |      | 4,516   |       |   |   | 5,135   |      
|Gain on debt reduction                                |                          |                                                 |        |       |      |   |        |       |   |   | (359    | )     |   |      |        |       |   |   |        |      
|Income (loss) before income taxes and equity earnings |                          |                                                 | 20,374  |       |      |   | 16,278  |       |   |   | 2,547   |       |   |      | (10,419 | )     |   |   | (27,051 | )    
|Equity earnings of affiliates                         |                          |                                                 | 39      |       |      |   | 3       |       |   |   |        |       |   |      |        |       |   |   |        |      
|Net income (loss)                                     |                          |                                                 | 14,061  |       |      |   | 10,099  |       |   |   | 1,650   |       |   |      | (6,510  | )     |   |   | (17,473 | )    
|Earnings per share  Diluted                          |                          | $                                               | 0.48    |       |      | $ | 0.35    |       |   | $ | 0.08    |       |   | $    | (0.76   | )     |   | $ | (2.05   | )    
|Dividends declared per share                          |                          | $                                               |        |       |      | $ |        |       |   | $ |        |       |   | $    | 0.09    |       |   | $ | 0.12    |      
|Balance Sheet Data:                                   |                          |                                                 |         |       |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|Total investments and cash and cash equivalents       |                          | $                                               | 402,156 |       |      | $ | 324,235 |       |   | $ | 286,050 |       |   | $    | 233,723 |       |   | $ | 240,083 |      
|Total assets                                          |                          |                                                 | 801,696 |       |      |   | 692,266 |       |   |   | 674,839 |       |   |      | 687,888 |       |   |   | 661,183 |      
|Loss and LAE reserves                                 |                          |                                                 | 378,157 |       |      |   | 339,465 |       |   |   | 374,933 |       |   |      | 394,596 |       |   |   | 341,824 |      
|Debt                                                  |                          |                                                 | 12,144  |       |      |   | 17,506  |       |   |   | 32,497  |       |   |      | 54,741  |       |   |   | 53,013  |      
|Debentures                                            |                          |                                                 | 35,310  |       |      |   | 10,310  |       |   |   |        |       |   |      |        |       |   |   |        |      
|Shareholders equity                                  |                          |                                                 | 167,510 |       |      |   | 155,113 |       |   |   | 147,395 |       |   |      | 80,316  |       |   |   | 85,975  |      
|Book value per share                                  |                          | $                                               | 5.76    |       |      | $ | 5.34    |       |   | $ | 4.98    |       |   | $    | 9.44    |       |   | $ | 10.10   |      
|Other Data:                                           |                          |                                                 |         |       |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|GAAP ratios (insurance companies only):               |                          |                                                 |         |       |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|                                                      | Net loss and LAE ratio   |                                                 |         | 67.9  | %    |   |         | 70.1  | % |   |         | 72.1  | % |      |         | 81.1  | % |   |         | 90.9  | %
|                                                      | Expense ratio            |                                                 |         | 33.5  | %    |   |         | 34.3  | % |   |         | 36.5  | % |      |         | 35.8  | % |   |         | 35.9  | %
|                                                      | Combined ratio           |                                                 |         | 101.4 | %    |   |         | 104.4 | % |   |         | 108.6 | % |      |         | 116.9 | % |   |         | 126.8 | %
|                                                      | Statutory combined ratio |                                                 |         | 101.2 | %    |   |         | 101.9 | % |   |         | 109.7 | % |      |         | 113.0 | % |   |         | 126.4 | %






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

20



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MEADOWBROOK INSURANCE GROUP, INC.


Unconsolidated GAAP data  Ratio Calculation
Table:


|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |         |      |   |   |         |      |  
|----------------------------------------------------------------- | --------------------------- | -------------------------------- | ------- | ---- | ---- | - | ------- | ---- | - | - | ------- | ---- | - | ---- | ------- | ---- | - | - | ------- | ---- | -
|                                                                  |                             | For the Years Ended December 31, |        
|                                                                  |                             |                                  |        
|                                                                  |                             | 2004                             |         |      | 2003 |   |         | 2002 |   |   | 2001    |      |   | 2000 |        
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|Net earned premiums                                               |                             | $                                | 214,493 |      |      | $ | 151,205 |      |   | $ | 145,383 |      |   | $    | 163,665 |      |   | $ | 146,000 |     
|Consolidated net losses and LAE                                   |                             | $                                | 135,938 |      |      | $ | 98,472  |      |   | $ | 98,734  |      |   | $    | 125,183 |      |   | $ | 127,619 |     
|Intercompany claim fees                                           |                             |                                  | 9,691   |      |      |   | 7,514   |      |   |   | 6,154   |      |   |      | 7,520   |      |   |   | 5,026   |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|Unconsolidated net losses and LAE                                 |                             | $                                | 145,629 |      |      | $ | 105,986 |      |   | $ | 104,888 |      |   | $    | 132,703 |      |   | $ | 132,645 |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|                                                                  | GAAP net loss and LAE ratio |                                  |         | 67.9 | %    |   |         | 70.1 | % |   |         | 72.1 | % |      |         | 81.1 | % |   |         | 90.9 | %
|Consolidated policy acquisition and other underwriting expenses   |                             | $                                | 33,424  |      |      | $ | 23,606  |      |   | $ | 33,573  |      |   | $    | 31,216  |      |   | $ | 25,399  |     
|Intercompany administrative and other underwriting fees           |                             |                                  | 38,359  |      |      |   | 28,296  |      |   |   | 19,445  |      |   |      | 27,309  |      |   |   | 27,002  |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|Unconsolidated policy acquisition and other underwriting expenses |                             | $                                | 71,783  |      |      | $ | 51,902  |      |   | $ | 53,018  |      |   | $    | 58,525  |      |   | $ | 52,401  |     
|                                                                  |                             |                                  |         |      |      |   |         |      |   |   |         |      |   |      |        
|                                                                  | GAAP expense ratio          |                                  |         | 33.5 | %    |   |         | 34.3 | % |   |         | 36.5 | % |      |         | 35.8 | % |   |         | 35.9 | %
|GAAP combined ratio                                               |                             |                                  | 101.4   | %    |      |   | 104.4   | %    |   |   | 108.6   | %    |   |      | 116.9   | %    |   |   | 126.8   | %   







21



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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. Results could differ
materially from those indicated by such forward-looking
statements. Among the important factors that could cause actual
results to differ materially from those indicated by such
forward-looking statements are: the frequency and severity of
claims; uncertainties inherent in reserve estimates;
catastrophic events; a change in the demand for, pricing of,
availability or collectibility of reinsurance; increased rate
pressure on premiums; obtainment of certain rate increases in
current market conditions; investment rate of return; changes in
and adherence to insurance regulation; actions taken by
regulators, rating agencies or lenders; obtainment of certain
processing efficiencies; changing rates of inflation; general
economic conditions and other risks identified in our reports
and registration statements filed with the Securities and
Exchange Commission. We are not under any obligation to (and
expressly disclaim any such obligation to) update or alter our
forward-looking statements whether as a result of new
information, future events or otherwise.


Description of Business










22



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






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



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




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



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|         |                            |                                  |   |         |      |  |   |         |   |  |   |         |  
|-------- | -------------------------- | -------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|         |                            | For the Years Ended December 31, |  
|         |                            |                                  |  
|         |                            | 2004                             |   |         | 2003 |  |   | 2002    |  
|         |                            |                                  |   |         |      |  |   |         |  
|Revenues |                            |                                  |   |         |      |  |   |         |   |  |   |        
|         | Net earned premiums        |                                  | $ | 214,493 |      |  | $ | 151,205 |   |  | $ | 145,383 |  
|         | Management fees            |                                  |   | 16,253  |      |  |   | 18,751  |   |  |   | 12,761  |  
|         | Claims fees                |                                  |   | 13,207  |      |  |   | 14,756  |   |  |   | 8,076   |  
|         | Loss control fees          |                                  |   | 2,174   |      |  |   | 2,303   |   |  |   | 2,590   |  
|         | Reinsurance placement      |                                  |   | 420     |      |  |   | 308     |   |  |   | 309     |  
|         | Investment income          |                                  |   | 14,887  |      |  |   | 13,471  |   |  |   | 13,906  |  
|         | Net realized gains         |                                  |   | 339     |      |  |   | 823     |   |  |   | 666     |  
|         |                            |                                  |   |         |      |  |   |         |  
|         | Specialty risk management  |                                  |   | 261,773 |      |  |   | 201,617 |   |  |   | 183,691 |  
|         | Agency operations          |                                  |   | 17,690  |      |  |   | 14,954  |   |  |   | 14,330  |  
|         | Reconciling items(1)       |                                  |   | 24      |      |  |   | 13      |   |  |   | 52      |  
|         | Gain on sale of subsidiary |                                  |   |        |      |  |   |        |   |  |   | 199     |  
|         | Intersegment revenue(2)    |                                  |   | (9,209  | )    |  |   | (5,781  | ) |  |   | (485    | )
|         |                            |                                  |   |         |      |  |   |         |  
|         | Consolidated revenue       |                                  | $ | 270,278 |      |  | $ | 210,803 |   |  | $ | 197,787 |  
|         |                            |                                  |   |         |      |  |   |         |  






|    |                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The revenue included in reconciling items relates to interest
    income in the holding company.                                                                                                                                                                                                                                                                    
|   
|(2) | Intersegment revenue is related to intercompany agency
    commission revenue, which represents commissions received by our
    agency operations from our Insurance Company Subsidiaries. This
    revenue is primarily related to the conversion of an existing
    west-coast commercial transportation program to one of our
    Insurance Company Subsidiaries.

Critical Accounting Estimates




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





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





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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








.




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





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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






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









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





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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued










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





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

Goodwill and Other Intangible
Assets


Results of Operations




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



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




2004 compared to 2003:






 Summary of Significant Accounting
Policies


28



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


2003 compared to 2002:






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



|                      |                                      |                                  |   |         |      |  |   |         |  |  |   |         |  
|--------------------- | ------------------------------------ | -------------------------------- | - | ------- | ---- |  | - | ------- |  |  | - | ------- | -
|                      |                                      | For the Years Ended December 31, |  
|                      |                                      |                                  |  
|                      |                                      | 2004                             |   |         | 2003 |  |   | 2002    | 
|                      |                                      |                                  |   |         |      |  |   |         | 
|Revenue:              |                                      |                                  |   |         |      |  |   |         |  |  |   |        
|                      | Net earned premiums                  |                                  | $ | 214,493 |      |  | $ | 151,205 |  |  | $ | 145,383 |  
|                      | Management fees                      |                                  |   | 16,253  |      |  |   | 18,751  |  |  |   | 12,761  |  
|                      | Claims fees                          |                                  |   | 13,207  |      |  |   | 14,756  |  |  |   | 8,076   |  
|                      | Loss control fees                    |                                  |   | 2,174   |      |  |   | 2,303   |  |  |   | 2,590   |  
|                      | Reinsurance placement                |                                  |   | 420     |      |  |   | 308     |  |  |   | 309     |  
|                      | Investment income                    |                                  |   | 14,887  |      |  |   | 13,471  |  |  |   | 13,906  |  
|                      | Net realized gains                   |                                  |   | 339     |      |  |   | 823     |  |  |   | 666     |  
|                      |                                      |                                  |   |         |      |  |   |         | 
|                      | Total revenue                        |                                  | $ | 261,773 |      |  | $ | 201,617 |  |  | $ | 183,691 |  
|                      |                                      |                                  |   |         |      |  |   |         | 
|Pre-tax income (loss) |                                      |                                  |   |         |      |  |   |         |  |  |   |        
|                      | Specialty risk management operations |                                  | $ | 16,577  |      |  | $ | 11,822  |  |  | $ | (739    | )

2004 compared to 2003:










29



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued












2003 compared to 2002:




30



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


















31



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




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



|                |  |                                  |        |  |      |   |        |      |  |   |        | 
|--------------- |  | -------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                |  | For the Years Ended December 31, |       
|                |  |                                  |       
|                |  | 2004                             |        |  | 2003 |   |        | 2002 | 
|                |  |                                  |        |  |      |   |        |      | 
|Net commission  |  | $                                | 17,690 |  |      | $ | 14,954 |      |  | $ | 14,330 | 
|Pre-tax income* |  | $                                | 8,885  |  |      | $ | 6,945  |      |  | $ | 6,552  | 




|  |                                                
|- | -----------------------------------------------
|* | Excluding the allocation of corporate overhead.

2004 compared to 2003:






2003 compared to 2002:








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



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



|                                             |  |               |         |  |               |   |         |          |  |   |         | 
|-------------------------------------------- |  | ------------- | ------- |  | ------------- | - | ------- | -------- |  | - | ------- | 
|                                             |  | Minimum       |         |  | Maximum       |   |         | Selected | 
|Line of Business                             |  | Reserve Range |         |  | Reserve Range |   |         | Reserves | 
|                                             |  |               |         |  |               |   |         |          | 
|Workers Compensation(1)                     |  | $             | 125,208 |  |               | $ | 137,570 |          |  | $ | 131,477 | 
|Commercial Multiple Peril/ General Liability |  |               | 39,858  |  |               |   | 49,336  |          |  |   | 44,187  | 
|Commercial Automobile                        |  |               | 30,089  |  |               |   | 34,968  |          |  |   | 33,265  | 
|Other                                        |  |               | 16,881  |  |               |   | 19,243  |          |  |   | 18,067  | 
|                                             |  |               |         |  |               |   |         |          | 
|Total Net Reserves                           |  | $             | 212,036 |  |               | $ | 241,117 |          |  | $ | 226,996 | 
|                                             |  |               |         |  |               |   |         |          | 




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

32



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








|                                             |  |              |         |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |        |  |  |   |        |  |  |   |         | 
|-------------------------------------------- |  | ------------ | ------- | -------------- | ------------- | - | --------------- | ------- |  | ----------- | ------- |  |  | ----------- | ------ | - | ------- | - | ------- | ----- |  | - | ------ |  |  | ------------ | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                             |  |              |         | Reserves of    |               |   |                 |         |  |             |        
|                                             |  |              |         | Deconsolidated |               |   | Incurred Losses |         |  | Paid Losses |         |  | 
|                                             |  | Reserves at  |         |                | Subsidiary at |   |                 |         |  |             |         |  |  | Reserves at |       
|                                             |  | December 31, |         |                | December 31,  |   |                 | Current |  |             | Prior   |  |  | Total       |        |   | Current |   |         | Prior |  |   | Total  |  |  | December 31, |       
|Line of Business                             |  | 2003         |         |                | 2003(1)       |   |                 | Year    |  |             | Years   |  |  | Incurred    |        |   | Year    |   |         | Years |  |   | Paid   |  |  | 2004         |       
|                                             |  |              |         |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |       
|Workers Compensation                        |  | $            | 91,587  |                |               | $ | (2,250          | )       |  | $           | 61,657  |  |  | $           | 2,673  |   |         | $ | 64,330  |       |  | $ | 11,313 |  |  | $            | 30,268 |  |  | $ | 41,581 |  |  | $ | 112,086 | 
|Residual Markets                             |  |              | 14,506  |                |               |   |                |         |  |             | 13,867  |  |  |             | (1,682 | ) |         |   | 12,185  |       |  |   | 3,944  |  |  |              | 3,356  |  |  |   | 7,300  |  |  |   | 19,391  | 
|Commercial Multiple Peril/ General Liability |  |              | 42,389  |                |               |   | (737            | )       |  |             | 19,310  |  |  |             | 3,016  |   |         |   | 22,326  |       |  |   | 989    |  |  |              | 18,802 |  |  |   | 19,791 |  |  |   | 44,187  | 
|Commercial Automobile                        |  |              | 27,515  |                |               |   |                |         |  |             | 23,876  |  |  |             | 1,192  |   |         |   | 25,068  |       |  |   | 5,863  |  |  |              | 13,455 |  |  |   | 19,318 |  |  |   | 33,265  | 
|Other                                        |  |              | 16,022  |                |               |   | (2              | )       |  |             | 12,699  |  |  |             | (670   | ) |         |   | 12,029  |       |  |   | 4,425  |  |  |              | 5,557  |  |  |   | 9,982  |  |  |   | 18,067  | 
|                                             |  |              |         |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |       
|Net Reserves                                 |  |              | 192,019 |                |               | $ | (2,989          | )       |  | $           | 131,409 |  |  | $           | 4,529  |   |         | $ | 135,938 |       |  | $ | 26,534 |  |  | $            | 71,438 |  |  | $ | 97,972 |  |  |   | 226,996 | 
|                                             |  |              |         |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |       
|Reinsurance Recoverable                      |  |              | 147,446 |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |        |  |  |   |        |  |  |   | 151,161 | 
|                                             |  |              |         |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |       
|Consolidated                                 |  | $            | 339,465 |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |        |  |  |   |        |  |  | $ | 378,157 | 
|                                             |  |              |         |                |               |   |                 |         |  |             |         |  |  |             |        |   |         |   |         |       |  |   |        |  |  |              |       

33



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


|                                             |  |              |         |  |             |              |         |              |                |   |                 |  |  |  |       |   
|-------------------------------------------- |  | ------------ | ------- |  | ----------- | ------------ | ------- | ------------ | -------------- | - | --------------- |  |  |  | ----- | --
|                                             |  |              |         |  |             | Re-estimated |         |              |               
|                                             |  |              |         |  |             | reserves at  |         |              | Development as |  
|                                             |  | Reserves at  |         |  | Reserves at |              |         | December 31, |                |   | a percentage of | 
|                                             |  | December 31, |         |  | January 1,  |              |         | 2004 on      |                |   | prior year      | 
|Line of Business                             |  | 2003         |         |  | 2004(1)     |              |         | prior pears  |                |   | reserves        | 
|                                             |  |              |         |  |             |              |         |              |                |   |                 | 
|Workers Compensation                        |  | $            | 91,587  |  |             | $            | 89,337  |              |                | $ | 92,010          |  |  |  | 3.0   | % 
|Commercial Multiple Peril/ General Liability |  |              | 42,389  |  |             |              | 41,652  |              |                |   | 44,668          |  |  |  | 7.2   | % 
|Commercial Automobile                        |  |              | 27,515  |  |             |              | 27,515  |              |                |   | 28,707          |  |  |  | 4.3   | % 
|Other                                        |  |              | 16,022  |  |             |              | 16,020  |              |                |   | 15,350          |  |  |  | (4.2  | )%
|                                             |  |              |         |  |             |              |         |              |                |   |                 | 
|Sub-total                                    |  |              | 177,513 |  |             |              | 174,524 |              |                |   | 180,735         |  |  |  | 3.6   | % 
|Residual Markets                             |  |              | 14,506  |  |             |              | 14,506  |              |                |   | 12,824          |  |  |  | (11.6 | )%
|                                             |  |              |         |  |             |              |         |              |                |   |                 | 
|Total Net Reserves                           |  | $            | 192,019 |  |             | $            | 189,030 |              |                | $ | 193,559         |  |  |  | 2.4   | % 
|                                             |  |              |         |  |             |              |         |              |                |   |                 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In accordance with FIN 46(R), we performed an evaluation of
    our business relationships and determined that our wholly owned
    subsidiary, American Indemnity, did not meet the tests for
    consolidation, as neither we, 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). 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. Refer to Recent Accounting
    Pronouncementsof Managements Discussion and Analysis.



