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

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934For the fiscal year ended December 31, 2008oro

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

38-2626206(State of
    Incorporation)

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

48034-6112(Address of principal executive
    offices)

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

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

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




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##### 





MEADOWBROOK
    INSURANCE GROUP, INC.
  PART I
  ITEM 1.
    BUSINESS  The
    Company
  48034-5178 (248) 358-1100).
        ProCentury
    Merger
  30-day ProCentury Merger
   2




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
        
    launching a new wholesale relationship in the Midwest;
    fulfilling a surplus lines market need for an existing
    workers compensation partner in New England;
    expanding ProCentury products into states through our existing
    admitted market capability;
    capitalizing on enhanced business development capabilities by
    having a more comprehensive risk management offering and shared
    marketing platform;
    reorganization and development of claims expertise in our
    various offices;
    generation of reinsurance cost savings due to the increased size
    and diversity of the merged companies; and
    providing a workers compensation market to select
    qualified ProCentury wholesalers.  Other
    Significant Acquisitions
  
    In April 2007, we acquired the business of U.S. Specialty
    Underwriters, Inc. (USSU). USSU is a specialty
    program manager that produces fee based income by underwriting
    targeted classes within excess workers compensation
    coverage for a select group of insurance companies.
    In November 2005, we acquired the business of
    Insurance & Benefit Consultants (IBC) of
    Sarasota, Florida. IBC is a retail and wholesale agency
    specializing in group and individual health insurance products
    and personal financial planning services.
    In August 1999, we acquired the assets of TPA Associates, Inc.,
    all the outstanding stock of TPA Insurance Agency, Inc., and
    Preferred Insurance Agency, Inc., and approximately ninety-four
    percent of the outstanding stock of PICL (collectively,
    TPA). TPA is a program-oriented risk management
    company that provides risk management services to self-insured
    clients, manages alternative risk management programs, and
    performs underwriting, policy issuance and loss control services
    for unaffiliated insurance companies. In January 2002, we
    purchased the remaining six percent minority interest of PICL.
    PICL was dissolved effective January 31, 2008.
    In July 1998, we acquired Florida Preferred Administrators, Inc.
    (Florida Preferred), a third party administrator and
    Ameritrust Insurance Corporation (Ameritrust). In
    December 2002, Ameritrust became a wholly owned subsidiary of
    Star. Florida Preferred provides a broad range of risk
    management services for Ameritrust and other third parties.
    In July 1997, we acquired Crest Financial Corporation
    (Crest), a California-based holding company, which
    formerly owned Williamsburg National Insurance Company
    (Williamsburg). Crest provides 3




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  risk management services primarily to Williamsburg. On
    December 31, 1999, Williamsburg became a wholly owned
    subsidiary of Star.  
    In July 1990, we acquired Savers Property and Casualty Insurance
    Company (Savers).  Employees
    Overview
          rent-a-captive. rent-a-captive Accounting
    and Reporting for Reinsurance of Short-Duration and
    Long-Duration Contracts.
 4




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    Objective
    and Strategy
      
    Generate consistent investment income with a low-risk,
    high-quality, primarily fixed income portfolio;
    Leverage invested assets to equity;
    Generate stable, consistent fee and commission income through
    our agency and specialty insurance operations; and
    Generate free cash flow from dividends from our Insurance
    Company Subsidiaries and non-regulated insurance administration
    services.  Operational
    Structure
  
    
    Program and Product Design
    Underwriting, Risk Selection, and Policy Issuance
    Sales, Marketing, and Public Relations to Members of Groups
    Reinsurance Placement
    Policy Administration and Statistical Reporting
    Loss Prevention and Control
    Claims Administration and Handling 5




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   
    Litigation Management
    Information Technology and Processing
    Accounting and Actuarial Functions
    General Management and Oversight of the Program
    Rate and Policy Form Filing    Company
    Segments
    
    Specialty insurance operations, which generate service fees, net
    earned premium and investment income; and
    Agency operations, which generate commission income.  Specialty
    Insurance Operations
          
    Workers Compensation
    Commercial Multiple Peril
    Commercial Automobile
    General Liability      
    Garage Keepers Liability
    Employment Practices Liability 6




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   
    Professional Liability        
    Marine
    Product Liability
    Excess Insurance and Reinsurance
    Commercial Property
    Surety  Agency
    Operations
      Description
    of Specialty Insurance Operations
  Fee-for-Service
    Specialty or 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 operational functions and oversight of the program. 7




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
       Insurance
    Company Programs:
  rent-a-captive.
      