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





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



34



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






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





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





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



Salary and Employee Benefits and Other Administrative
Expenses








35



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








Interest Expense


Liquidity and Capital Resources


Income Taxes




Liquidity and Capital Resources




36



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |        |   |       |        |         |  
|----------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ----- | ------ | ------- | -
|                                                            |                                                                           | For the Years Ended December 31,                                                            |       
|                                                            |                                                                           |                                                                                             |       
|                                                            |                                                                           | 2004                                                                                        |        |        | 2003   |   |        | 2002   |       
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|Net income                                                  |                                                                           | $                                                                                           | 14,061 |        |        | $ | 10,099 |        |        | $ | 1,650 |       
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|Regulated Subsidiaries:                                     |                                                                           |                                                                                             |        |        |        |   |        |        |        |   |       |       
|                                                            |                                                                           | Net income (loss)                                                                           |        | $      | 6,973  |   |        | $      | 3,928  |   |       | $      | (591    | )
|                                                            |                                                                           | Depreciation and amortization                                                               |        |        |       |   |        |        | 6      |   |       |        | 12      |  
|                                                            |                                                                           | Interest                                                                                    |        |        |       |   |        |        | 8      |   |       |        | 23      |  
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            | Net income (loss), excluding interest, depreciation, and
    amortization |                                                                                             |        | 6,973  |        |   |        | 3,942  |        |   |       | (556   | )      
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            |                                                                           | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities |        |        | 6,866  |   |        |        | 5,517  |   |       |        | 394     |  
|                                                            |                                                                           | Changes in operating assets and liabilities                                                 |        |        | 48,270 |   |        |        | 20,166 |   |       |        | 6,170   |  
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            | Total adjustments                                                         |                                                                                             |        | 55,136 |        |   |        | 25,683 |        |   |       | 6,564  |        
|                                                            | Depreciation and amortization                                             |                                                                                             |        |       |        |   |        | (6     | )      |   |       | (12    | )      
|                                                            | Interest                                                                  |                                                                                             |        |       |        |   |        | (8     | )      |   |       | (23    | )      
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            | Net cash provided by operating activities                                 |                                                                                             | $      | 62,109 |        |   | $      | 29,611 |        |   | $     | 5,973  |        
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|Non-regulated Subsidiaries (including the holding company): |                                                                           |                                                                                             |        |        |        |   |        |        |        |   |       |       
|                                                            |                                                                           | Net income                                                                                  |        | $      | 7,088  |   |        | $      | 6,171  |   |       | $      | 2,241   |  
|                                                            |                                                                           | Depreciation and amortization                                                               |        |        | 1,967  |   |        |        | 1,765  |   |       |        | 2,411   |  
|                                                            |                                                                           | Interest                                                                                    |        |        | 2,535  |   |        |        | 1,229  |   |       |        | 3,337   |  
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            | Net income, excluding interest, depreciation, and amortization            |                                                                                             |        | 11,590 |        |   |        | 9,165  |        |   |       | 7,989  |        
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            |                                                                           | Adjustments to reconcile net income to net cash provided by
    operating activities        |        |        | (1,063 | ) |        |        | 2,365  |   |       |        | 4,270   |  
|                                                            |                                                                           | Changes in operating assets and liabilities                                                 |        |        | 2,540  |   |        |        | 9,383  |   |       |        | (10,701 | )
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            | Total adjustments                                                         |                                                                                             |        | 1,477  |        |   |        | 11,748 |        |   |       | (6,431 | )      
|                                                            | Depreciation and amortization                                             |                                                                                             |        | (1,967 | )      |   |        | (1,765 | )      |   |       | (2,411 | )      
|                                                            | Interest                                                                  |                                                                                             |        | (2,535 | )      |   |        | (1,229 | )      |   |       | (3,337 | )      
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|                                                            | Net cash provided by (used in) operating activities                       |                                                                                             | $      | 8,565  |        |   | $      | 17,919 |        |   | $     | (4,190 | )      
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|Consolidated total adjustments                              |                                                                           |                                                                                             | 56,613 |        |        |   | 37,431 |        |        |   | 133   |       
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       
|Consolidated net cash provided by operating activities      |                                                                           | $                                                                                           | 70,674 |        |        | $ | 47,530 |        |        | $ | 1,783 |       
|                                                            |                                                                           |                                                                                             |        |        |        |   |        |        |       



37



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


2004 compared to 2003:






2003 compared to 2002:






Other Items:




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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


















39



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


















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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


Contractual Obligations and Commitments




|                                       |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |        |  |  |   |        | 
|-------------------------------------- |  | ---------------------- | ------- | --------- | -------- | - | ------- | ----------- |  | -------- | ---------- |  | --------- | ---------- | ------ |  |  | - | ------ | 
|                                       |  | Payments due by period |        
|                                       |  |                        |        
|                                       |  |                        |         | Less than |          |   | One to  |             |  | Three to |            |  | More than |           
|                                       |  | Total                  |         |           | one year |   |         | three years |  |          | five years |  |           | five years |       
|                                       |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |       
|Non-regulated companies:               |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |        |  |  |   |        | 
|Lines of credit(1)                     |  | $                      | 12,144  |           |          | $ | 12,144  |             |  | $        |           |  |           | $          |       |  |  | $ |       | 
|Senior debentures                      |  |                        | 25,000  |           |          |   |        |             |  |          |           |  |           |            |       |  |  |   | 25,000 | 
|Junior subordinated debentures         |  |                        | 10,310  |           |          |   |        |             |  |          |           |  |           |            |       |  |  |   | 10,310 | 
|Operating lease obligations(2)         |  |                        | 11,698  |           |          |   | 2,264   |             |  |          | 3,226      |  |           |            | 2,319  |  |  |   | 3,889  | 
|Regulated companies:                   |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |        |  |  |   |        | 
|Losses and loss adjustment expenses(3) |  |                        | 378,157 |           |          |   | 170,944 |             |  |          | 135,103    |  |           |            | 40,138 |  |  |   | 31,972 | 
|                                       |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |       
|Total                                  |  | $                      | 437,309 |           |          | $ | 185,352 |             |  | $        | 138,329    |  |           | $          | 42,457 |  |  | $ | 71,171 | 
|                                       |  |                        |         |           |          |   |         |             |  |          |            |  |           |            |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Relates to revolving lines of credit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | Consists of rental obligations under real estate leases related
    to branch offices. In addition, includes amounts related to
    equipment leases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | 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 $151.2 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 $68.3 million, $54.0 million,
    $16.1 million, and $12.8 million, respectively,
    resulting in net losses and loss adjustment expenses of
    $102.6 million, $81.1 million, $24.0 million, and
    $19.2 million, respectively.



Regulatory and Rating Issues






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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company Action Level is triggered if a
    companys total adjusted capital is less than 200% but
    greater than or equal to 150% of its risk-based capital. At the
    Company Action Level, a company must submit a
    comprehensive plan to the regulatory authority that discusses
    proposed corrective actions to improve its capital position. A
    company whose total adjusted capital is between 250% and 200% of
    its risk-based capital is subject to a trend test. A trend test
    calculates the greater of any decrease in the margin (i.e. the
    amount in dollars by which a companys adjusted capital
    exceeds it risk-based capital) between the current year and the
    prior year and between the current year and the average of the
    past three years, and assumes that the decrease could occur
    again in the coming year. If a similar decrease in margin in the
    coming year would result in a risk-based capital ratio of less
    than 190%, then Company Action Level regulatory
    action would be triggered.
|
| |  | The Regulatory Action Level is triggered if a
    companys total adjusted capital is less than 150% but
    greater than or equal to 100% of its risk-based capital. At the
    Regulatory Action Level, the regulatory authority
    will perform a special examination of the company and issue an
    order specifying corrective actions that must be followed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | The Authorized Control Level is triggered if a
    companys total adjusted capital is less than 100% but
    greater than or equal to 70% of its risk-based capital, at which
    level the regulatory authority may take any action it deems
    necessary, including placing the company under regulatory
    control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The Mandatory Control Level, is triggered if a
    companys total adjusted capital is less than 70% of its
    risk-based capital, at which level the regulatory authority is
    mandated to place the company under its control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           





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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                                                |  |                |  |       |        |  
|----------------------------------------------- |  | -------------- |  | ----- | ------ | -
|Ratio                                           |  | Usual Range    |  | Value |       
|                                                |  |                |  |       |       
|Company: Star                                   |  |                |  |       |        |  
|Change in Net Writings                          |  | <33% or > 33%  |  |       | 33%(1  | )
|Investment Yield                                |  | <10% or > 4.5% |  |       | 3.1%(2 | )
|Estimated Current Reserve Deficiency to Surplus |  | Under 25%      |  |       | 57%(3  | )
|Company: Savers                                 |  |                |  |       |        |  
|Two-year Overall Operating Ratio                |  | Under 100%     |  |       | 110%(4 | )
|Company: Williamsburg                           |  |                |  |       |        |  
|Investment Yield                                |  | <10% or > 4.5% |  |       | 3.1%(2 | )
|Company: Ameritrust                             |  |                |  |       |        |  
|Investment Yield                                |  | <10% or > 4.5% |  |       | 4.0%(2 | )
|Two-Year Reserve Development to Surplus         |  | Under 20%      |  |       | 22%(5  | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The increase in Stars net written premium in 2004
    reflected anticipated growth from premium rate increases, the
    conversion of existing controlled programs to our
    subsidiarys paper in 2003 and controlled growth related to
    select new business.                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | The decrease in the investment yield is the result of a
    substantial amount of principal payments on mortgage-backed
    securities due to low interest rates and a strong mortgage
    refinance market in 2004. Cash flows were reinvested in short
    and long-term securities in an interest rate environment where
    interest rates are still relatively low. Also contributing to
    the decrease is a shift in investment strategy toward greater
    allocation to municipal bonds, which have lower yields than
    taxable bonds.                                                                                                                                            
|   
|(3) | The Estimated Current Reserve Deficiency to Surplus ratio
    measures the relationship between the current years net
    premium earned to cumulative net unpaid loss and loss adjustment
    expense reserves. Stated differently, this ratio compares
    balance sheet accounts (loss and loss adjustment expense
    reserves) for all years to an income statement account (net
    earned premium) for a single year. This ratio implicitly assumes
    that there is a constant relationship between premiums earned
    and reserves; that there is a constant level of rate adequacy;
    that there is a constant mix of business; and there are
    consistent reinsurance terms.



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As the NAIC IRIS Instruction Manual states, the results of
    this ratio can be distorted by significant changes in premium
    volume. The unusual range reflects the impact of earned premium
    growth in Star of 59% which resulted from the reduction in
    premiums in 2002 and the subsequent controlled growth in 2003
    and 2004. In addition, the cumulative rate increases since
    January 2000 were 80.3%. Finally, the workers compensation
    reinsurance program over the past five years has changed with
    the termination of the 2000 and 2001 surplus relief treaty and
    increases in net retentions from a low of $100,000 per
    occurrence in 2000 to $350,000 in 2004. A more accurate
    reflection of the values intended to be derived in the formula
    would utilize a weighted average premium approach. Three
    different approaches, using weighted premiums with a 50-50 split
    of current and prior premiums, weights based on current reserves
    by age, and weights based on percentages of reserves to ultimate
    incurred by age would result in a reduction of 47.1 percentage
    points, 34.1 percentage points, and 44.9 percentage points,
    respectively, all of which are within the normal range.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The Two-Year Overall Operating Ratio on Savers in 2004 was 110%.
    Certain liability occurrence programs insured by Savers
    experienced larger loss reserve development than historically
    realized. The results of these programs have caused Savers to
    re-underwrite the programs as well as implement substantial rate
    increases. These programs have historically been profitable for
    Savers, and, although

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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | there can be no guaranty, we believe the underwriting efforts
    and rate increases that have occurred will return these programs
    to profitability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(5) | Ameritrusts loss reserves from 2000 and prior accident
    years were impacted by two factors, both of which contributed to
    the increase in the Two-Year Reserve Development to Surplus
    ratio. First, some large claims increased to amounts that would
    have been ceded to Reliance Insurance Company. A re-evaluation
    of reinsurance recoveries was made due to Reliance being placed
    into liquidation, the result of which was a write-down of these
    ceded loss reserves. The other factor impacting this ratio was
    reserve strengthening on claims incurred in older accident years
    that resulted from a claims audit performed during 2004.



Reinsurance Considerations






|                                    |  |                           |        |  |                         |   |        |           |  |  |    | 
|----------------------------------- |  | ------------------------- | ------ |  | ----------------------- | - | ------ | --------- |  |  | -- | 
|                                    |  | Reinsurance Premium Ceded |        |  | Reinsurance Recoverable |   |        | A.M. Best | 
|Reinsurer                           |  | December 31, 2004         |        |  | December 31, 2004       |   |        | Rating    | 
|                                    |  |                           |        |  |                         |   |        |           | 
|                                    |  | (In thousands)            |        |  | (In thousands)          |   |        |          
|Employers Reinsurance Corporation   |  | $                         | 18,648 |  |                         | $ | 59,123 |           |  |  | A  | 
|Gene Accid Motors Insurance Company |  |                           | 9,366  |  |                         |   | 7,047  |           |  |  | A  | 
|Aspen Insurance UK Ltd.             |  |                           | 4,824  |  |                         |   | 2,394  |           |  |  | A  | 
|Alea London UK Ltd.                 |  |                           | 3,902  |  |                         |   | 2,473  |           |  |  | A- | 
|Munich American Reinsurance         |  |                           | 3,677  |  |                         |   | 865    |           |  |  | A+ | 



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




Off-Balance Sheet Arrangements




Recent Accounting Pronouncements


Consolidation of Variable Interest Entities. Debt




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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued


The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments Accounting for Certain
Investments in Debt and Equity Securities


Share-Based Payment Accounting for Stock Issued to
Employees.


Related Party Transactions


 Related Party Transaction




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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued







Sale-Leaseback Transaction






Subsequent Events




Risk Factors




| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our reserves for losses and loss adjustment expenses are
    not adequate, we will have to increase our reserves, which would
    result in reductions in net income and retained earnings.





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



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




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







| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | We cannot guarantee that our reinsurers will pay in a timely
    fashion, if at all, and, as a result, we could experience
    losses.





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | 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;

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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuations in interest rates, inflationary pressures and other
    changes in the investment environment, which affect returns on
    invested assets and may impact the ultimate payout of losses; and
|
| |  | increase in medical costs.                                                                                                                                                                               





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







| |   |                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the enactment of the Gramm-Leach-Bliley Act of 1999 (which
    permits financial services companies such as banks and brokerage
    firms to engage in the insurance business), which could result
    in increased competition from new entrants to our markets;
|
| |  | the formation of new insurers and an influx of new capital in
    the marketplace as existing companies attempt to expand their
    business as a result of better pricing and/or terms;                                                                         
|
| |  | programs in which state-sponsored entities provide property
    insurance in catastrophe-prone areas or other alternative market
    types of coverage; and                                                                                                      
|
| |  | changing practices created by the internet, which has increased
    competition within the insurance business.                                                                                                                                                   





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | Because we are heavily regulated by the states in which we
    operate, we may be limited in the way we operate.



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | standards of solvency, including risk-based capital measurements;                                                                                                                                          
|
| |  | restrictions on the nature, quality and concentration of
    investments;                                                                                                                                  
|
| |  | restrictions on the types of terms that we can include in the
    insurance policies we offer;                                                                                                             
|
| |  | required methods of accounting;                                                                                                                                                                            
|
| |  | reserves for unearned premiums, losses and other purposes; and                                                                                                                                             
|
| |  | potential assessments for the provision of funds necessary for
    the settlement of covered claims under certain insurance
    policies provided by impaired, insolvent or failed insurance
    companies.





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





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





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



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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued








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









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





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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued






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








Item 7A.     Qualitative and
Quantitative Disclosures About Market Risk










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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued




|                          |  |                   |         |   |                 |   |         |                 |  |   |         |  
|------------------------- |  | ----------------- | ------- | - | --------------- | - | ------- | --------------- |  | - | ------- | -
|                          |  | Rates Down 100bps |         |   | Rates Unchanged |   |         | Rates Up 100bps | 
|                          |  |                   |         |   |                 |   |         |                 | 
|Market Value              |  | $                 | 345,521 |   |                 | $ | 332,242 |                 |  | $ | 319,928 |  
|Yield to Maturity or Call |  |                   | 2.72    | % |                 |   | 3.72    | %               |  |   | 4.72    | %
|Effective Duration        |  |                   | 3.82    |   |                 |   | 3.92    |                 |  |   | 4.05    |  












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











Item 9B.     Other
Information









PART III




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MEADOWBROOK INSURANCE GROUP, INC.


MANAGEMENTS DISCUSSION AND
ANALYSIS  continued







Item 10.     Directors and
Executive Officers of the Registrant









Item 11.     Executive
Compensation









|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                                           |       |                                      |           |           |                         |   |      |                           |  |  |           |           | 
|---------------------------------------------------------- | ----- | ------------------------------------ | --------- | --------- | ----------------------- | - | ---- | ------------------------- |  |  | --------- | --------- | 
|                                                           |       | Equity Compensation Plan Information |           |           | Number of securities    |  
|                                                           |       |                                      |           |           | remaining available for |  
|                                                           |       | Number of securities to              |           |           | Weighted-average        |   |      | future issuance under     | 
|                                                           |       | be issued upon exercise              |           |           | exercise price of       |   |      | equity compensation       | 
|                                                           |       | of outstanding options,              |           |           | outstanding options,    |   |      | plans (excluding          | 
|                                                           |       | warrants and rights                  |           |           | warrants and rights     |   |      | securities in column (a)) | 
|Plan category                                              |       | (a)                                  |           |           | (b)                     |   |      | (c)                       | 
|                                                           |       |                                      |           |           |                         |   |      |                           | 
|Equity compensation plans approved by security holders     |       |                                      | 2,121,317 |           |                         | $ | 5.53 |                           |  |  | 1,538,804 |          
|Equity compensation plans not approved by security holders |       |                                      | 285,000   |           |                         |   | 3.10 |                           |  |  |          |          
|                                                           |       |                                      |           |           |                         |   |      |                           | 
|                                                           | Total |                                      |           | 2,406,317 |                         |   | $    | 5.24                      |  |  |           | 1,538,804 | 
|                                                           |       |                                      |           |           |                         |   |      |                           | 








Item 13.     Certain
Relationships and Related Transactions









Item 14.     Principal
Accountant Fees and Services




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MEADOWBROOK INSURANCE GROUP, INC.







PART IV







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



|   |  |                                                                                                                                                                                                             |  |      |       | 
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | 
|   |  |                                                                                                                                                                                                             |  | Page |      
|   |  |                                                                                                                                                                                                             |  |      |      
|1. |  | List of Financial Statements:                                                                                                                                                                               |  |      |       | 
|   |  | Report of PricewaterhouseCoopers LLP, Independent Registered
    Public Accounting Firm                                                                                                                     |  |      | 56    | 
|   |  | Consolidated Balance Sheet  December 31, 2004
    and 2003                                                                                                                                                 |  |      | 57    | 
|   |  | Consolidated Statement of Income  For Years Ended
    December 31, 2004, 2003, and 2002                                                                                                                    |  |      | 58    | 
|   |  | Consolidated Statement of Comprehensive Income  For
    Years Ended December 31, 2004, 2003, and 2002                                                                                                      |  |      | 59    | 
|   |  | Consolidated Statement of Shareholders Equity 
    For Years Ended December 31, 2004, 2003, and 2002                                                                                                      |  |      | 60    | 
|   |  | Consolidated Statement of Cash Flows  For Years Ended
    December 31, 2004, 2003, and 2002                                                                                                                |  |      | 61    | 
|   |  | Notes to Consolidated Financial Statements                                                                                                                                                                  |  |      | 62-92 | 
|2. |  | Financial Statement Schedules                                                                                                                                                                               |  |      |       | 
|   |  | Schedule I Summary of Investments Other Than Investments in
    Related Parties                                                                                                                             |  |      | 93    | 
|   |  | Schedule II Condensed Financial Information of Registrant                                                                                                                                                   |  |      | 94-96 | 
|   |  | Schedule III Supplementary Insurance Information                                                                                                                                                            |  |      | 97-99 | 
|   |  | Schedule IV Reinsurance                                                                                                                                                                                     |  |      | 100   | 
|   |  | Schedule V Valuation and qualifying accounts                                                                                                                                                                |  |      | 101   | 
|   |  | Schedule VI Supplemental Information Concerning Property
    and Casualty Insurance Operations                                                                                                              |  |      | 102   | 
|3. |  | Exhibits: The Exhibits listed on the accompanying
    Exhibit Index immediately following the financial statement
    schedule are filed as part of, or incorporated by reference
    into, this Form 10-K. |  |      |       | 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM















56



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED BALANCE SHEET


|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |         |   |         |         |         | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                        |                                                                                                                                 | December 31,                                                                                                                                      |                                           
|                                        |                                                                                                                                 |                                                                                                                                                   |                                           
|                                        |                                                                                                                                 | 2004                                                                                                                                              |                                            |         | 2003    |        
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                        |                                                                                                                                 | (In thousands, except                                                                                                                             |                                           
|                                        |                                                                                                                                 | share data)                                                                                                                                       |                                           
|ASSETS                                 
|Investments                             |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |         |   |        
|                                        | Debt securities available for sale, at fair value (amortized
    cost of $324,966 and $260,330 in 2004 and 2003, respectively)  |                                                                                                                                                   | $                                          | 332,242 |         |         | $ | 271,217 |        
|                                        | Equity securities available for sale, at fair value (cost of $0
    and $1,980 in 2004 and 2003, respectively)                  |                                                                                                                                                   |                                            | 39      |         |         |   | 2,371   |        
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                        |                                                                                                                                 |                                                                                                                                                   | Total investments                          |         |         | 332,281 |   |         |         | 273,588 | 
|                                        | Cash and cash equivalents                                                                                                       |                                                                                                                                                   |                                            | 69,875  |         |         |   | 50,647  |        
|                                        | Accrued investment income                                                                                                       |                                                                                                                                                   |                                            | 4,331   |         |         |   | 3,441   |        
|                                        | Premiums and agent balances receivable (net of allowance of
    $4,336 and $4,651 in 2004 and 2003, respectively)               |                                                                                                                                                   |                                            | 84,094  |         |         |   | 77,554  |        
|                                        | Reinsurance recoverable on:                                                                                                     |                                                                                                                                                   |                                            |         |         |         |   |         |        
|                                        |                                                                                                                                 | Paid losses                                                                                                                                       |                                            |         | 17,908  |         |   |         | 17,566  |        
|                                        |                                                                                                                                 | Unpaid losses                                                                                                                                     |                                            |         | 151,161 |         |   |         | 147,446 |        
|                                        | Prepaid reinsurance premiums                                                                                                    |                                                                                                                                                   |                                            | 26,075  |         |         |   | 20,492  |        
|                                        | Deferred policy acquisition costs                                                                                               |                                                                                                                                                   |                                            | 25,167  |         |         |   | 19,564  |        
|                                        | Deferred federal income taxes, net                                                                                              |                                                                                                                                                   |                                            | 14,956  |         |         |   | 15,201  |        
|                                        | Goodwill                                                                                                                        |                                                                                                                                                   |                                            | 28,997  |         |         |   | 28,997  |        
|                                        | Other assets                                                                                                                    |                                                                                                                                                   |                                            | 46,851  |         |         |   | 37,770  |        
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                        |                                                                                                                                 |                                                                                                                                                   | Total assets                               |         | $       | 801,696 |   |         | $       | 692,266 | 
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                       
|LIABILITIES AND SHAREHOLDERS EQUITY   
|                                       
|Liabilities                             |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |         |   |        
|                                        | Losses and loss adjustment expenses                                                                                             |                                                                                                                                                   | $                                          | 378,157 |         |         | $ | 339,465 |        
|                                        | Unearned premiums                                                                                                               |                                                                                                                                                   |                                            | 134,302 |         |         |   | 109,677 |        
|                                        | Debt                                                                                                                            |                                                                                                                                                   |                                            | 12,144  |         |         |   | 17,506  |        
|                                        | Debentures                                                                                                                      |                                                                                                                                                   |                                            | 35,310  |         |         |   | 10,310  |        
|                                        | Accounts payable and accrued expenses                                                                                           |                                                                                                                                                   |                                            | 38,837  |         |         |   | 26,283  |        
|                                        | Reinsurance funds held and balances payable                                                                                     |                                                                                                                                                   |                                            | 17,832  |         |         |   | 13,961  |        
|                                        | Payable to insurance companies                                                                                                  |                                                                                                                                                   |                                            | 6,990   |         |         |   | 7,853   |        
|                                        | Other liabilities                                                                                                               |                                                                                                                                                   |                                            | 10,614  |         |         |   | 12,098  |        
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                        |                                                                                                                                 |                                                                                                                                                   | Total liabilities                          |         |         | 634,186 |   |         |         | 537,153 | 
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|Commitments and contingencies (Note 13) |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |         |   |        
|Shareholders Equity                    |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |         |   |        
|                                        | Common stock, $0.01 stated value; authorized
    50,000,000 shares; 29,074,832 and 29,022,435 shares
    issued and outstanding |                                                                                                                                                   |                                            | 290     |         |         |   | 290     |        
|                                        | Additional paid-in capital                                                                                                      |                                                                                                                                                   |                                            | 126,085 |         |         |   | 125,181 |        
|                                        | Retained earnings                                                                                                               |                                                                                                                                                   |                                            | 37,175  |         |         |   | 23,069  |        
|                                        | Note receivable from officer                                                                                                    |                                                                                                                                                   |                                            | (868    | )       |         |   | (886    | )      
|                                        | Accumulated other comprehensive income:                                                                                         |                                                                                                                                                   |                                            |         |         |         |   |         |        
|                                        |                                                                                                                                 | Unrealized appreciation on available for sale securities, net of
    deferred tax expense of $2,487 and $3,819 in 2004 and 2003,
    respectively |                                            |         | 4,828   |         |   |         | 7,459   |        
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                        |                                                                                                                                 |                                                                                                                                                   | Total shareholders equity                 |         |         | 167,510 |   |         |         | 155,113 | 
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        
|                                        |                                                                                                                                 |                                                                                                                                                   | Total liabilities and shareholders equity |         | $       | 801,696 |   |         | $       | 692,266 | 
|                                        |                                                                                                                                 |                                                                                                                                                   |                                            |         |         |        



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF INCOME


|                                         |                                                    |                                       |        |            |         |   |        |            |         |   |       |            |         |  
|---------------------------------------- | -------------------------------------------------- | ------------------------------------- | ------ | ---------- | ------- | - | ------ | ---------- | ------- | - | ----- | ---------- | ------- | -
|                                         |                                                    | For the Years Ended December 31,      |       
|                                         |                                                    |                                       |       
|                                         |                                                    | 2004                                  |        |            | 2003    |   |        | 2002       |        
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|                                         |                                                    | (In thousands, except per share data) |       
|Revenues                                 |                                                    |                                       |        |            |         |   |        |            |         |   |       |           
|                                         | Premiums earned                                    |                                       |        |            |         |   |        |            |         |   |       |            |        
|                                         |                                                    | Gross                                 |        | $          | 288,868 |   |        | $          | 212,281 |   |       | $          | 208,961 |  
|                                         |                                                    | Ceded                                 |        |            | (74,375 | ) |        |            | (61,076 | ) |       |            | (63,578 | )
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|                                         | Net earned premiums                                |                                       |        | 214,493    |         |   |        | 151,205    |         |   |       | 145,383    |        
|                                         | Net commissions and fees                           |                                       |        | 40,535     |         |   |        | 45,291     |         |   |       | 37,581     |        
|                                         | Net investment income                              |                                       |        | 14,911     |         |   |        | 13,484     |         |   |       | 13,958     |        
|                                         | Net realized gains                                 |                                       |        | 339        |         |   |        | 823        |         |   |       | 666        |        
|                                         | Gain on sale of subsidiary                         |                                       |        |           |         |   |        |           |         |   |       | 199        |        
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|                                         |                                                    | Total revenues                        |        |            | 270,278 |   |        |            | 210,803 |   |       |            | 197,787 |  
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|Expenses                                 |                                                    |                                       |        |            |         |   |        |            |         |   |       |           
|                                         | Losses and loss adjustment expenses                |                                       |        | 212,337    |         |   |        | 150,998    |         |   |       | 171,226    |        
|                                         | Reinsurance recoveries                             |                                       |        | (76,399    | )       |   |        | (52,526    | )       |   |       | (72,492    | )      
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|                                         | Net losses and loss adjustment expenses            |                                       |        | 135,938    |         |   |        | 98,472     |         |   |       | 98,734     |        
|                                         | Salaries and employee benefits                     |                                       |        | 52,297     |         |   |        | 48,238     |         |   |       | 37,659     |        
|                                         | Policy acquisition and other underwriting expenses |                                       |        | 33,424     |         |   |        | 23,606     |         |   |       | 33,573     |        
|                                         | Other administrative expenses                      |                                       |        | 25,964     |         |   |        | 23,232     |         |   |       | 22,612     |        
|                                         | Interest expense                                   |                                       |        | 2,281      |         |   |        | 977        |         |   |       | 3,021      |        
|                                         | Gain on debt reduction                             |                                       |        |           |         |   |        |           |         |   |       | (359       | )      
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|                                         |                                                    | Total expenses                        |        |            | 249,904 |   |        |            | 194,525 |   |       |            | 195,240 |  
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|Income before taxes and equity earnings  |                                                    |                                       | 20,374 |            |         |   | 16,278 |            |         |   | 2,547 |           
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|                                         | Federal and state income tax expense               |                                       |        | 6,352      |         |   |        | 6,182      |         |   |       | 897        |        
|                                         | Equity earnings of affiliates                      |                                       |        | 39         |         |   |        | 3          |         |   |       |           |        
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|Net income                               |                                                    | $                                     | 14,061 |            |         | $ | 10,099 |            |         | $ | 1,650 |           
|                                         |                                                    |                                       |        |            |         |   |        |            |        
|Earnings Per Share                       |                                                    |                                       |        |            |         |   |        |            |         |   |       |           
|                                         | Basic                                              |                                       | $      | 0.48       |         |   | $      | 0.35       |         |   | $     | 0.08       |        
|                                         | Diluted                                            |                                       | $      | 0.48       |         |   | $      | 0.35       |         |   | $     | 0.08       |        
|Weighted average number of common shares |                                                    |                                       |        |            |         |   |        |            |         |   |       |           
|                                         | Basic                                              |                                       |        | 29,048,069 |         |   |        | 29,188,967 |         |   |       | 20,543,878 |        
|                                         | Diluted                                            |                                       |        | 29,420,508 |         |   |        | 29,268,799 |         |   |       | 20,543,878 |        



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


|           |                                         |                                                                        |        |        |        |   |        |        |      |   |       |       |       |  
|---------- | --------------------------------------- | ---------------------------------------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ---- | - | ----- | ----- | ----- | -
|           |                                         | For the Years Ended December 31,                                       |       
|           |                                         |                                                                        |       
|           |                                         | 2004                                                                   |        |        | 2003   |   |        | 2002   |     
|           |                                         |                                                                        |        |        |        |   |        |        |     
|           |                                         | (In thousands)                                                         |       
|Net income |                                         | $                                                                      | 14,061 |        |        | $ | 10,099 |        |      | $ | 1,650 |      
|           | Other comprehensive income, net of tax: |                                                                        |        |        |        |   |        |        |      |   |       |       |      
|           |                                         | Unrealized(losses)gains on securities                                  |        |        | (2,364 | ) |        |        | (814 | ) |       |       | 5,889 |  
|           |                                         | Deconsolidation of subsidiary                                          |        |        | (45    | ) |        |        |     |   |       |       |      |  
|           |                                         | Less: reclassification adjustment for gains included in net
    income |        |        | (222   | ) |        |        | (200 | ) |       |       | (489  | )
|           |                                         |                                                                        |        |        |        |   |        |        |     
|           | Other comprehensive (loss) income       |                                                                        |        | (2,631 | )      |   |        | (1,014 | )    |   |       | 5,400 |      
|           |                                         |                                                                        |        |        |        |   |        |        |     
|           | Comprehensive income                    |                                                                        | $      | 11,430 |        |   | $      | 9,085  |      |   | $     | 7,050 |      
|           |                                         |                                                                        |        |        |        |   |        |        |     



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY


|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |       |  |               |       |   |               |   |        |   |  |   |         |  
|-------------------------------------------------------- |  | ----------------------------------------------------- | --- | ----------- | ------- | - | ------- | -------- | ---- | - | ------------ | ----- |  | ------------- | ----- | - | ------------- | - | ------ | - |  | - | ------- | -
|                                                         |  | For the Years Ended December 31, 2004, 2003, and 2002 |    
|                                                         |  |                                                       |    
|                                                         |  |                                                       |     | Accumulated |         |   |        
|                                                         |  |                                                       |     | Additional  |         |   |         |          | Note |   |              | Other |  |               | Total |  
|                                                         |  | Common                                                |     |             | Paid-In |   |         | Retained |      |   | Receivable   |       |  | Comprehensive |       |   | Shareholders |  
|                                                         |  | Stock                                                 |     |             | Capital |   |         | Earnings |      |   | from Officer |       |  | Income        |       |   | Equity        |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |       |  |               |       |   |               |  
|                                                         |  | (In thousands)                                        |    
|Balances December 31, 2001                               |  | $                                                     | 85  |             |         | $ | 67,948  |          |      | $ | 10,034       |       |  | $             | (824  | ) |               | $ | 3,073  |   |  | $ | 80,316  |  
|Unrealized appreciation on available for sale securities |  |                                                       |    |             |         |   |        |          |      |   |             |       |  |               |      |   |               |   | 5,400  |   |  |   | 5,400   |  
|Issuance of 21,275,000 shares of common stock (net)      |  |                                                       | 213 |             |         |   | 60,303  |          |      |   |             |       |  |               |      |   |               |   |       |   |  |   | 60,516  |  
|Retirement of 195,700 shares of common stock             |  |                                                       | (2  | )           |         |   | (822    | )        |      |   | 389          |       |  |               |      |   |               |   |       |   |  |   | (435    | )
|Note receivable from an officer                          |  |                                                       |    |             |         |   |        |          |      |   |             |       |  |               | (52   | ) |               |   |       |   |  |   | (52     | )
|Net income                                               |  |                                                       |    |             |         |   |        |          |      |   | 1,650        |       |  |               |      |   |               |   |       |   |  |   | 1,650   |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |       |  |               |       |   |               |  
|Balances December 31, 2002                               |  |                                                       | 296 |             |         |   | 127,429 |          |      |   | 12,073       |       |  |               | (876  | ) |               |   | 8,473  |   |  |   | 147,395 |  
|Unrealized depreciation on available for sale securities |  |                                                       |    |             |         |   |        |          |      |   |             |       |  |               |      |   |               |   | (1,014 | ) |  |   | (1,014  | )
|Stock-based employee compensation                        |  |                                                       |    |             |         |   | 189     |          |      |   |             |       |  |               |      |   |               |   |       |   |  |   | 189     |  
|Retirement of 569,059 shares of common stock             |  |                                                       | (6  | )           |         |   | (2,437  | )        |      |   | 897          |       |  |               |      |   |               |   |       |   |  |   | (1,546  | )
|Note receivable from an officer                          |  |                                                       |    |             |         |   |        |          |      |   |             |       |  |               | (10   | ) |               |   |       |   |  |   | (10     | )
|Net income                                               |  |                                                       |    |             |         |   |        |          |      |   | 10,099       |       |  |               |      |   |               |   |       |   |  |   | 10,099  |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |       |  |               |       |   |               |  
|Balances December 31, 2003                               |  |                                                       | 290 |             |         |   | 125,181 |          |      |   | 23,069       |       |  |               | (886  | ) |               |   | 7,459  |   |  |   | 155,113 |  
|Unrealized depreciation on available for sale securities |  |                                                       |    |             |         |   |        |          |      |   |             |       |  |               |      |   |               |   | (2,586 | ) |  |   | (2,586  | )
|Deconsolidation of subsidiary                            |  |                                                       |    |             |         |   |        |          |      |   | 45           |       |  |               |      |   |               |   | (45    | ) |  |   |        |  
|Long term incentive plan; restricted stock award         |  |                                                       |    |             |         |   | 650     |          |      |   |             |       |  |               |      |   |               |   |       |   |  |   | 650     |  
|Stock-based employee compensation                        |  |                                                       |    |             |         |   | 78      |          |      |   |             |       |  |               |      |   |               |   |       |   |  |   | 78      |  
|Issuance of 54,500 shares of common stock                |  |                                                       |    |             |         |   | 185     |          |      |   |             |       |  |               |      |   |               |   |       |   |  |   | 185     |  
|Retirement of 2,103 shares of common stock               |  |                                                       |    |             |         |   | (9      | )        |      |   |             |       |  |               |      |   |               |   |       |   |  |   | (9      | )
|Note receivable from an officer                          |  |                                                       |    |             |         |   |        |          |      |   |             |       |  |               | 18    |   |               |   |       |   |  |   | 18      |  
|Net income                                               |  |                                                       |    |             |         |   |        |          |      |   | 14,061       |       |  |               |      |   |               |   |       |   |  |   | 14,061  |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |       |  |               |       |   |               |  
|Balances December 31, 2004                               |  | $                                                     | 290 |             |         | $ | 126,085 |          |      | $ | 37,175       |       |  | $             | (868  | ) |               | $ | 4,828  |   |  | $ | 167,510 |  
|                                                         |  |                                                       |     |             |         |   |         |          |      |   |              |       |  |               |       |   |               |  



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MEADOWBROOK INSURANCE GROUP, INC.


CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |         |         |   |       |          |         |  
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------------- | ------ | -------- | ------- | - | ------ | ------- | ------- | - | ----- | -------- | ------- | -
|                                                                            |                                                                                                 | For the Years Ended December 31,                                             |                                                    
|                                                                            |                                                                                                 |                                                                              |                                                    
|                                                                            |                                                                                                 | 2004                                                                         |                                                     |        | 2003     |         |   | 2002   |        
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 | (In thousands)                                                               |                                                    
|Cash Flows From Operating Activities                                        |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |         |         |   |      
|                                                                            | Net income                                                                                      |                                                                              | $                                                   | 14,061 |          |         | $ | 10,099 |         |         | $ | 1,650 |         
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            | Adjustments to reconcile net income to net cash provided by
    (used in) operating activities: |                                                                              |                                                     |        |          |         |   |        |         |         |   |       |         
|                                                                            |                                                                                                 | Amortization of other intangible assets                                      |                                                     |        | 376      |         |   |        | 353     |         |   |       | 15       |        
|                                                                            |                                                                                                 | Amortization of deferred debenture issuance costs                            |                                                     |        | 110      |         |   |        | 11      |         |   |       |         |        
|                                                                            |                                                                                                 | Depreciation of furniture and equipment                                      |                                                     |        | 1,591    |         |   |        | 1,418   |         |   |       | 2,408    |        
|                                                                            |                                                                                                 | Net accretion of discount and premiums on bonds                              |                                                     |        | 1,856    |         |   |        | 1,798   |         |   |       | 700      |        
|                                                                            |                                                                                                 | Gain on sale of investments                                                  |                                                     |        | (337     | )       |   |        | (303    | )       |   |       | (741     | )      
|                                                                            |                                                                                                 | Gain on sale of fixed assets                                                 |                                                     |        | (98      | )       |   |        |        |         |   |       |         |        
|                                                                            |                                                                                                 | Gain on debt reduction                                                       |                                                     |        |         |         |   |        |        |         |   |       | (359     | )      
|                                                                            |                                                                                                 | Stock-based employee compensation                                            |                                                     |        | 78       |         |   |        | 189     |         |   |       |         |        
|                                                                            |                                                                                                 | Long term incentive plan expense                                             |                                                     |        | 650      |         |   |        |        |         |   |       |         |        
|                                                                            |                                                                                                 | Deferred income tax expense                                                  |                                                     |        | 1,577    |         |   |        | 4,415   |         |   |       | 2,642    |        
|                                                                            | Changes in operating assets and liabilities:                                                    |                                                                              |                                                     |        |          |         |   |        |         |         |   |       |         
|                                                                            | Decrease (increase) in:                                                                         |                                                                              |                                                     |        |          |         |   |        |         |         |   |       |         
|                                                                            |                                                                                                 | Premiums and agent balances receivable                                       |                                                     |        | (6,277   | )       |   |        | (6,134  | )       |   |       | 6,750    |        
|                                                                            |                                                                                                 | Reinsurance recoverable on paid and unpaid losses                            |                                                     |        | (2,445   | )       |   |        | 37,201  |         |   |       | 20,245   |        
|                                                                            |                                                                                                 | Prepaid reinsurance premiums                                                 |                                                     |        | (5,157   | )       |   |        | (2,377  | )       |   |       | 19,736   |        
|                                                                            |                                                                                                 | Deferred policy acquisition costs                                            |                                                     |        | (5,773   | )       |   |        | (7,424  | )       |   |       | 1,813    |        
|                                                                            |                                                                                                 | Other assets                                                                 |                                                     |        | 2,772    |         |   |        | (3,747  | )       |   |       | 5,640    |        
|                                                                            | Increase (decrease) in:                                                                         |                                                                              |                                                     |        |          |         |   |        |         |         |   |       |         
|                                                                            |                                                                                                 | Losses and loss adjustment expenses                                          |                                                     |        | 38,692   |         |   |        | (35,468 | )       |   |       | (19,663  | )      
|                                                                            |                                                                                                 | Unearned premiums                                                            |                                                     |        | 24,625   |         |   |        | 40,999  |         |   |       | (25,324  | )      
|                                                                            |                                                                                                 | Payable to insurance companies                                               |                                                     |        | (863     | )       |   |        | (505    | )       |   |       | 2,518    |        
|                                                                            |                                                                                                 | Reinsurance funds held and balances payable                                  |                                                     |        | 3,659    |         |   |        | (2,238  | )       |   |       | (10,688  | )      
|                                                                            |                                                                                                 | Other liabilities                                                            |                                                     |        | 1,577    |         |   |        | 9,243   |         |   |       | (5,559   | )      
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 |                                                                              | Total Adjustments                                   |        |          | 56,613  |   |        |         | 37,431  |   |       |          | 133     |  
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 | Net cash provided by operating activities                                    |                                                     |        | 70,674   |         |   |        | 47,530  |         |   |       | 1,783    |        
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|Cash Flows From Investing Activities                                        |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |         |         |   |      
|                                                                            |                                                                                                 | Purchase of debt securities available for sale                               |                                                     |        | (115,954 | )       |   |        | (89,433 | )       |   |       | (162,327 | )      
|                                                                            |                                                                                                 | Proceeds from sale of equity securities available for sale                   |                                                     |        | 2,409    |         |   |        |        |         |   |       | 900      |        
|                                                                            |                                                                                                 | Proceeds from sales and maturities of debt securities available
    for sale |                                                     |        | 47,362   |         |   |        | 59,483  |         |   |       | 123,416  |        
|                                                                            |                                                                                                 | Capital expenditures                                                         |                                                     |        | (5,244   | )       |   |        | (2,155  | )       |   |       | (658     | )      
|                                                                            |                                                                                                 | Purchase of books of business                                                |                                                     |        | (446     | )       |   |        | (738    | )       |   |       | (221     | )      
|                                                                            |                                                                                                 | Proceeds from sale of fixed assets                                           |                                                     |        | 2,837    |         |   |        |        |         |   |       |         |        
|                                                                            |                                                                                                 | Deconsolidation of subsidiary                                                |                                                     |        | (4,218   | )       |   |        |        |         |   |       |         |        
|                                                                            |                                                                                                 | Cash advance to agent                                                        |                                                     |        | 174      |         |   |        | 1,002   |         |   |       | (1,002   | )      
|                                                                            |                                                                                                 | Net cash deposited in funds held                                             |                                                     |        | 2,315    |         |   |        | 1,208   |         |   |       | 5,215    |        
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 |                                                                              | Net cash used in investing activities               |        |          | (70,765 | ) |        |         | (30,633 | ) |       |          | (34,677 | )
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|Cash Flows From Financing Activities                                        |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |         |         |   |      
|                                                                            |                                                                                                 | Proceeds from lines of credit                                                |                                                     |        | 10,489   |         |   |        | 18,957  |         |   |       | 19,710   |        
|                                                                            |                                                                                                 | Payment of lines of credit                                                   |                                                     |        | (15,851  | )       |   |        | (33,948 | )       |   |       | (41,595  | )      
|                                                                            |                                                                                                 | Book overdraft                                                               |                                                     |        | 268      |         |   |        | 1,212   |         |   |       | 832      |        
|                                                                            |                                                                                                 | Net proceeds from public offering                                            |                                                     |        |         |         |   |        |        |         |   |       | 60,516   |        
|                                                                            |                                                                                                 | Net proceeds from debentures                                                 |                                                     |        | 24,250   |         |   |        | 9,700   |         |   |       |         |        
|                                                                            |                                                                                                 | Issuance of common stock                                                     |                                                     |        | 145      |         |   |        |        |         |   |       |         |        
|                                                                            |                                                                                                 | Retirement of common stock                                                   |                                                     |        |         |         |   |        | (1,562  | )       |   |       | (455     | )      
|                                                                            |                                                                                                 | Other financing activities                                                   |                                                     |        | 18       |         |   |        | 6       |         |   |       | (31      | )      
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 |                                                                              | Net cash provided by (used in) financing activities |        |          | 19,319  |   |        |         | (5,635  | ) |       |          | 38,977  |  
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 | Net increase in cash and cash equivalents                                    |                                                     |        | 19,228   |         |   |        | 11,262  |         |   |       | 6,083    |        
|                                                                            |                                                                                                 | Cash and cash equivalents, beginning of year                                 |                                                     |        | 50,647   |         |   |        | 39,385  |         |   |       | 33,302   |        
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|                                                                            |                                                                                                 | Cash and cash equivalents, end of year                                       |                                                     | $      | 69,875   |         |   | $      | 50,647  |         |   | $     | 39,385   |        
|                                                                            |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |        
|Supplemental Disclosure of Cash Flow Information:                           |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |         |         |   |      
|                                                                            |                                                                                                 | Interest paid                                                                |                                                     | $      | 1,902    |         |   | $      | 835     |         |   | $     | 3,681    |        
|                                                                            |                                                                                                 | Net income taxes paid (received)                                             |                                                     | $      | 5,578    |         |   | $      | 76      |         |   | $     | (1,599   | )      
|Supplemental Disclosure of Non Cash Investing and Financing
    Activities: |                                                                                                 |                                                                              |                                                     |        |          |         |   |        |         |         |   |      
|                                                                            |                                                                                                 | Tax benefit from stock options                                               |                                                     | $      | 30       |         |   | $      |        |         |   | $     |         |        
|                                                                            |                                                                                                 | Stock-based employee compensation                                            |                                                     | $      | 78       |         |   | $      | 189     |         |   | $     |         |        
|                                                                            |                                                                                                 | Accrued liability for purchase of building(1)                                |                                                     | $      | 11,583   |         |   | $      |        |         |   | $     |         |        






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



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MEADOWBROOK INSURANCE GROUP, INC.







NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     Summary of Significant
Accounting Policies


Basis of Presentation and Principles of Consolidation






Recent Accounting Pronouncements


Debt




Business






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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Debt


Debt




Use of Estimates






| |   |                                                   
| | - | --------------------------------------------------
| |  | unpaid losses and loss adjusting expense reserves;
|
| |  | reinsurance recoverables;                         
|
| |  | legal contingencies;                              
|
| |  | goodwill valuation;                               
|
| |  | revenue recognition                               



| |   |                                     
| | - | ------------------------------------
| |  | earned and unbilled premium;        
|
| |  | contingent commissions;             
|
| |  | allowance for doubtful accounts; and



| |   |                                  
| | - | ---------------------------------
| |  | other than temporary impairments.



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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Cash and Cash Equivalents




Investments






Other Than Temporary Impairments of Securities and Unrealized
Losses on Investments




Losses and Loss Adjustment Expenses and Reinsurance
Recoverables








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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






Revenue Recognition










Deferred Policy Acquisition Costs




Furniture and Equipment




Goodwill and Other Intangible Assets


Goodwill and Other Intangible Assets


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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Income Taxes






Stock Options


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






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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                                                                                                                     |                       |      |        |      |      |   |        |      |  |   |        |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ---- | ------ | ---- | ---- | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                                     |                       | 2004 |        |      | 2003 |   |        | 2002 | 
|                                                                                                                                                     |                       |      |        |      |      |   |        |      | 
|Net income, as reported                                                                                                                              |                       | $    | 14,061 |      |      | $ | 10,099 |      |  | $ | 1,650  |     
|Add: Stock-based employee compensation expense included in
    reported income, net of related tax effects                                           |                       |      | 52     |      |      |   | 125    |      |  |   |       |     
|Deduct: Total stock-based employee compensation expense
    determined under fair-value-based methods for all awards, net of
    related tax effects |                       |      | (438   | )    |      |   | (882   | )    |  |   | (1,106 | )   
|                                                                                                                                                     |                       |      |        |      |      |   |        |      | 
|Pro forma net income                                                                                                                                 |                       | $    | 13,675 |      |      | $ | 9,342  |      |  | $ | 544    |     
|                                                                                                                                                     |                       |      |        |      |      |   |        |      | 
|Earnings per share:                                                                                                                                  |                       |      |        |      |      |   |        |      |  |   |        |     
|                                                                                                                                                     | Basic  as reported   |      | $      | 0.48 |      |   | $      | 0.35 |  |   | $      | 0.08 | 
|                                                                                                                                                     | Basic  pro forma     |      | $      | 0.47 |      |   | $      | 0.32 |  |   | $      | 0.03 | 
|                                                                                                                                                     | Diluted  as reported |      | $      | 0.48 |      |   | $      | 0.35 |  |   | $      | 0.08 | 
|                                                                                                                                                     | Diluted  pro forma   |      | $      | 0.46 |      |   | $      | 0.32 |  |   | $      | 0.03 | 





Earnings Per Share






Comprehensive Income




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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Recent Accounting Pronouncements


Consolidation of Variable Interest Entities. Debt




The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments Accounting for Certain
Investments in Debt and Equity Securities


Share-Based Payment Accounting for Stock Issued to
Employees.


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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




2.     Investments




|                                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |        |        |   |         |         |         | 
|---------------------------------------------------------- | ------------------------------------------ | ----------------------------------- | ------- | ------- | ---------- | - | ----- | ---------- | ----- | - | --------- | ------ | ------ | - | ------- | ------- | ------- | 
|                                                           |                                            | December 31, 2004                   |        
|                                                           |                                            |                                     |        
|                                                           |                                            | Cost or                             |         |         | Gross      |   |       | Gross      |       |   | Estimated |       
|                                                           |                                            | Amortized                           |         |         | Unrealized |   |       | Unrealized |       |   | Fair      |       
|                                                           |                                            | Cost                                |         |         | Gains      |   |       | Losses     |       |   | Value     |       
|                                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |       
|Debt Securities:                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |        |        |   |         |        
|Debt securities issued by the U.S. government and agencies |                                            | $                                   | 56,492  |         |            | $ | 1,234 |            |       | $ | (288      | )      |        | $ | 57,438  |        
|Obligations of states and political subdivisions           |                                            |                                     | 104,009 |         |            |   | 1,857 |            |       |   | (271      | )      |        |   | 105,595 |        
|Corporate securities                                       |                                            |                                     | 99,784  |         |            |   | 4,813 |            |       |   | (446      | )      |        |   | 104,151 |        
|Mortgage and asset-backed securities                       |                                            |                                     | 64,681  |         |            |   | 673   |            |       |   | (296      | )      |        |   | 65,058  |        
|                                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |       
|                                                           | Total Debt Securities available for sale   |                                     |         | 324,966 |            |   |       | 8,577      |       |   |           | (1,301 | )      |   |         | 332,242 |        
|Equity Securities:                                         |                                            |                                     |         |         |            |   |       |            |       |   |           |        |        |   |         |        
|Preferred Stocks                                           |                                            |                                     |        |         |            |   |      |            |       |   |          |        |        |   |        |        
|Common Stocks                                              |                                            |                                     |        |         |            |   | 39    |            |       |   |          |        |        |   | 39      |        
|                                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |       
|                                                           | Total Equity Securities available for sale |                                     |         |        |            |   |       | 39         |       |   |           |       |        |   |         | 39      |        
|                                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |       
|                                                           |                                            | Total Securities available for sale |         | $       | 324,966    |   |       | $          | 8,616 |   |           | $      | (1,301 | ) |         | $       | 332,281 | 
|                                                           |                                            |                                     |         |         |            |   |       |            |       |   |           |       

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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |      |      |   |        |         |         | 
|---------------------------------------------------------- | ------------------------------------------ | ----------------------------------- | ------ | ------- | ---------- | - | ----- | ---------- | ------ | - | --------- | ---- | ---- | - | ------ | ------- | ------- | 
|                                                           |                                            | December 31, 2003                   |       
|                                                           |                                            |                                     |       
|                                                           |                                            | Cost or                             |        |         | Gross      |   |       | Gross      |        |   | Estimated |     
|                                                           |                                            | Amortized                           |        |         | Unrealized |   |       | Unrealized |        |   | Fair      |     
|                                                           |                                            | Cost                                |        |         | Gains      |   |       | Losses     |        |   | Value     |     
|                                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |     
|Debt Securities:                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |      |      |   |        |        
|Debt securities issued by the U.S. government and agencies |                                            | $                                   | 58,616 |         |            | $ | 2,300 |            |        | $ | (232      | )    |      | $ | 60,683 |        
|Obligations of states and political subdivisions           |                                            |                                     | 47,597 |         |            |   | 2,030 |            |        |   | (37       | )    |      |   | 49,590 |        
|Corporate securities                                       |                                            |                                     | 93,701 |         |            |   | 6,392 |            |        |   | (432      | )    |      |   | 99,661 |        
|Mortgage and asset-backed securities                       |                                            |                                     | 60,416 |         |            |   | 1,058 |            |        |   | (192      | )    |      |   | 61,283 |        
|                                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |     
|                                                           | Total Debt Securities available for sale   |                                     |        | 260,330 |            |   |       | 11,780     |        |   |           | (893 | )    |   |        | 271,217 |        
|Equity Securities:                                         |                                            |                                     |        |         |            |   |       |            |        |   |           |      |      |   |        |        
|Preferred Stocks                                           |                                            |                                     | 1,980  |         |            |   | 352   |            |        |   |          |      |      |   | 2,332  |        
|Common Stocks                                              |                                            |                                     |       |         |            |   | 39    |            |        |   |          |      |      |   | 39     |        
|                                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |     
|                                                           | Total Equity Securities available for sale |                                     |        | 1,980   |            |   |       | 391        |        |   |           |     |      |   |        | 2,371   |        
|                                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |     
|                                                           |                                            | Total Securities available for sale |        | $       | 262,310    |   |       | $          | 12,171 |   |           | $    | (893 | ) |        | $       | 273,588 | 
|                                                           |                                            |                                     |        |         |            |   |       |            |        |   |           |     



|                                                                                     |  |              |        |   |      |   |        |  
|------------------------------------------------------------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                                                     |  | December 31, |       
|                                                                                     |  |              |       
|                                                                                     |  | 2004         |        |   | 2003 |  
|                                                                                     |  |              |        |   |      |  
|Unrealized appreciation                                                              |  | $            | 8,616  |   |      | $ | 12,171 |  
|Unrealized depreciation                                                              |  |              | (1,301 | ) |      |   | (893   | )
|                                                                                     |  |              |        |   |      |  
|Net unrealized appreciation                                                          |  |              | 7,315  |   |      |   | 11,278 |  
|Deferred federal income tax benefit                                                  |  |              | (2,487 | ) |      |   | (3,819 | )
|                                                                                     |  |              |        |   |      |  
|Net unrealized appreciation on investments, net of deferred
    federal income taxes |  | $            | 4,828  |   |      | $ | 7,459  |  
|                                                                                     |  |              |        |   |      |  









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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                       |  |                    |         |  |            |   |         | 
|-------------------------------------- |  | ------------------ | ------- |  | ---------- | - | ------- | 
|                                       |  | Available for Sale |        
|                                       |  |                    |        
|                                       |  | Amortized          |         |  | Estimated  |  
|                                       |  | Cost               |         |  | Fair Value |  
|                                       |  |                    |         |  |            |  
|Due in one year or less                |  | $                  | 13,245  |  |            | $ | 13,445  | 
|Due after one year through five years  |  |                    | 131,883 |  |            |   | 134,864 | 
|Due after five years through ten years |  |                    | 107,976 |  |            |   | 111,390 | 
|Due after ten years                    |  |                    | 7,181   |  |            |   | 7,485   | 
|Mortgage-backed securities             |  |                    | 64,681  |  |            |   | 65,058  | 
|                                       |  |                    |         |  |            |  
|                                       |  | $                  | 324,966 |  |            | $ | 332,242 | 
|                                       |  |                    |         |  |            |  



|                              |  |      |        |  |      |   |        |      |  |   |        | 
|----------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                              |  | 2004 |        |  | 2003 |   |        | 2002 | 
|                              |  |      |        |  |      |   |        |      | 
|Investment Income On:         |  |      |        |  |      |   |        |      |  |   |        | 
|Debt securities               |  | $    | 13,559 |  |      | $ | 12,481 |      |  | $ | 12,572 | 
|Equity securities             |  |      | 149    |  |      |   | 182    |      |  |   | 230    | 
|Cash and cash equivalents     |  |      | 1,657  |  |      |   | 1,425  |      |  |   | 1,736  | 
|                              |  |      |        |  |      |   |        |      | 
|Total gross investment income |  |      | 15,365 |  |      |   | 14,088 |      |  |   | 14,538 | 
|Less investment expenses      |  |      | 454    |  |      |   | 604    |      |  |   | 580    | 
|                              |  |      |        |  |      |   |        |      | 
|Net investment income         |  | $    | 14,911 |  |      | $ | 13,484 |      |  | $ | 13,958 | 
|                              |  |      |        |  |      |   |        |      | 