    the unique nature of the insured business is outside the risk
    profile of standard lines carriers;
    the risk associated with an insured is higher than the risk
    anticipated by a standard lines carrier when it filed its rates
    and forms for regulatory approval, which prevents it from
    charging a premium that is thought to be appropriate for the
    heightened risk;
    many geographic regions are considered to be adverse or more
    risky markets in which to operate due to legal, regulatory or
    claims issues or because they are too remote to warrant a
    marketing effort and, as a result, agents in theses areas have a
    limited choice of admitted insurers; and
    small agent organizations who do not generate enough premium
    volume to qualify for direct relationships with standard lines
    carriers.  rent-a-captive. rent-a-captive
 8




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  rent-a-captive, rent-a-captive rent-a-captive Accounting and Reporting for
    Reinsurance of Short-Duration and Long-Duration
    Contracts.
        CAPTIVE
    RISK-SHARING STRUCTURE
  
 9




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    (1)
    
    We account for transactions with
    these risk-sharing clients as reinsurance under the provisions
    of SFAS No. 113 Accounting and Reporting for
    Reinsurance of Short-Duration and Long-Duration
    Clients.            and/or Related Party
    Disclosures
         10




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Description
    of Major Specialty Risk Management Services
    Program and Product Design.
  Underwriting Risk Selection and Policy
    Issuance.
  Claims Administration and Handling.
  Loss Prevention and Control.
  Administration of Risk-Bearing Entities. and/or rent-a-captives.
  Reinsurance Placement.
  Sales, Marketing, and Public Relations.
   11




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      Insurance
    Company Subsidiaries
  rent-a-captive.
    rent-a-captive
     12




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      Gross Written Premium

2008


%


2007


%


2006


%


2005


%


2004


%Workers Compensation

$
137,503



30.04
%

$
116,717



33.69
%

$
118,794



35.90
%

$
133,732



40.26
%

$
146,982



46.89
%Commercial Multi-Peril Liability


29,114



6.36
%


69,970



20.20
%


67,764



20.48
%


59,928



18.04
%


51,083



16.29
%Commercial Multi-Peril Property


37,519



8.20
%


30,394



8.77
%


26,591



8.04
%


26,050



7.84
%


20,632



6.58
%Other Liability


116,988



25.56
%


28,550



8.24
%


20,001



6.04
%


16,167



4.87
%


15,248



4.86
%Other Commercial Auto Liability


73,952



16.16
%


61,119



17.64
%


59,308



17.92
%


59,144



17.80
%


48,070



15.33
%All Other Lines


62,607



13.68
%


39,701



11.46
%


38,414



11.61
%


37,188



11.19
%


31,478



10.04
%Total

$
457,683



100.00
%

$
346,451



100.00
%

$
330,872



100.00
%

$
332,209



100.00
%

$
313,493



100.00
%   Net Earned Premium

2008


%


2007


%


2006


%


2005


%


2004


%Workers Compensation

$
109,312



29.57
%

$
102,256



38.13
%

$
108,085



42.40
%

$
119,423



47.78
%

$
117,914



54.97
%Commercial Multi-Peril Liability


46,326



12.53
%


50,031



18.65
%


45,192



17.73
%


38,541



15.42
%


32,018



14.93
%Commercial Multi-Peril Property


31,847



8.61
%


21,018



7.84
%


17,946



7.04
%


16,288



6.52
%


11,683



5.45
%Other Liability


74,470



20.14
%


15,571



5.81
%


10,433



4.09
%


8,072



3.23
%


6,416



2.99
%Other Commercial Auto Liability


62,306



16.85
%


53,469



19.94
%


49,341



19.36
%


45,374



18.15
%


29,274



13.65
%All Other Lines


45,460



12.30
%


25,852



9.64
%


23,923



9.38
%


22,261



8.91
%


17,188



8.01
%Total

$
369,721



100.00
%

$
268,197



100.00
%

$
254,920



100.00
%

$
249,959



100.00
%

$
214,493



100.00
%   Net Written Premium

2008


%


2007


%


2006


%


2005


%


2004


%Workers Compensation

$
120,507



32.12
%

$
105,003



37.47
%

$
104,846



39.92
%

$
117,287



45.44
%

$
122,896



52.53
%Commercial Multi-Peril Liability


24,690



6.58
%


52,815



18.85
%


48,737



18.55
%


42,157



16.33
%


32,872



14.05
%Commercial Multi-Peril Property


30,270



8.07
%


23,465



8.37
%


18,767



7.14
%


17,713



6.86
%


13,479



5.76
%Other Liability


87,760



23.39
%


18,915



6.75
%


12,384



4.71
%


8,004



3.10
%


7,568



3.23
%Other Commercial Auto Liability


64,678



17.24
%


52,798



18.84
%


52,950



20.16
%


49,122



19.03
%


37,762



16.14
%All Other Lines


47,289



12.60
%


27,215



9.71
%


24,984



9.51
%


23,851



9.24
%


19,384



8.29
%Total

$
375,194



100.00
%

$
280,211



100.00
%

$
262,668



100.00
%

$
258,134



100.00
%

$
233,961



100.00
%      13




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
              Reserves
     14