Other Than Temporary Impairments of Securities and Unrealized
Losses on Investments




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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |        |  |   |      |      |  
|------------------------------------------------------ | ------ | ------------------- | ------ | ------ | ---------------------- | - | ------------- | ---------- | - | - | ---------- | ------ |  | - | ---- | ---- | -
|                                                       |        | December 31, 2004   |       
|                                                       |        |                     |       
|                                                       |        | Less than 12 months |        |        | Greater than 12 months |  
|                                                       |        |                     |        |        |                        |  
|                                                       |        | Fair Value of       |        |        |                        |   | Fair Value of |            |   |  
|                                                       |        | Investments         |        |        |                        |   | Investments   |            |   |  
|                                                       |        | with                |        |        | Gross                  |   |               | with       |   |   | Gross      |       
|                                                       |        | Unrealized          |        |        | Unrealized             |   |               | Unrealized |   |   | Unrealized |       
|                                                       |        | Losses              |        |        | Losses                 |   |               | Losses     |   |   | Losses     |       
|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |       
|Debt Securities:                                       |        |                     |        |        |                        |   |               |            |   |   |            |        |  |   |      |     
|Debt securities issued by U.S. government and agencies |        | $                   | 18,480 |        |                        | $ | (138          | )          |   | $ | 4,871      |        |  | $ | (150 | )   
|Obligations of states and political subdivisions       |        |                     | 28,581 |        |                        |   | (257          | )          |   |   | 551        |        |  |   | (14  | )   
|Corporate securities                                   |        |                     | 23,323 |        |                        |   | (220          | )          |   |   | 7,450      |        |  |   | (226 | )   
|Mortgage and asset backed securities                   |        |                     | 19,583 |        |                        |   | (167          | )          |   |   | 6,442      |        |  |   | (129 | )   
|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |       
|                                                       | Totals |                     | $      | 89,967 |                        |   | $             | (782       | ) |   | $          | 19,314 |  |   | $    | (519 | )
|                                                       |        |                     |        |        |                        |   |               |            |   |   |            |       

|                                                      |        |                     |        |        |                        |   |               |            |   |   |            |       |  |   |     |     |  
|----------------------------------------------------- | ------ | ------------------- | ------ | ------ | ---------------------- | - | ------------- | ---------- | - | - | ---------- | ----- |  | - | --- | --- | -
|                                                      |        | December 31, 2003   |       
|                                                      |        |                     |       
|                                                      |        | Less than 12 months |        |        | Greater than 12 months |  
|                                                      |        |                     |        |        |                        |  
|                                                      |        | Fair Value of       |        |        |                        |   | Fair Value of |            |   |  
|                                                      |        | Investments         |        |        |                        |   | Investments   |            |   |  
|                                                      |        | with                |        |        | Gross                  |   |               | with       |   |   | Gross      |      
|                                                      |        | Unrealized          |        |        | Unrealized             |   |               | Unrealized |   |   | Unrealized |      
|                                                      |        | Losses              |        |        | Losses                 |   |               | Losses     |   |   | Losses     |      
|                                                      |        |                     |        |        |                        |   |               |            |   |   |            |      
|Debt Securities:                                      |        |                     |        |        |                        |   |               |            |   |   |            |       |  |   |     |    
|Debt securities issued by U.S government and agencies |        | $                   | 10,106 |        |                        | $ | (211          | )          |   | $ | 995        |       |  | $ | (21 | )  
|Obligations of states and political subdivisions      |        |                     | 2,467  |        |                        |   | (37           | )          |   |   |           |       |  |   |    |    
|Corporate securities                                  |        |                     | 20,550 |        |                        |   | (361          | )          |   |   | 1,137      |       |  |   | (71 | )  
|Mortgage and asset backed securities                  |        |                     | 17,158 |        |                        |   | (192          | )          |   |   |           |       |  |   |    |    
|                                                      |        |                     |        |        |                        |   |               |            |   |   |            |      
|                                                      | Totals |                     | $      | 50,281 |                        |   | $             | (801       | ) |   | $          | 2,132 |  |   | $   | (92 | )
|                                                      |        |                     |        |        |                        |   |               |            |   |   |            |      

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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


3.     Liability for Losses and Loss
Adjustment Expenses




|                                                |                               |                                  |         |         |      |   |         |         |  |   |         |         | 
|----------------------------------------------- | ----------------------------- | -------------------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                |                               | For the Years Ended December 31, |        
|                                                |                               |                                  |        
|                                                |                               | 2004                             |         |         | 2003 |   |         | 2002    | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Balance, beginning of year                      |                               | $                                | 339,465 |         |      | $ | 374,933 |         |  | $ | 394,596 |        
|Adjustment for deconsolidation of subsidiary(1) |                               |                                  | (2,989  | )       |      |   |        |         |  |   |        |        
|Less reinsurance recoverables                   |                               |                                  | 147,446 |         |      |   | 181,817 |         |  |   | 195,943 |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Net balance, beginning of year                  |                               |                                  | 189,030 |         |      |   | 193,116 |         |  |   | 198,653 |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Incurred related to:                            |                               |                                  |         |         |      |   |         |         |  |   |         |        
|                                                | Current year                  |                                  |         | 131,409 |      |   |         | 95,565  |  |   |         | 92,644  | 
|                                                | Prior years                   |                                  |         | 4,529   |      |   |         | 2,907   |  |   |         | 6,090   | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Total incurred                                  |                               |                                  | 135,938 |         |      |   | 98,472  |         |  |   | 98,734  |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Paid related to:                                |                               |                                  |         |         |      |   |         |         |  |   |         |        
|                                                | Current year                  |                                  |         | 26,534  |      |   |         | 21,446  |  |   |         | 23,247  | 
|                                                | Prior years                   |                                  |         | 71,438  |      |   |         | 78,123  |  |   |         | 81,024  | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Total paid                                      |                               |                                  | 97,972  |         |      |   | 99,569  |         |  |   | 104,271 |        
|                                                |                               |                                  |         |         |      |   |         |         | 
|Net balance, end of year                        |                               |                                  | 226,996 |         |      |   | 192,019 |         |  |   | 193,116 |        
|                                                | Plus reinsurance recoverables |                                  |         | 151,161 |      |   |         | 147,446 |  |   |         | 181,817 | 
|                                                |                               |                                  |         |         |      |   |         |         | 
|Balance, end of year                            |                               | $                                | 378,157 |         |      | $ | 339,465 |         |  | $ | 374,933 |        
|                                                |                               |                                  |         |         |      |   |         |         | 






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







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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








4.     Reinsurance












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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)
















Accounting and Reporting for


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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Reinsurance of Short-Duration and Long-Duration
Contracts Deposit Accounting: Accounting for
Insurance and Reinsurance Contracts That Do Not Transfer
Insurance Risk
















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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|        |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |   |         |   |  |   |         |  
|------- |  | ------- | ------- | - | ------ | - | ------- | ------- |  | - | ------- | - |  | ------- | ------- | - | ------ | - | ------- | - |  | - | ------- | -
|        |  | 2004    |         |   | 2003   |   |         | 2002    | 
|        |  |         |         |   |        |   |         |         | 
|        |  | Written |         |   | Earned |   |         | Written |  |   | Earned  |   |  | Written |         |   | Earned |  
|        |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |  
|Direct  |  | $       | 261,653 |   |        | $ | 247,169 |         |  | $ | 229,647 |   |  | $       | 198,991 |   |        | $ | 167,629 |   |  | $ | 195,186 |  
|Assumed |  |         | 51,840  |   |        |   | 41,699  |         |  |   | 23,633  |   |  |         | 13,290  |   |        |   | 16,008  |   |  |   | 13,775  |  
|Ceded   |  |         | (79,532 | ) |        |   | (74,375 | )       |  |   | (63,453 | ) |  |         | (61,076 | ) |        |   | (43,842 | ) |  |   | (63,578 | )
|        |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |  
|Net     |  | $       | 233,961 |   |        | $ | 214,493 |         |  | $ | 189,827 |   |  | $       | 151,205 |   |        | $ | 139,795 |   |  | $ | 145,383 |  
|        |  |         |         |   |        |   |         |         |  |   |         |   |  |         |         |   |        |  



5.     Segment Information




Specialty Risk Management Operations




Agency Operations




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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                |                                   |                                  |                      |         |         |         |   |         |         |         |   |         |         |         | 
|--------------- | --------------------------------- | -------------------------------- | -------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                |                                   | For the Years Ended December 31, |                     
|                |                                   |                                  |                     
|                |                                   | 2004                             |                      |         | 2003    |         |   | 2002    |        
|                |                                   |                                  |                      |         |         |         |   |         |        
|Revenues        |                                   |                                  |                      |         |         |         |   |         |         |         |   |        
|                | Net earned premiums               |                                  | $                    | 214,493 |         |         | $ | 151,205 |         |         | $ | 145,383 |        
|                | Management fees                   |                                  |                      | 16,253  |         |         |   | 18,751  |         |         |   | 12,761  |        
|                | Claims fees(1)                    |                                  |                      | 13,207  |         |         |   | 14,756  |         |         |   | 8,076   |        
|                | Loss control fees                 |                                  |                      | 2,174   |         |         |   | 2,303   |         |         |   | 2,590   |        
|                | Reinsurance placement             |                                  |                      | 420     |         |         |   | 308     |         |         |   | 309     |        
|                | Investment income                 |                                  |                      | 14,887  |         |         |   | 13,471  |         |         |   | 13,906  |        
|                | Net realized gains on investments |                                  |                      | 339     |         |         |   | 823     |         |         |   | 666     |        
|                |                                   |                                  |                      |         |         |         |   |         |        
|                |                                   | Specialty risk management        |                      |         | 261,773 |         |   |         | 201,617 |         |   |         | 183,691 |        
|                | Agency operations                 |                                  |                      | 17,690  |         |         |   | 14,954  |         |         |   | 14,330  |        
|                | Reconciling items                 |                                  |                      | 24      |         |         |   | 13      |         |         |   | 52      |        
|                | Gain on sale of subsidiary        |                                  |                      |        |         |         |   |        |         |         |   | 199     |        
|                | Intersegment revenue(2)           |                                  |                      | (9,209  | )       |         |   | (5,781  | )       |         |   | (485    | )      
|                |                                   |                                  |                      |         |         |         |   |         |        
|                |                                   |                                  | Consolidated revenue |         | $       | 270,278 |   |         | $       | 210,803 |   |         | $       | 197,787 | 
|                |                                   |                                  |                      |         |         |         |   |         |        
|Pre-tax income: |                                   |                                  |                      |         |         |         |   |         |         |         |   |        
|                | Specialty risk management(1)      |                                  | $                    | 16,577  |         |         | $ | 11,822  |         |         | $ | (739    | )      
|                | Agency operations*                |                                  |                      | 8,885   |         |         |   | 6,945   |         |         |   | 6,552   |        
|                | Reconciling items                 |                                  |                      | (5,088  | )       |         |   | (2,489  | )       |         |   | (3,465  | )      
|                | Gain on sale of subsidiary        |                                  |                      |        |         |         |   |        |         |         |   | 199     |        
|                |                                   |                                  |                      |         |         |         |   |         |        
|                |                                   | Consolidated pre-tax income      |                      | $       | 20,374  |         |   | $       | 16,278  |         |   | $       | 2,547   |        
|                |                                   |                                  |                      |         |         |         |   |         |        






| |   |                                                
| | - | -----------------------------------------------
| | * | Excluding the allocation of corporate overhead.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During 2004, the Company accelerated the recognition of the
    deferred claim revenue related to a multi-state claims run-off
    service contract. The acceleration of this revenue was a result
    of an earlier than anticipated termination of the Companys
    obligation under the contract. This contract was terminated by
    the Liquidator during the third quarter of 2004, after a
    liquidation order was entered against the entity for which the
    Company had serviced the claims. At the time of termination, the
    Company had $3.5 million of deferred revenue related to the
    claims contract. The revenue had been paid to the Company
    pursuant to an agreed upon schedule. However, the Company, in
    order to remain consistent with its historic claims handling
    pattern, had previously adopted a more conservative revenue
    recognition pattern; therefore, resulting in the establishment
    of deferred revenue. At the termination of the contract,
    pursuant to the contract terms, the Company is no longer
    obligated to handle the related claims. The $3.5 million of
    deferred revenue related to the claims contract, was fully
    recognized as of September 30, 2004. Had the contract not
    been terminated, the Company would have received additional
    claims fee revenue for continued claims handling services. Of
    the $3.5 million, approximately $993,000 was expected to be
    recognized within the fourth quarter of 2004. Therefore, the
    pre-tax favorable impact for 2004 in relation to the
    acceleration of the deferred claim revenue, net of related
    expenses, would have been approximately $2.1 million. Refer
    to the Companys revenue recognition accounting policy
    described in Note 1  Summary of Significant
    Accounting Policiesof the Consolidated Financial Statements.
|   
|(2) | Intersegment revenue is related to intercompany agency
    commission revenue, which represents commissions received by our
    agency operations from our Insurance Company Subsidiaries. This
    revenue is primarily related to the conversion of an existing
    west-coast commercial transportation program to one of our
    Insurance Company Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                         |  |                                  |        |   |      |   |        |      |  |   |        |  
|------------------------ |  | -------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                         |  | For the Years Ended December 31, |       
|                         |  |                                  |       
|                         |  | 2004                             |        |   | 2003 |   |        | 2002 | 
|                         |  |                                  |        |   |      |   |        |      | 
|Holding company expenses |  | $                                | (2,431 | ) |      | $ | (1,159 | )    |  | $ | (788   | )
|Gain on debt reduction   |  |                                  |       |   |      |   |       |      |  |   | 359    |  
|Amortization             |  |                                  | (376   | ) |      |   | (353   | )    |  |   | (15    | )
|Interest expense         |  |                                  | (2,281 | ) |      |   | (977   | )    |  |   | (3,021 | )
|                         |  |                                  |        |   |      |   |        |      | 
|                         |  | $                                | (5,088 | ) |      | $ | (2,489 | )    |  | $ | (3,465 | )
|                         |  |                                  |        |   |      |   |        |      | 

6.     Debt


Lines of Credit












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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Senior Debentures








Junior Subordinated Debentures










Letters of Credit




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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


7.     Regulatory Matters and Rating
Issues






|                                      |  |      |         |  |        |   |        |              |  |   |            |  |  |      |        |  |        |   |        |              |  |   |            |   |  |   |        |  |  |   |        |  
|------------------------------------- |  | ---- | ------- |  | ------ | - | ------ | ------------ |  | - | ---------- |  |  | ---- | ------ |  | ------ | - | ------ | ------------ |  | - | ---------- | - |  | - | ------ |  |  | - | ------ | -
|                                      |  | 2004 |         |  | 2003   |  
|                                      |  |      |         |  |        |  
|                                      |  | Star |         |  | Savers |   |        | Williamsburg |  |   | Ameritrust |  |  | Star |        |  | Savers |   |        | Williamsburg |  |   | Ameritrust |  
|                                      |  |      |         |  |        |   |        |              |  |   |            |  |  |      |        |  |        |   |        |              |  |   |            |  
|Statutory capital and surplus         |  | $    | 120,727 |  |        | $ | 29,303 |              |  | $ | 15,579     |  |  | $    | 13,001 |  |        | $ | 99,915 |              |  | $ | 30,066     |   |  | $ | 13,720 |  |  | $ | 13,053 |  
|Minimum statutory capital and surplus |  |      | 7,000   |  |        |   | 2,400  |              |  |   | 2,600      |  |  |      | 4,000  |  |        |   | 7,000  |              |  |   | 2,400      |   |  |   | 2,600  |  |  |   | 4,000  |  
|Statutory net (loss) income           |  |      | 7,040   |  |        |   | (1,816 | )            |  |   | 2,544      |  |  |      | 4      |  |        |   | (1,624 | )            |  |   | (936       | ) |  |   | 2,689  |  |  |   | (863   | )







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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company Action Level is triggered if a
    companys total adjusted capital is less than 200% but
    greater than or equal to 150% of its risk-based capital. At the
    Company Action Level, a company must submit a
    comprehensive plan to the regulatory authority that discusses
    proposed corrective actions to improve its capital position. A
    company whose total adjusted capital is between 250% and 200% of
    its risk-based capital is subject to a trend test. A trend test
    calculates the greater of any decrease in the margin (i.e. the
    amount in dollars by which a companys adjusted capital
    exceeds it risk-based capital) between the current year and the
    prior year and between the current year and the average of the
    past three years, and assumes that the decrease could occur
    again in the coming year. If a similar decrease in margin in the
    coming year would result in a risk-based capital ratio of less
    than 190%, then Company Action Level regulatory
    action would be triggered.
|
| |  | The Regulatory Action Level is triggered if a
    companys total adjusted capital is less than 150% but
    greater than or equal to 100% of its risk-based capital. At the
    Regulatory Action Level, the regulatory authority
    will perform a special examination of the company and issue an
    order specifying corrective actions that must be followed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | The Authorized Control Level is triggered if a
    companys total adjusted capital is less than 100% but
    greater than or equal to 70% of its risk-based capital, at which
    level the regulatory authority may take any action it deems
    necessary, including placing the company under regulatory
    control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The Mandatory Control Level, is triggered if a
    companys total adjusted capital is less than 70% of its
    risk-based capital, at which level the regulatory authority is
    mandated to place the company under its control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



8.     Deferred Policy Acquisition
Costs




|                                       |  |                                  |         |   |      |   |         |      |  |   |         |  
|-------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                       |  | For the Years Ended December 31, |        
|                                       |  |                                  |        
|                                       |  | 2004                             |         |   | 2003 |   |         | 2002 | 
|                                       |  |                                  |         |   |      |   |         |      | 
|Balance, beginning of period           |  | $                                | 19,564  |   |      | $ | 12,140  |      |  | $ | 13,953  |  
|Acquisition costs deferred             |  |                                  | 30,883  |   |      |   | 25,626  |      |  |   | 23,421  |  
|Amortized to expense during the period |  |                                  | (25,280 | ) |      |   | (18,202 | )    |  |   | (25,234 | )
|                                       |  |                                  |         |   |      |   |         |      | 
|Balance, end of period                 |  | $                                | 25,167  |   |      | $ | 19,564  |      |  | $ | 12,140  |  
|                                       |  |                                  |         |   |      |   |         |      | 



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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


9.     Income Taxes




|                                       |  |                                  |       |  |      |   |       |      |  |   |        |  
|-------------------------------------- |  | -------------------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ------ | -
|                                       |  | For the Years Ended December 31, |      
|                                       |  |                                  |      
|                                       |  | 2004                             |       |  | 2003 |   |       | 2002 | 
|                                       |  |                                  |       |  |      |   |       |      | 
|Current tax expense (benefit)          |  | $                                | 4,775 |  |      | $ | 1,767 |      |  | $ | (1,745 | )
|Deferred tax expense                   |  |                                  | 1,577 |  |      |   | 4,415 |      |  |   | 2,642  |  
|                                       |  |                                  |       |  |      |   |       |      | 
|Total provision for income tax expense |  | $                                | 6,352 |  |      | $ | 6,182 |      |  | $ | 897    |  
|                                       |  |                                  |       |  |      |   |       |      | 



|                                |                                            |                                  |       |      |      |   |       |      |   |   |      |      |  
|------------------------------- | ------------------------------------------ | -------------------------------- | ----- | ---- | ---- | - | ----- | ---- | - | - | ---- | ---- | -
|                                |                                            | For the Years Ended December 31, |      
|                                |                                            |                                  |      
|                                |                                            | 2004                             |       |      | 2003 |   |       | 2002 |  
|                                |                                            |                                  |       |      |      |   |       |      |  
|Tax provision at statutory rate |                                            | $                                | 6,927 |      |      | $ | 5,535 |      |   | $ | 866  |     
|Tax effect of:                  |                                            |                                  |       |      |      |   |       |      |   |   |      |     
|                                | Tax exempt interest                        |                                  |       | (777 | )    |   |       | (371 | ) |   |      | (367 | )
|                                | State income taxes, net of federal benefit |                                  |       | 38   |      |   |       | 816  |   |   |      | 308  |  
|                                | Other, net                                 |                                  |       | 164  |      |   |       | 202  |   |   |      | 90   |  
|                                |                                            |                                  |       |      |      |   |       |      |  
|Federal income tax expense      |                                            | $                                | 6,352 |      |      | $ | 6,182 |      |   | $ | 897  |     
|                                |                                            |                                  |       |      |      |   |       |      |  
|Effective tax expense rate      |                                            |                                  | 31.2  | %    |      |   | 38.0  | %    |   |   | 35.2 | %   
|                                |                                            |                                  |       |      |      |   |       |      |  



Accounting for Income Taxes


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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                            |                      |                         |        |        |             |   |       |          |  |   |             |        |        |   |       |        |  | 
|------------------------------------------- | -------------------- | ----------------------- | ------ | ------ | ----------- | - | ----- | -------- |  | - | ----------- | ------ | ------ | - | ----- | ------ |  | 
|                                            |                      | 2004                    |        |        | 2003        |  
|                                            |                      |                         |        |        |             |  
|                                            |                      | Deferred                |        |        | Deferred    |   |       | Deferred |  |   | Deferred    |       
|                                            |                      | Tax                     |        |        | Tax         |   |       | Tax      |  |   | Tax         |       
|                                            |                      | Assets                  |        |        | Liabilities |   |       | Assets   |  |   | Liabilities |       
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       
|Unpaid losses and loss adjustment expenses  |                      | $                       | 11,815 |        |             | $ |      |          |  | $ | 10,885      |        |        | $ |      |       
|Unearned premium reserves                   |                      |                         | 7,512  |        |             |   |      |          |  |   | 6,216       |        |        |   |      |       
|Unrealized gains on investments             |                      |                         |       |        |             |   | 2,487 |          |  |   |            |        |        |   | 3,819 |       
|Deferred policy acquisition expense         |                      |                         |       |        |             |   | 8,557 |          |  |   |            |        |        |   | 6,594 |       
|Allowance for doubtful accounts             |                      |                         | 1,440  |        |             |   |      |          |  |   | 1,458       |        |        |   |      |       
|Policyholder dividends                      |                      |                         | 112    |        |             |   |      |          |  |   | 17          |        |        |   |      |       
|Alternate minimum tax credit                |                      |                         | 4,061  |        |             |   |      |          |  |   | 2,427       |        |        |   |      |       
|Net operating loss carryforward             |                      |                         | 125    |        |             |   |      |          |  |   | 3,376       |        |        |   |      |       
|Goodwill                                    |                      |                         |       |        |             |   | 1,131 |          |  |   |            |        |        |   | 777   |       
|Deferred revenue                            |                      |                         | 147    |        |             |   |      |          |  |   | 930         |        |        |   |      |       
|Long term incentive plan                    |                      |                         | 442    |        |             |   |      |          |  |   |            |        |        |   |      |       
|Amortization of intangible assets           |                      |                         | 171    |        |             |   |      |          |  |   |            |        |        |   |      |       
|Deferred gain on sale-leaseback transaction |                      |                         | 284    |        |             |   |      |          |  |   |            |        |        |   |      |       
|Other                                       |                      |                         | 1,022  |        |             |   |      |          |  |   | 1,082       |        |        |   |      |       
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       
|                                            | Total deferred taxes |                         |        | 27,131 |             |   |       | 12,175   |  |   |             | 26,391 |        |   |       | 11,190 | 
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       
|                                            |                      | Net deferred tax assets |        | $      | 14,956      |   |       |          |  |   |             | $      | 15,201 |   |       |        |  | 
|                                            |                      |                         |        |        |             |   |       |          |  |   |             |       


Summary of Significant Accounting Policies


10.     Stock Options






84



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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|                                                               |  |         |           |           |       |   |      |         |           |   |           |   |  |           |      |  |       |   |           |   |  |   |       | 
|-------------------------------------------------------------- |  | ------- | --------- | --------- | ----- | - | ---- | ------- | --------- | - | --------- | - |  | --------- | ---- |  | ----- | - | --------- | - |  | - | ----- | 
|                                                               |  | 2004    |           |           | 2003  |   |      | 2002    |          
|                                                               |  |         |           |           |       |   |      |         |          
|                                                               |  |         |           | Weighted- |       |   |      |         | Weighted- |   |           |   |  | Weighted- |     
|                                                               |  |         |           | Average   |       |   |      |         | Average   |   |           |   |  | Average   |     
|                                                               |  |         |           | Exercise  |       |   |      |         | Exercise  |   |           |   |  | Exercise  |     
|                                                               |  | Options |           |           | Price |   |      | Options |           |   | Price     |   |  | Options   |      |  | Price |  
|                                                               |  |         |           |           |       |   |      |         |           |   |           |   |  |           |      |  |       |  
|Outstanding  beginning of year                                |  |         | 2,381,609 |           |       | $ | 5.80 |         |           |   | 2,693,223 |   |  | $         | 6.78 |  |       |   | 1,582,716 |   |  | $ | 9.87  | 
|Granted                                                        |  |         |          |           |       |   |     |         |           |   | 331,490   |   |  |           | 2.17 |  |       |   | 1,276,220 |   |  |   | 3.26  | 
|Exercised                                                      |  |         | (39,500   | )         |       |   | 2.74 |         |           |   | (550      | ) |  |           | 2.82 |  |       |   |          |   |  |   |      | 
|Forfeited                                                      |  |         | (220,792  | )         |       |   | 8.97 |         |           |   | (642,554  | ) |  |           | 8.01 |  |       |   | (165,713  | ) |  |   | 10.18 | 
|                                                               |  |         |           |           |       |   |      |         |           |   |           |   |  |           |      |  |       |  
|Outstanding  end of year                                      |  |         | 2,121,317 |           |       | $ | 5.53 |         |           |   | 2,381,609 |   |  | $         | 5.80 |  |       |   | 2,693,223 |   |  | $ | 6.78  | 
|                                                               |  |         |           |           |       |   |      |         |           |   |           |   |  |           |      |  |       |  
|Exercisable at end of year                                     |  |         | 1,451,015 |           |       | $ | 5.92 |         |           |   | 1,231,981 |   |  | $         | 6.75 |  |       |   | 1,063,387 |   |  | $ | 8.40  | 
|Weighted-average fair value of options granted during the year |  |         |          |           |       |   |     |         |           | $ | 1.14      |   |  |           |     |  |       | $ | 1.77      |   |  |   |      | 



|                  |  |                     |           |           |                     |  |           |       |  |   |         |           |  |       |           |  |  |   |       | 
|----------------- |  | ------------------- | --------- | --------- | ------------------- |  | --------- | ----- |  | - | ------- | --------- |  | ----- | --------- |  |  | - | ----- | 
|                  |  | Options Outstanding |           |           | Options Exercisable | 
|                  |  |                     |           |           |                     | 
|                  |  |                     |           | Weighted- |                     |  | Weighted- |       |  |   |         | Weighted- | 
|                  |  |                     |           | Average   |                     |  | Average   |       |  |   |         | Average   | 
|Range of          |  |                     |           | Remaining |                     |  | Exercise  |       |  |   |         | Exercise  | 
|Exercise Prices   |  | Options             |           |           | Life (Years)        |  |           | Price |  |   | Options |           |  | Price |          
|                  |  |                     |           |           |                     |  |           |       |  |   |         |           |  |       |          
|$2.173 to $3.066  |  |                     | 599,815   |           |                     |  | 2.8       |       |  | $ | 2.66    |           |  |       | 302,846   |  |  | $ | 2.75  | 
|$3.507 to $4.69   |  |                     | 585,000   |           |                     |  | 1.8       |       |  |   | 3.53    |           |  |       | 353,000   |  |  |   | 3.53  | 
|$5.675 to $6.5063 |  |                     | 726,500   |           |                     |  | 0.7       |       |  |   | 6.15    |           |  |       | 642,000   |  |  |   | 6.10  | 
|$10.25 to $30.45  |  |                     | 210,002   |           |                     |  | 3.1       |       |  |   | 17.16   |           |  |       | 153,169   |  |  |   | 16.92 | 
|                  |  |                     |           |           |                     |  |           |       |  |   |         |           |  |       |          
|                  |  |                     | 2,121,317 |           |                     |  | 2.2       |       |  | $ | 5.53    |           |  |       | 1,451,015 |  |  | $ | 5.92  | 
|                  |  |                     |           |           |                     |  |           |       |  |   |         |           |  |       |          



11.     Shareholders Equity








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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






 Regulatory Matters and Rating Issues


12.     Goodwill and Other
Intangible Assets


Goodwill








|                                      |  |            |       |  |                       |   |        |       |  |   |        | 
|------------------------------------- |  | ---------- | ----- |  | --------------------- | - | ------ | ----- |  | - | ------ | 
|                                      |  | Agency     |       |  | Specialty Risk        |   |        |      
|                                      |  | Operations |       |  | Management Operations |   |        | Total | 
|                                      |  |            |       |  |                       |   |        |       | 
|Balance at December 31, 2004 and 2003 |  | $          | 3,964 |  |                       | $ | 25,033 |       |  | $ | 28,997 | 

Goodwill and
Other Intangible Assets,


Other Intangible Assets




86



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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|     |                            |   |     |       | 
|---- | -------------------------- | - | --- | ----- | 
|2005 |                            | $ | 369 |      
|2006 |                            |   | 369 |      
|2007 |                            |   | 356 |      
|2008 |                            |   | 8   |      
|2009 |                            |   |    |      
|     |                            |   |    
|     | Total amortization expense |   | $   | 1,102 | 
|     |                            |   |    

13.     Commitments and
Contingencies




|           |                                 |   |       |        | 
|---------- | ------------------------------- | - | ----- | ------ | 
|2005       |                                 | $ | 2,264 |       
|2006       |                                 |   | 1,824 |       
|2007       |                                 |   | 1,402 |       
|2008       |                                 |   | 1,227 |       
|2009       |                                 |   | 1,092 |       
|Thereafter |                                 |   | 3,889 |       
|           |                                 |   |      
|           | Total minimum lease commitments |   | $     | 11,698 | 
|           |                                 |   |      



 Subsequent Events


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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








Accounting for
Contingencies,


88



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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


14.     Sale-leaseback
Transaction






15.     Related Party
Transactions














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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




 Sale-Leaseback Transaction






16.     Employee Benefit Plans


1 2




|    |                                    
|--- | -----------------------------------
|17. | Fair Value of Financial Instruments

Disclosures about Fair Value of
Financial Instruments


Accounting for Certain Investments in Debt and Equity
Securities


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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                     
|--- | ------------------------------------
|18. | Quarterly Financial Data (Unaudited)



|                                                   |  |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|-------------------------------------------------- |  | ------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | -
|                                                   |  | 1st     |        |   | 2nd     |   |        | 3rd     |  |   | 4th     |  
|                                                   |  | Quarter |        |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                                                   |  |         |        |   |         |   |        |         |  |   |         |  
|2004:                                              |  |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|Gross premiums written                             |  | $       | 81,054 |   |         | $ | 70,871 |         |  | $ | 79,234  |   |  | $ | 82,334 |  
|Net premiums written                               |  |         | 62,951 |   |         |   | 53,025 |         |  |   | 56,303  |   |  |   | 61,682 |  
|Net premiums earned                                |  |         | 49,713 |   |         |   | 53,083 |         |  |   | 52,963  |   |  |   | 58,734 |  
|Net commissions and fees                           |  |         | 11,281 |   |         |   | 8,844  |         |  |   | 12,669  |   |  |   | 7,741  |  
|Net investment income and realized gains/losses    |  |         | 3,477  |   |         |   | 3,515  |         |  |   | 3,836   |   |  |   | 4,422  |  
|Net losses and LAE incurred                        |  |         | 32,509 |   |         |   | 32,826 |         |  |   | 31,829  |   |  |   | 38,774 |  
|Policy acquisition and other underwriting expenses |  |         | 7,546  |   |         |   | 8,870  |         |  |   | 8,169   |   |  |   | 8,839  |  
|Other administrative expenses                      |  |         | 6,096  |   |         |   | 6,469  |         |  |   | 6,802   |   |  |   | 6,597  |  
|Salaries and employee benefits                     |  |         | 12,808 |   |         |   | 12,325 |         |  |   | 14,284  |   |  |   | 12,880 |  
|Interest expense                                   |  |         | 315    |   |         |   | 528    |         |  |   | 686     |   |  |   | 752    |  
|Net income                                         |  |         | 3,232  |   |         |   | 2,820  |         |  |   | 5,252   |   |  |   | 2,757  |  
|Diluted earnings per share                         |  | $       | 0.11   |   |         | $ | 0.10   |         |  | $ | 0.18    |   |  | $ | 0.09   |  
|GAAP combined ratio(1)                             |  |         | 102.0  | % |         |   | 101.2  | %       |  |   | 99.5    | % |  |   | 102.6  | %
|2003:                                              |  |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|Gross premiums written                             |  | $       | 68,789 |   |         | $ | 56,220 |         |  | $ | 65,839  |   |  | $ | 62,432 |  
|Net premiums written                               |  |         | 51,802 |   |         |   | 40,177 |         |  |   | 50,568  |   |  |   | 47,280 |  
|Net premiums earned                                |  |         | 27,384 |   |         |   | 36,230 |         |  |   | 40,187  |   |  |   | 47,404 |  
|Net commissions and fees                           |  |         | 13,356 |   |         |   | 11,271 |         |  |   | 10,803  |   |  |   | 9,861  |  
|Net investment income and realized gains/losses    |  |         | 3,558  |   |         |   | 3,951  |         |  |   | 3,496   |   |  |   | 3,302  |  
|Net losses and LAE incurred                        |  |         | 17,186 |   |         |   | 24,109 |         |  |   | 26,357  |   |  |   | 30,820 |  
|Policy acquisition and other underwriting expenses |  |         | 3,745  |   |         |   | 5,993  |         |  |   | 5,995   |   |  |   | 7,873  |  
|Other administrative expenses                      |  |         | 6,660  |   |         |   | 4,940  |         |  |   | 5,623   |   |  |   | 6,009  |  
|Salaries and employee benefits                     |  |         | 11,932 |   |         |   | 11,868 |         |  |   | 12,372  |   |  |   | 12,066 |  
|Interest expense                                   |  |         | 237    |   |         |   | 212    |         |  |   | 207     |   |  |   | 321    |  
|Net income                                         |  |         | 2,756  |   |         |   | 2,679  |         |  |   | 2,500   |   |  |   | 2,164  |  
|Diluted earnings per share                         |  | $       | 0.09   |   |         | $ | 0.09   |         |  | $ | 0.09    |   |  | $ | 0.07   |  
|GAAP combined ratio(1)                             |  |         | 105.4  | % |         |   | 106.4  | %       |  |   | 103.4   | % |  |   | 103.1  | %






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



|    |                  
|--- | -----------------
|19. | Subsequent Events



91



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MEADOWBROOK INSURANCE GROUP, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




92



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SCHEDULE I


MEADOWBROOK INSURANCE GROUP, INC.