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Losses and Loss Adjustment Expenses and
    Reinsurance Recoverables Summary of Significant Accounting Policies Liability for Losses and Loss
    Adjustment Expenses Critical Accounting
    Policies Reserves Managements Discussion and Analysis
  Analysis
    of Loss and Loss Adjustment Expense Development (1)
  Years Ended December 31,1999


2000


2001


2002


2003


2004


2005


2006


2007


2008(In thousands)Reserves for losses and LAE at end of period

$
127,500


$
172,862


$
198,653


$
193,116


$
192,019


$
226,996


$
271,423


$
302,655


$
341,541


$
625,331Deconsolidation of subsidiary(1)


(1,425
)


(3,744
)


(5,572
)


(2,973
)


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

$
126,075


$
169,118


$
193,081


$
190,143


$
189,030


$
226,996


$
271,423


$
302,655


$
341,541


$
625,331Cumulative paid as of1 year later


54,928



70,952



77,038



78,023



71,427



79,056



83,271



81,779



95,3932 years later


90,416



115,669



130,816



122,180



118,729



124,685



133,809



140,3083 years later


116,001



146,548



157,663



151,720



145,279



153,780



170,2264 years later


132,995



160,673



176,172



167,288



159,220



171,9465 years later


139,939



171,992



186,847



174,778



169,9806 years later


146,997



179,010



191,936



180,4897 years later


150,514



182,954



196,4868 years later


152,544



186,1989 years later


154,220Reserves re-estimated as of end of year:1 year later


146,213



182,976



199,171



193,532



193,559



231,880



268,704



295,563



330,4162 years later


144,453



186,191



205,017



196,448



203,394



227,462



263,069



286,6473 years later


152,630



189,632



207,379



202,126



205,650



226,437



261,3194 years later


156,997



190,305



211,394



203,738



202,748



226,4925 years later


158,287



196,158



213,802



202,028



202,7166 years later


159,449



199,520



212,274



201,7867 years later


161,376



198,500



212,2928 years later


161,023



198,6709 years later


161,048Net cumulative (deficiency) redundancy:Dollars

$
(34,973
)

$
(29,552
)

$
(19,211
)

$
(11,643
)

$
(13,686
)

$
504


$
10,104


$
16,008


$
11,125Percentage


27.7
%


17.5
%


9.9
%


6.1
%


7.2
%


0.2
%


3.7
%


5.3
%


3.3
%Net reserves


126,075



169,118



193,081



190,143



189,030



226,996



271,423



302,655



341,541



625,331Ceded reserves


101,744



168,962



195,943



181,817



147,446



151,161



187,254



198,422



198,461



260,366Gross reserves


227,819



338,080



389,024



371,960



336,476



378,157



458,677



501,077



540,002



885,697Net re-estimated


161,048



198,670



212,292



201,786



202,716



226,492



261,319



286,647



330,416Ceded re-estimated


178,358



261,594



286,950



257,069



246,190



205,591



208,436



206,696



209,483Gross re-estimated


339,406



460,264



499,242



458,855



448,906



432,083



469,755



493,343



539,899Gross cumulative (deficiency) redundancy

$
(111,587
)

$
(122,184
)

$
(110,218
)

$
(86,895
)

$
(112,430
)

$
(53,926
)

$
(11,078
)

$
7,734


$
103     (1)
    
    In accordance with FIN 46(R),
    we performed an evaluation of our business relationships and
    determined our wholly owned subsidiary, American Indemnity, did
    not meet the tests for consolidation, as neither us, nor our
    subsidiary Star, are the primary beneficiaries of American
    Indemnity. Therefore, effective January 1, 2004, we
    deconsolidated American Indemnity on a prospective basis in
    accordance with the provisions of FIN 46(R). Accordingly,
    we have adjusted the reserves and development within the above
    table. The adoption of FIN 46(R) and the deconsolidation of
    American Indemnity did not have a material impact on our
    consolidated balance sheet or consolidated statement of income. 15




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##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
     2008