SUMMARY OF INVESTMENTS  OTHER THAN INVESTMENTS IN
RELATED PARTIES


As of December 31, 2004


|                                                      |                         |                   |         |         |         |             |         |         |         |   |         |         |         | 
|----------------------------------------------------- | ----------------------- | ----------------- | ------- | ------- | ------- | ----------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                      |                         |                   |         |         |         | Amount at   |        
|                                                      |                         |                   |         |         |         | Which       |        
|                                                      |                         |                   |         |         |         | Shown in    |        
|                                                      |                         |                   |         |         |         | the Balance |        
|Type of Investment                                    |                         | Cost              |         |         | Value   |             |         | Sheet   |        
|                                                      |                         |                   |         |         |         |             |         |         |        
|                                                      |                         | (In thousands)    |        
|Fixed Maturities:                                     |                         |                   |         |         |         |             |         |         |         |   |         |        
|US government and government agencies and authorities |                         | $                 | 56,492  |         |         | $           | 57,438  |         |         | $ | 57,438  |        
|States and political subdivisions                     |                         |                   | 104,009 |         |         |             | 105,595 |         |         |   | 105,595 |        
|Corporate securities                                  |                         |                   | 99,784  |         |         |             | 104,151 |         |         |   | 104,151 |        
|Mortgage-backed securities                            |                         |                   | 64,681  |         |         |             | 65,058  |         |         |   | 65,058  |        
|                                                      |                         |                   |         |         |         |             |         |         |        
|                                                      | Total Fixed Maturities  |                   |         | 324,966 |         |             |         | 332,242 |         |   |         | 332,242 |        
|Equity Securities:                                    |                         |                   |         |         |         |             |         |         |         |   |         |        
|Preferred stocks                                      |                         |                   |        |         |         |             |        |         |         |   |        |        
|Common stocks                                         |                         |                   |        |         |         |             | 39      |         |         |   | 39      |        
|                                                      |                         |                   |         |         |         |             |         |         |        
|                                                      | Total Equity Securities |                   |         |        |         |             |         | 39      |         |   |         | 39      |        
|                                                      |                         |                   |         |         |         |             |         |         |        
|                                                      |                         | Total Investments |         | $       | 324,966 |             |         | $       | 332,281 |   |         | $       | 332,281 | 
|                                                      |                         |                   |         |         |         |             |         |         |        

93



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SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


BALANCE SHEET


|                                                         |                            |                                            |             |             |             |   |             |             |             | 
|-------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------- | ----------- | ----------- | - | ----------- | ----------- | ----------- | 
|                                                         |                            | December 31,                               |            
|                                                         |                            |                                            |            
|                                                         |                            | 2004                                       |             |             | 2003        |  
|                                                         |                            |                                            |             |             |             |  
|ASSETS                                                   |                            |                                            |             |             |             |   |             |            
|Cash and cash equivalents                                |                            | $                                          | 5,755,167   |             |             | $ | 647,733     |            
|Investment in subsidiaries                               |                            |                                            | 200,029,364 |             |             |   | 175,798,461 |            
|Goodwill                                                 |                            |                                            | 3,023,828   |             |             |   | 3,023,828   |            
|Other assets                                             |                            |                                            | 18,721,523  |             |             |   | 2,930,989   |            
|                                                         |                            |                                            |             |             |             |  
|                                                         | Total assets               |                                            | $           | 227,529,882 |             |   | $           | 182,401,011 |            
|                                                         |                            |                                            |             |             |             |  
|LIABILITIES                                              |                            |                                            |             |             |             |   |             |            
|Other liabilities                                        |                            | $                                          | 12,608,390  |             |             | $ | 217,969     |            
|Payable to subsidiaries                                  |                            |                                            | 3,056,911   |             |             |   | 2,759,633   |            
|Debt                                                     |                            |                                            | 9,044,146   |             |             |   | 14,000,000  |            
|Debentures                                               |                            |                                            | 35,310,000  |             |             |   | 10,310,000  |            
|                                                         |                            |                                            |             |             |             |  
|                                                         | Total liabilities          |                                            |             | 60,019,447  |             |   |             | 27,287,602  |            
|                                                         |                            |                                            |             |             |             |  
|SHAREHOLDERS EQUITY                                     |                            |                                            |             |             |             |   |             |            
|Common stock                                             |                            |                                            | 290,748     |             |             |   | 290,224     |            
|Additional paid-in capital                               |                            |                                            | 126,084,545 |             |             |   | 125,181,162 |            
|Retained earnings                                        |                            |                                            | 37,175,383  |             |             |   | 23,069,541  |            
|Note receivable from officer                             |                            |                                            | (868,125    | )           |             |   | (885,794    | )          
|Unrealized appreciation on available for sale securities |                            |                                            | 4,827,884   |             |             |   | 7,458,276   |            
|                                                         |                            |                                            |             |             |             |  
|                                                         | Total shareholders equity |                                            |             | 167,510,435 |             |   |             | 155,113,409 |            
|                                                         |                            |                                            |             |             |             |  
|                                                         |                            | Total liabilities and shareholders equity |             | $           | 227,529,882 |   |             | $           | 182,401,011 | 
|                                                         |                            |                                            |             |             |             |  

94



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SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


INCOME STATEMENT


|                                               |                        |                                  |            |           |           |   |            |           |           |   |            |           |           | 
|---------------------------------------------- | ---------------------- | -------------------------------- | ---------- | --------- | --------- | - | ---------- | --------- | --------- | - | ---------- | --------- | --------- | 
|                                               |                        | For the Years Ended December 31, |           
|                                               |                        |                                  |           
|                                               |                        | 2004                             |            |           | 2003      |   |            | 2002      |          
|                                               |                        |                                  |            |           |           |   |            |           |          
|Revenue                                        |                        | $                                | 466,281    |           |           | $ | 216,093    |           |           | $ | 277,599    |          
|Operating expenses:                            |                        |                                  |            |           |           |   |            |           |           |   |            |          
|                                               | Interest expense       |                                  |            | 2,368,725 |           |   |            | 1,060,810 |           |   |            | 3,102,988 |          
|                                               | Gain on debt reduction |                                  |            |          |           |   |            |          |           |   |            | (359,029  | )        
|                                               | Other expenses         |                                  |            | 2,897,941 |           |   |            | 1,374,558 |           |   |            | 1,065,627 |          
|                                               |                        |                                  |            |           |           |   |            |           |          
|                                               |                        | Total operating expenses         |            |           | 5,266,666 |   |            |           | 2,435,368 |   |            |           | 3,809,586 | 
|                                               |                        |                                  |            |           |           |   |            |           |          
|Loss before income taxes and subsidiary equity |                        |                                  | (4,800,385 | )         |           |   | (2,219,275 | )         |           |   | (3,531,987 | )        
|Federal and state income tax benefit           |                        |                                  | (1,906,101 | )         |           |   | (828,597   | )         |           |   | (1,351,813 | )        
|                                               |                        |                                  |            |           |           |   |            |           |          
|Loss before subsidiary equity earnings         |                        |                                  | (2,894,284 | )         |           |   | (1,390,678 | )         |           |   | (2,180,174 | )        
|Subsidiary equity earnings                     |                        |                                  | 16,955,019 |           |           |   | 11,490,030 |           |           |   | 3,830,268  |          
|                                               |                        |                                  |            |           |           |   |            |           |          
|Net income                                     |                        | $                                | 14,060,735 |           |           | $ | 10,099,352 |           |           | $ | 1,650,094  |          
|                                               |                        |                                  |            |           |           |   |            |           |          

SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


STATEMENT OF COMPREHENSIVE INCOME


|           |                                                |                                                                        |            |            |            |   |            |            |          |   |           |           |           |  
|---------- | ---------------------------------------------- | ---------------------------------------------------------------------- | ---------- | ---------- | ---------- | - | ---------- | ---------- | -------- | - | --------- | --------- | --------- | -
|           |                                                | For the Years Ended December 31,                                       |           
|           |                                                |                                                                        |           
|           |                                                | 2004                                                                   |            |            | 2003       |   |            | 2002       |         
|           |                                                |                                                                        |            |            |            |   |            |            |         
|Net income |                                                | $                                                                      | 14,060,735 |            |            | $ | 10,099,352 |            |          | $ | 1,650,094 |          
|           | Other comprehensive (loss) income, net of tax: |                                                                        |            |            |            |   |            |            |          |   |           |           |          
|           |                                                | Unrealized(losses)gains on securities:                                 |            |            | (2,362,996 | ) |            |            | (814,673 | ) |           |           | 5,888,375 |  
|           |                                                | Deconsolidation of subsidiary                                          |            |            | (45,106    | ) |            |            |         |   |           |           |          |  
|           |                                                | Less: reclassification adjustment for gains included in net
    income |            |            | (222,290   | ) |            |            | (199,668 | ) |           |           | (489,227  | )
|           |                                                |                                                                        |            |            |            |   |            |            |         
|           | Other comprehensive (loss) income              |                                                                        |            | (2,630,392 | )          |   |            | (1,014,341 | )        |   |           | 5,399,148 |          
|           |                                                |                                                                        |            |            |            |   |            |            |         
|           | Comprehensive income                           |                                                                        | $          | 11,430,343 |            |   | $          | 9,085,011  |          |   | $         | 7,049,242 |          
|           |                                                |                                                                        |            |            |            |   |            |            |         

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SCHEDULE II


CONDENSED FINANCIAL INFORMATION OF REGISTRANT


MEADOWBROOK INSURANCE GROUP, INC.


PARENT COMPANY ONLY


STATEMENT OF CASH FLOWS


|                                                     |                                          |                                       |                                                     |             |            |            |            |             |            |            |          |             |             |            | 
|---------------------------------------------------- | ---------------------------------------- | ------------------------------------- | --------------------------------------------------- | ----------- | ---------- | ---------- | ---------- | ----------- | ---------- | ---------- | -------- | ----------- | ----------- | ---------- | 
|                                                     |                                          | For the Years Ended December 31,      |                                                    
|                                                     |                                          |                                       |                                                    
|                                                     |                                          | 2004                                  |                                                     |             | 2003       |            |            | 2002        |           
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|Net cash (used in) provided by operating activities: |                                          | $                                     | (4,488,410                                          | )           |            | $          | 15,404,217 |             |            | $          | (63,694  | )          
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|Cash Flow from Investing Activities:                 |                                          |                                       |                                                     |             |            |            |            |             |            |            |          |            
|                                                     | Purchase of land                         |                                       |                                                     |            |            |            |            | (3,228,335  | )          |            |          |            |            
|                                                     | Dividends from subsidiaries              |                                       |                                                     | 3,678,052   |            |            |            |            |            |            |          |            |            
|                                                     | Investment in subsidiaries               |                                       |                                                     | (13,539,222 | )          |            |            | (6,271,665  | )          |            |          | (37,500,000 | )          
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|                                                     |                                          | Net cash used in investing activities |                                                     |             | (9,861,170 | )          |            |             | (9,500,000 | )          |          |             | (37,500,000 | )         
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|Cash Flow from Financing Activities:                 |                                          |                                       |                                                     |             |            |            |            |             |            |            |          |            
|                                                     | Proceeds from borrowings                 |                                       |                                                     | 3,744,146   |            |            |            | 8,800,000   |            |            |          | 8,300,000   |            
|                                                     | Principal payments on borrowings         |                                       |                                                     | (8,700,000  | )          |            |            | (22,350,000 | )          |            |          | (30,869,709 | )          
|                                                     | Net proceeds from public offering        |                                       |                                                     |            |            |            |            |            |            |            |          | 60,516,184  |            
|                                                     | Net proceeds from issuance of debentures |                                       |                                                     | 24,250,000  |            |            |            | 9,700,000   |            |            |          |            |            
|                                                     | Issuance of common stock                 |                                       |                                                     | 145,198     |            |            |            |            |            |            |          |            |            
|                                                     | Retirement of common stock               |                                       |                                                     |            |            |            |            | (1,562,623  | )          |            |          | (454,878    | )          
|                                                     | Other financing activities               |                                       |                                                     | 17,670      |            |            |            | 6,261       |            |            |          | (31,246     | )          
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|                                                     |                                          |                                       | Net cash provided by (used in) financing activities |             |            | 19,457,014 |            |             |            | (5,406,362 | )        |             |             | 37,460,351 | 
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|Increase (decrease) in cash and cash equivalents     |                                          |                                       | 5,107,434                                           |             |            |            | 497,855    |             |            |            | (103,343 | )          
|Cash and cash equivalents, beginning of year         |                                          |                                       | 647,733                                             |             |            |            | 149,878    |             |            |            | 253,221  |            
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           
|Cash and cash equivalents, end of year               |                                          | $                                     | 5,755,167                                           |             |            | $          | 647,733    |             |            | $          | 149,878  |            
|                                                     |                                          |                                       |                                                     |             |            |            |            |             |           

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SCHEDULE III


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTARY INSURANCE INFORMATION


December 31, 2004


(In thousands)


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

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

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SCHEDULE III


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTARY INSURANCE INFORMATION


December 31, 2003


(In thousands)


|                                     |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |   |  |  |   |         | 
|------------------------------------ |  | ----------------- | ------ | ----------------- | ------------- | - | ------- | -------- | ------------ | - | ---------------- |  |  | ------- | - |  |  | - | ------- | 
|                                     |  |                   |        | Future Policy     |               |   |         |          |              |   |                 
|                                     |  |                   |        | Benefits, Losses, |               |   |         |          | Other Policy |   |                  | 
|                                     |  | Deferred Policy   |        |                   | Claims & Loss |   |         | Unearned |              |   | Claims &         |  |  | Premium |  
|                                     |  | Acquisition Costs |        |                   | Expenses      |   |         | Premium  |              |   | Benefits Payable |  |  | Revenue |  
|                                     |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|Specialty Risk Management Operations |  | $                 | 19,564 |                   |               | $ | 339,465 |          |              | $ | 109,677          |  |  |         |  |  |  | $ | 151,205 | 
|Agency Operations                    |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|Reconciling Items                    |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|                                     |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|                                     |  | $                 | 19,564 |                   |               | $ | 339,465 |          |              | $ | 109,677          |  |  |         |  |  |  | $ | 151,205 | 
|                                     |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  

|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |        |   |  |   |         | 
|------------------------------------- |  | ---------- | ------ | ----------------- | ---------- | - | ------ | ----------------- |  | - | --------- |  |  | ------- | ------ | - |  | - | ------- | 
|                                      |  |            |        | Benefits, Claims, |            |   |        |                   |  |   |          
|                                      |  | Net        |        |                   | Losses &   |   |        | Amortization of   |  |   | Other     |  |  |        
|                                      |  | Investment |        |                   | Settlement |   |        | Deferred Policy   |  |   | Operating |  |  | Premium |       
|                                      |  | Income     |        |                   | Expenses   |   |        | Acquisition Costs |  |   | Expenses  |  |  | Written |       
|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |       
|Speciality Risk Management Operations |  | $          | 13,471 |                   |            | $ | 98,472 |                   |  | $ | 18,202    |  |  | $       | 73,121 |   |  | $ | 189,827 | 
|Agency Operations                     |  |            |       |                   |            |   |       |                   |  |   |          |  |  |         | 8,009  |   |  |   |        | 
|Reconciling Items                     |  |            | 13     |                   |            |   |       |                   |  |   |          |  |  |         | (3,279 | ) |  |   |        | 
|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |       
|                                      |  | $          | 13,484 |                   |            | $ | 98,472 |                   |  | $ | 18,202    |  |  | $       | 77,851 |   |  | $ | 189,827 | 
|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |       

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SCHEDULE III


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTARY INSURANCE INFORMATION


December 31, 2002


(In thousands)


|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |   |  |  |   |         | 
|------------------------------------- |  | ----------------- | ------ | ----------------- | ------------- | - | ------- | -------- | ------------ | - | ---------------- |  |  | ------- | - |  |  | - | ------- | 
|                                      |  |                   |        | Future Policy     |               |   |         |          |              |   |                 
|                                      |  |                   |        | Benefits, Losses, |               |   |         |          | Other Policy |   |                  | 
|                                      |  | Deferred Policy   |        |                   | Claims & Loss |   |         | Unearned |              |   | Claims &         |  |  | Premium |  
|                                      |  | Acquisition Costs |        |                   | Expenses      |   |         | Premium  |              |   | Benefits Payable |  |  | Revenue |  
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|Speciality Risk Management Operations |  | $                 | 12,140 |                   |               | $ | 374,933 |          |              | $ | 68,678           |  |  |         |  |  |  | $ | 145,383 | 
|Agency Operations                     |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|Reconciling Items                     |  |                   |       |                   |               |   |        |          |              |   |                 |  |  |         |  |  |  |   |        | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  
|                                      |  | $                 | 12,140 |                   |               | $ | 374,933 |          |              | $ | 68,678           |  |  |         |  |  |  | $ | 145,383 | 
|                                      |  |                   |        |                   |               |   |         |          |              |   |                  |  |  |         |  

|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |        |  |  |   |         | 
|------------------------------------- |  | ---------- | ------ | ----------------- | ---------- | - | ------ | ----------------- |  | - | --------- |  |  | ------- | ------ |  |  | - | ------- | 
|                                      |  |            |        | Benefits, Claims, |            |   |        |                   |  |   |          
|                                      |  | Net        |        |                   | Losses &   |   |        | Amortization of   |  |   | Other     |  |  |        
|                                      |  | Investment |        |                   | Settlement |   |        | Deferred Policy   |  |   | Operating |  |  | Premium |       
|                                      |  | Income     |        |                   | Expenses   |   |        | Acquisition Costs |  |   | Expenses  |  |  | Written |       
|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |       
|Speciality Risk Management Operations |  | $          | 13,906 |                   |            | $ | 98,734 |                   |  | $ | 25,234    |  |  | $       | 60,462 |  |  | $ | 139,795 | 
|Agency Operations                     |  |            |       |                   |            |   |       |                   |  |   |          |  |  |         | 7,778  |  |  |   |        | 
|Reconciling Items                     |  |            | 52     |                   |            |   |       |                   |  |   |          |  |  |         | 3,032  |  |  |   |        | 
|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |       
|                                      |  | $          | 13,958 |                   |            | $ | 98,734 |                   |  | $ | 25,234    |  |  | $       | 71,272 |  |  | $ | 139,795 | 
|                                      |  |            |        |                   |            |   |        |                   |  |   |           |  |  |         |       

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SCHEDULE IV


MEADOWBROOK INSURANCE GROUP, INC.


REINSURANCE


For the Years Ended December 31,


(In thousands)


|                                 |  |        |         |          |           |         |        |           |  |   |            |           |  |         |         |  |  |  |       |  
|-------------------------------- |  | ------ | ------- | -------- | --------- | ------- | ------ | --------- |  | - | ---------- | --------- |  | ------- | ------- |  |  |  | ----- | -
|                                 |  |        |         |          |           | Assumed |        |           |  |   | Percentage |          
|                                 |  |        |         | Ceded to |           |         | from   |           |  |   |            | of Amount | 
|                                 |  | Gross  |         |          | Other     |         |        | Other     |  |   | Net        |           |  | Assumed |        
|                                 |  | Amount |         |          | Companies |         |        | Companies |  |   | Amount     |           |  | to Net  |        
|                                 |  |        |         |          |           |         |        |           |  |   |            |           |  |         |        
|Property and Liability Insurance |  |        |         |          |           |         |        |           |  |   |            |           |  |         |         |  |  |  |       |  
|2004                             |  | $      | 247,169 |          |           | $       | 74,375 |           |  | $ | 41,699     |           |  | $       | 214,493 |  |  |  | 19.44 | %
|2003                             |  | $      | 198,991 |          |           | $       | 61,076 |           |  | $ | 13,290     |           |  | $       | 151,205 |  |  |  | 8.79  | %
|2002                             |  | $      | 195,186 |          |           | $       | 63,578 |           |  | $ | 13,775     |           |  | $       | 145,383 |  |  |  | 9.47  | %

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SCHEDULE V


MEADOWBROOK INSURANCE GROUP, INC.


VALUATION AND QUALIFYING ACCOUNTS


For The Years Ended December 31,


(In thousands)


|                                |  |            |       |           |            |   |            |            |  |  |           |  |  |            |       |  |  |   |       | 
|------------------------------- |  | ---------- | ----- | --------- | ---------- | - | ---------- | ---------- |  |  | --------- |  |  | ---------- | ----- |  |  | - | ----- | 
|                                |  |            |       | Additions |            |   |            |            | 
|                                |  |            |       |           |            |   | Deductions |            |  | 
|                                |  | Balance at |       |           | Charged to |   |            | Charged to |  |  | from      |  |  | Balance at |      
|                                |  | Beginning  |       |           | Costs and  |   |            | Other      |  |  | Allowance |  |  | End of     |      
|                                |  | of Period  |       |           | Expense    |   |            | Accounts   |  |  | Account   |  |  | Period     |      
|                                |  |            |       |           |            |   |            |            |  |  |           |  |  |            |      
|Allowance for doubtful accounts |  |            |       |           |            |   |            |            |  |  |           |  |  |            |       |  |  |   |       | 
|2004                            |  | $          | 4,651 |           |            | $ | 822        |            |  |  |          |  |  | $          | 1,137 |  |  | $ | 4,336 | 
|2003                            |  | $          | 4,747 |           |            | $ | 2,724      |            |  |  |          |  |  | $          | 2,820 |  |  | $ | 4,651 | 
|2002                            |  | $          | 4,932 |           |            | $ | 1,707      |            |  |  |          |  |  | $          | 1,892 |  |  | $ | 4,747 | 

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SCHEDULE VI


MEADOWBROOK INSURANCE GROUP, INC.


SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND


CASUALTY INSURANCE OPERATIONS


|                                                   |  |                                  |        |              |             |   |         |                   |  |             |   |     |          |   |         |            |  |   |         |  |  |   |        | 
|-------------------------------------------------- |  | -------------------------------- | ------ | ------------ | ----------- | - | ------- | ----------------- |  | ----------- | - | --- | -------- | - | ------- | ---------- |  | - | ------- |  |  | - | ------ | 
|                                                   |  | For the Years Ended December 31, |       
|                                                   |  | (in thousands)                   |       
|                                                   |  |                                  |       
|                                                   |  |                                  |        | Reserves for |             |   |        
|                                                   |  | Deferred                         |        |              | Losses and  |   |         | Discount, if any, |  |            
|                                                   |  | Policy                           |        |              | Loss        |   |         | deducted from     |  |             |   | Net |          |   | Net     |           
|                                                   |  | Acquisition                      |        |              | Adjustment  |   |         | previous          |  | Unearned    |   |     | Premiums |   |         | Investment | 
|Affiliation with Registrant                        |  | Costs                            |        |              | Expenses(2) |   |         | column(1)         |  | Premiums(2) |   |     | Earned   |   |         | Income     | 
|                                                   |  |                                  |        |              |             |   |         |                   |  |             |   |     |          |   |         |            | 
|(a)Consolidated Property and Casualty Subsidiaries |  |                                  |        |              |             |   |         |                   |  |             |   |     |          |   |         |            |  |   |         |  |  |   |        | 
|2004                                               |  | $                                | 25,167 |              |             | $ | 378,157 |                   |  | $           |  |     |          | $ | 134,302 |            |  | $ | 214,493 |  |  | $ | 14,887 | 
|2003                                               |  | $                                | 19,564 |              |             | $ | 339,465 |                   |  | $           |  |     |          | $ | 109,677 |            |  | $ | 151,205 |  |  | $ | 13,471 | 
|2002                                               |  | $                                | 12,140 |              |             | $ | 374,933 |                   |  | $           |  |     |          | $ | 68,678  |            |  | $ | 145,383 |  |  | $ | 13,906 | 

|     |  |                     |         |  |                 |   |       |             |  |   |          |  |  |         |         |  |  |   |         | 
|---- |  | ------------------- | ------- |  | --------------- | - | ----- | ----------- |  | - | -------- |  |  | ------- | ------- |  |  | - | ------- | 
|     |  | Losses and loss     |         |  | Amortization of |   |       | Paid losses |  |   |         
|     |  | adjustment expenses |         |  | deferred policy |   |       | and loss    |  |   | Net      | 
|     |  |                     |         |  | acquisition     |   |       | adjustment  |  |   | Premiums | 
|     |  | Current Year        |         |  | Prior Years     |   |       | expenses    |  |   | expenses |  |  | Written |        
|     |  |                     |         |  |                 |   |       |             |  |   |          |  |  |         |        
|2004 |  | $                   | 131,409 |  |                 | $ | 4,529 |             |  | $ | 25,280   |  |  | $       | 97,972  |  |  | $ | 233,961 | 
|2003 |  | $                   | 95,565  |  |                 | $ | 2,907 |             |  | $ | 18,202   |  |  | $       | 99,569  |  |  | $ | 189,827 | 
|2002 |  | $                   | 92,644  |  |                 | $ | 6,090 |             |  | $ | 25,234   |  |  | $       | 104,271 |  |  | $ | 139,795 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company does not employ any discounting techniques.                                                                                                                                                                                                                                                                                                                             
|   
|(2) | Reserves for losses and loss adjustment expenses are shown gross
    of $151.2 million, $147.4 million and
    $181.8 million of reinsurance recoverable on unpaid losses
    in 2004, 2003 and 2002, respectively. Unearned premiums are
    shown gross of ceded unearned premiums of $26.1 million,
    $20.5 million and $18.1 million in 2004, 2003 and
    2002, respectively.

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MEADOWBROOK INSURANCE GROUP, INC.


Exhibit Index


|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |  |     |  
|------- | ----- |  | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ |  | --- | -
|Exhibit |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Filing | 
|No.     |       |  | Description |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Basis  | 
|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        | 
|        | 3.1   |  |             | Amended and Restated Articles of Incorporation of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |  | (7  | )
|        | 3.2   |  |             | Amended and Restated Bylaws of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |  | (1  | )
|        | 4.1   |  |             | Warrant Agreement By and Between Meadowbrook Insurance Group,
    Inc. and Freidman, Billings, Ramsey & Co., Inc. dated
    June 11, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |  | (8  | )
|        | 4.2   |  |             | Junior Subordinated Indenture between Meadowbrook Insurance
    Group, Inc., and JP Morgan Chase Bank, dated September 30,
    2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |  | (10 | )
|        | 10.1  |  |             | Meadowbrook Insurance Group, Inc. Amended and Restated 1995
    Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |  | (12 | )
|        | 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  |  |             | Subordinated Promissory Note, Guaranty, and Agreement between
    Meadowbrook Insurance Group, Inc. and Atlantic Mutual Insurance
    Company dated as of July 27, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |  | (5  | )
|        | 10.5  |  |             | Meadowbrook Insurance Group, Inc. Amended and Restated 2002
    Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |  | (12 | )
|        | 10.6  |  |             | Form of Management Services Agreement by and between Meadowbrook
    Insurance Group, Inc., Meadowbrook, Inc., and Star Insurance
    Company, Williamsburg National Insurance Co., Ameritrust
    Insurance Corporation, American Indemnity Insurance Company,
    Ltd., and Preferred Insurance Company, Ltd., respectively, each
    dated January 1, 2003                                                                                                                                                                                                                                                                |        |  | (9  | )
|        | 10.7  |  |             | Management Services Agreement by and between Savers Property and
    Casualty Insurance Company and Meadowbrook, Inc., dated
    January 1, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |  | (9  | )
|        | 10.8  |  |             | 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 |        |  | (9  | )
|        | 10.9  |  |             | Purchase Agreement among Meadowbrook Insurance Group, Inc.,
    Meadowbrook Capital Trust I, and Dekania CDO I, Ltd., dated
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |  | (10 | )
|        | 10.10 |  |             | 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                                                                                                                                                                                                                                                                                                                                                                                       |        |  | (10 | )
|        | 10.11 |  |             | Guaranty Agreement between Meadowbrook Insurance Group, Inc.,
    and JP Morgan Chase Bank, dated September 30, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |  | (10 | )
|        | 10.12 |  |             | Guaranty Agreement between Meadowbrook Insurance Group, Inc. and
    Comerica Bank, dated June 6, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  | (11 | )
|        | 10.13 |  |             | Development Agreement between Meadowbrook Insurance Group, Inc.
    and Kirco Development LLC, dated December 3, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |  | (11 | )
|        | 10.14 |  |             | Employment Agreement between the Company and Robert S. Cubbin,
    dated January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |  | (11 | )
|        | 10.15 |  |             | Employment Agreement between the Company and Merton J. Segal,
    dated January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |  | (11 | )
|        | 10.16 |  |             | Employment Agreement between the Company and Michael G.
    Costello, dated January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |  | (11 | )

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MEADOWBROOK INSURANCE GROUP, INC.


|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                    |        |  |     |  
|------- | ----- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------ |  | --- | -
|Exhibit |       |  |             |                                                                                                                                                                                                                                                                                                                                                                    | Filing | 
|No.     |       |  | Description |                                                                                                                                                                                                                                                                                                                                                                    | Basis  | 
|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                    |        | 
|        | 10.17 |  |             | Tri-Party Agreement between Meadowbrook Insurance Group, Inc.,
    Kirco Development LLC, and Standard Federal Bank N.A., dated
    March 24, 2004                                                                                                                                                                                                                 |        |  | (14 | )
|        | 10.18 |  |             | Meadowbrook Insurance Group, Inc. Long Term Incentive Plan                                                                                                                                                                                                                                                                                                         |        |  | (15 | )
|        | 10.19 |  |             | Purchase and Sale Agreement between Kirco Acquisition LLC and
    Meadowbrook Insurance Group, Inc., dated December 4, 2003                                                                                                                                                                                                                                        |        |  | (15 | )
|        | 10.20 |  |             | Standard Offer Agreement and Escrow Instructions for Purchase of
    Real Estate, dated April 26, 2004                                                                                                                                                                                                                                                             |        |  | (15 | )
|        | 10.21 |  |             | Indenture between Meadowbrook Insurance Group, Inc. and JPMorgan
    Chase Bank, as Trustee, dated April 29, 2004                                                                                                                                                                                                                                                  |        |  | (15 | )
|        | 10.22 |  |             | Amended and Restated Loan and Security Agreement between Liberty
    Premium Finance, Inc., and Comerica Bank, dated May 7, 2004                                                                                                                                                                                                                                   |        |  | (15 | )
|        | 10.23 |  |             | Indenture between Meadowbrook Insurance Group, Inc. and
    Wilmington Trust Company, as Trustee, dated May 26,
    2004                                                                                                                                                                                                                                           |        |  | (15 | )
|        | 10.24 |  |             | First Amendment to Purchase and Sale Agreement between Kirco
    Acquisition LLC and Meadowbrook Insurance Group, Inc., dated
    July 15, 2004                                                                                                                                                                                                                    |        |  | (15 | )
|        | 10.25 |  |             | Land Contract between Meadowbrook Insurance Group, Inc. and MB
    Center II LLC, dated July 15, 2004                                                                                                                                                                                                                                                              |        |  | (15 | )
|        | 10.26 |  |             | Addendum 1 to the Management Services Agreement between
    Meadowbrook, Inc., and the Department of Insurance of the State
    of Missouri, dated April 1, 2004                                                                                                                                                                                                   |        |  | (16 | )
|        | 10.27 |  |             | 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                                                                                 |        |  |     |  
|        | 10.28 |  |             | Credit Agreement among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004                                                                                                                                                                                                                      |        |  | (13 | )
|        | 10.29 |  |             | Revolving Note among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004                                                                                                                                                                                                                        |        |  | (13 | )
|        | 10.30 |  |             | Security Agreement among Meadowbrook Insurance Group, Inc. and
    Standard Federal Bank National Association dated as of
    November 12, 2004                                                                                                                                                                                                                    |        |  | (13 | )
|        | 10.31 |  |             | Form of Nonqualified Stock Option Agreement under the
    Meadowbrook Insurance Group, Inc., Stock Option Plan, dated
    February 21, 2003                                                                                                                                                                                                                        |        |  |     |  
|        | 10.32 |  |             | Lease Agreement between Meadowbrook Insurance Group, Inc. and
    Meadowbrook, Inc., dated December 6, 2004                                                                                                                                                                                                                                                        |        |  |     |  
|        | 10.33 |  |             | Master Lease Agreement between LaSalle National Leasing
    Corporation and Meadowbrook Insurance Group, Inc., dated
    December 30, 2004                                                                                                                                                                                                                         |        |  |     |  
|        | 10.34 |  |             | Promissory Note between Meadowbrook Insurance Group, Inc. and
    Star Insurance Company, dated January 1, 2005                                                                                                                                                                                                                                                    |        |  |     |  
|        | 10.35 |  |             | Commercial Mortgage between Meadowbrook Insurance Group, Inc.
    and Star Insurance Company, dated January 1, 2005                                                                                                                                                                                                                                                |        |  |     |  
|        | 10.36 |  |             | Assignment of Leases and Rents between Meadowbrook Insurance
    Group, Inc. and Star Insurance Company, dated January 1,
    2005                                                                                                                                                                                                                                 |        |  |     |  
|        | 10.37 |  |             | Form of At-Will Employment and Severance Agreement by and among
    Meadowbrook, Inc., Meadowbrook Insurance Group, Inc., and Karen
    M. Spaun, Stephen Belden, Gregory L. Wilde, Robert C. Spring,
    Archie S. McIntyre, Arthur C. Pletz, Randolph W. Fort, Angelo L.
    Williams, Susan L. Cubbin, Kenn R. Allen and John Wallis, dated
    January 1, 2005 |        |  |     |  
|        | 10.38 |  |             | Amendment to Demand Note Addendum among the Company and
    Robert S. Cubbin and Kathleen D. Cubbin, dated February 17,
    2005                                                                                                                                                                                                                                   |        |  |     |  

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##### Table of Contents



MEADOWBROOK INSURANCE GROUP, INC.


|        |       |  |             |                                                                                                                                                                                                                                                                                                                          |        |  |    |  
|------- | ----- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------ |  | -- | -
|Exhibit |       |  |             |                                                                                                                                                                                                                                                                                                                          | Filing | 
|No.     |       |  | Description |                                                                                                                                                                                                                                                                                                                          | Basis  | 
|        |       |  |             |                                                                                                                                                                                                                                                                                                                          |        | 
|        | 10.39 |  |             | Amendment to Employment Agreement between the Company and Merton
    J. Segal, dated April 1, 2005                                                                                                                                                                                                                       |        |  |    |  
|        | 14    |  |             | Compliance Program/Code of Conduct                                                                                                                                                                                                                                                                                       |        |  |    |  
|        | 21    |  |             | List of Subsidiaries                                                                                                                                                                                                                                                                                                     |        |  |    |  
|        | 23    |  |             | Consent of Independent Accountants                                                                                                                                                                                                                                                                                       |        |  |    |  
|        | 24    |  |             | Power of Attorney                                                                                                                                                                                                                                                                                                        |        |  |    |  
|        | 28.1  |  |             | Star Insurance Companys 2004 Schedule P                                                                                                                                                                                                                                                                                 |        |  | (2 | )
|        | 28.2  |  |             | Savers Property & Casualty Insurance Companys
    2004 Schedule P                                                                                                                                                                                                                                                       |        |  | (2 | )
|        | 28.3  |  |             | Williamsburg National Insurance Companys 2004
    Schedule P                                                                                                                                                                                                                                                            |        |  | (2 | )
|        | 28.4  |  |             | Ameritrust Insurance Corporations 2004 Schedule P                                                                                                                                                                                                                                                                       |        |  | (2 | )
|        | 31.1  |  |             | Certification of Robert S. Cubbin, Chief Executive Officer of
    the Corporation, pursuant to Securities Exchange Act
    Rule 13a-14(a)                                                                                                                                                                                |        |  |    |  
|        | 31.2  |  |             | Certification of Karen M. Spaun, Chief Financial Officer of the
    Corporation, pursuant to Securities Exchange Act
    Rule 13a-14(a)                                                                                                                                                                                  |        |  |    |  
|        | 32.1  |  |             | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by Robert S. Cubbin, Chief Executive Officer of
    the Corporation                                                                                                               |        |  |    |  
|        | 32.2  |  |             | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by Karen M. Spaun, Chief Financial Officer of
    the Corporation                                                                                                                 |        |  |    |  
|        | 99.1  |  |             | Rights Agreement, dated as of September 30, 1999, by and
    between Meadowbrook Insurance Group, Inc. and First Chicago
    Trust Company of New York, including the Certificate of
    Designation, the form of Rights Certificate and the Summary of
    Rights attached thereto as Exhibits A, B and C, respectively |        |  | (3 | )






| |     |                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to Form S-1 Registration
    Statement (No. 33-2626206) of Meadowbrook Insurance Group, Inc.
    declared effective November 20, 1995.
|
| | (2) | Submitted in paper format under separate cover; see Form SE
    filing.                                                                                         
|
| | (3) | Incorporated by reference to Exhibit 99.1 to the
    Companys Form 8-A filed with the Securities and
    Exchange Commission on October 12, 1999.              
|
| | (4) | Filed as Exhibit to Form 10-K for the year ending
    December 31, 1998.                                                                                        
|
| | (5) | Filed as Exhibit to Form 10-K for the year ending
    December 31, 2000.                                                                                        
|
| | (6) | Filed as Appendix to Meadowbrook Insurance Group, Inc. 2002
    Proxy Statement.                                                                                
|
| | (7) | Filed as Exhibit to Form 10-Q for the period ending
    March 31, 2002.                                                                                         
|
| | (8) | Filed as Exhibit to Amendment No. 1 to Registration
    Statement on Form S-2 (Registration No. 333-86548)
    filed on May 10, 2002.                           
|
| | (9) | Filed as Exhibit to Form 10-K for the year ending
    December 31, 2002.                                                                                        



|     |                                                                                 
|---- | --------------------------------------------------------------------------------
|(10) | Filed as Exhibit to Form 10-Q for the period ending
    September 30, 2003.     
|    
|(11) | Filed as Exhibit to Form 10-K for the year ending
    December 31, 2003         
|    
|(12) | Filed as Appendix to Meadowbrook Insurance Group, Inc. 2004
    Proxy Statement.
|    
|(13) | Filed as Exhibit to Current Report on Form 8-K filed on
    November 18, 2004.  
|    
|(14) | Filed as Exhibit to Form 10-Q for the period ending
    March 31, 2004.         
|    
|(15) | Filed as Exhibit to Form 10-Q for the period ending
    June 30, 2004.          
|    
|(16) | Filed as Exhibit to Form 10-Q for the period ending
    September 30, 2004.     

105



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##### Table of Contents



SIGNATURES






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



| |     |                     
| | --- | --------------------
| | By: | -s- Robert S. Cubbin

| |                              
| | -----------------------------
| |                              
| | Robert S. Cubbin             
| | Chief Executive Officer      
| | (Principal Executive Officer)



| |     |                   
| | --- | ------------------
| | By: | -s- Karen M. Spaun

| |                              
| | -----------------------------
| |                              
| | Karen M. Spaun               
| | Senior Vice President and    
| | Chief Financial Officer      
| | (Principal Financial Officer)





|                                         |  |                                                                                   |  |               
|---------------------------------------- |  | --------------------------------------------------------------------------------- |  | --------------
|Signature                                |  | Title                                                                             |  | Date          
|                                         |  |                                                                                   |  |               
|**Merton
    J. Segal                    |  | Chairman and Director                                                             |  | March 16, 2005
|                                        
|-s- Robert S. CubbinRobert
    S. Cubbin |  | President, Chief Executive Officer and Director (Principal
    Executive Officer) |  | March 16, 2005
|                                        
|**Joseph
    S. Dresner                  |  | Director                                                                          |  | March 16, 2005
|                                        
|**Hugh
    W. Greenberg                  |  | Director                                                                          |  | March 16, 2005
|                                        
|**Florine
    Mark                       |  | Director                                                                          |  | March 16, 2005
|                                        
|**Ralph
    Milo                         |  | Director                                                                          |  | March 16, 2005
|                                        
|**Robert
    H. Naftaly                  |  | Director                                                                          |  | March 16, 2005
|                                        
|**David
    K. Page                      |  | Director                                                                          |  | March 16, 2005
|                                        
|**Robert
    W. Sturgis                  |  | Director                                                                          |  | March 16, 2005

106



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##### Table of Contents



|                                                                    |  |          |  |               
|------------------------------------------------------------------- |  | -------- |  | --------------
|Signature                                                           |  | Title    |  | Date          
|                                                                    |  |          |  |               
|                                                                   
|**Irvin
    F. Swider, Sr.                                          |  | Director |  | March 16, 2005
|                                                                   
|**Bruce
    E. Thal                                                 |  | Director |  | March 16, 2005
|                                                                   
|**Herbert
    Tyner                                                 |  | Director |  | March 16, 2005
|                                                                   
|**By:-s- Robert S. CubbinRobert
    S. Cubbin,
    Attorney-in-fact |  |          |  |               

107