2007GAAP reserves for losses and LAE

$
885,697


$
540,002Reinsurance recoverables for unpaid losses


(260,366
)


(198,461
)Allowances against reinsurance recoverables*


(481
)


(833
)Statutory reserves for losses and LAE

$
624,850


$
340,708     *
    
    The GAAP allowance for reinsurance
    recoverables is reported as a Schedule F penalty or a
    non-admitted asset for the purpose of statutory accounting.      Reinsurance
  Reinsurance
  Investments
  Investments Investments Managements Discussion and
    Analysis Quantitative and
    Qualitative Disclosures about Market Risk
  Competition
    and Pricing
     16




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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
    that must be maintained;
    establishment of reserves required to be maintained for unearned
    premium, loss and loss adjustment expense, or for other purposes;
    limitations on types and amounts of investments;
    underwriting and claims settlement practices;
    restrictions on the size of risks that may be insured by a
    single company;
    licensing of insurers and agents;
    deposits of securities for the benefit of policyholders; and
    the filing of periodic reports with respect to financial
    condition and other matters.    Insurance
    Holding Company Regulation
   17




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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
    pre-notification
 18




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      Membership
    in Insolvency Funds and Associations and Mandatory
    Pools
      Restrictions
    on Dividends and Risk-Based Capital
  Regulatory Matters and Rating Issues Regulatory and
    Rating Issues Managements Discussion and Analysis
  NAIC-IRIS
    Ratios
  Regulatory and
    Rating Issues Managements
    Discussion and Analysis
  Effect of
    Federal Legislation
   19




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      SEC
    Investigation Developments
  follow-up
  Available
    Information
  www.meadowbrook.com Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov
  Corporate
    Governance Listing Standards
   20




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  ITEM 1A.
    RISK
    FACTORS  Difficulties
    in combining ProCenturys operations with ours may prevent
    us from achieving the expected benefits from the recent
    merger.
      
    perceived adverse changes in product offerings available or
    service standards, whether or not these changes do, in fact,
    occur;
    the retention of existing policyholders, general agents and
    agents of each company; and
    retaining and integrating management and other key employees of
    the combined company.    If our
    estimates of reserves for losses and loss adjustment expenses
    are not adequate, we will have to increase our reserves, which
    would result in reductions in net income, retained earnings,
    statutory surplus, liquidity, and may limit our ability to pay
    future dividends and service debt.
    
    the amounts of claims settlements and awards;
    claims development patterns;
    legislative and judicial activity;
    changes in inflation and economic conditions; and
    the accuracy and timely reporting of claim information.    If our
    financial strength ratings are reduced, we may be adversely
    impacted.
   21




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      Severe
    weather conditions and other catastrophes may result in an
    increase in the number and amount of claims
    incurred.
  Reinsurance
  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 are
    subject to credit risk with respect to the obligations of our
    reinsurers and risk-sharing partners. The inability of our
    reinsurers or risk-sharing partners to meet their obligations
    could adversely affect our profitability.
   22




---



##### 



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




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
     Our
    success depends on our ability to appropriately price the risks
    we underwrite.
    
    the availability of sufficient reliable data and our ability to
    properly analyze available data;
    the uncertainties that inherently characterize estimates and
    assumptions;
    the selection and application of appropriate rating and pricing
    techniques;
    any changes in legal standards, claim settlement practices,
    medical care expenses and restoration costs;
    changes in mandated rates or benefits set by the state
    regulators; and
    legislative actions.    The
    failure of any of the loss limitation methods we employ could
    have a material adverse effect on our results of operations and
    financial condition.
    Our
    investment results and, therefore, our financial condition may
    be impacted by changes in the business, financial condition or
    operating results of the entities in which we invest, as well as
    changes in government monetary policies, general economic
    conditions and overall capital market conditions, all of which
    impact interest rates.
   24




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      
    credit risk, which is the risk that our investments will
    decrease in value due to unfavorable changes in the financial
    prospects or a downgrade in the credit rating of an entity in
    which we have invested;
    equity price risk, which is the risk that we will incur economic
    loss due to a decline in common or preferred stock or bond
    mutual fund share prices; and
    interest rate risk, which is the risk that our investments may
    decrease in value due to changes in interest rates.      We
    could be forced to sell investments to meet our liquidity
    requirements.
    If our
    businesses do not perform well, we may be required to recognize
    an impairment of our goodwill, which could have a material
    adverse effect on our results of operations and financial
    condition.
   25




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Goodwill and Other Intangible
    Assets,
  Because
    we are heavily regulated by the states in which we operate, we
    may be limited in the way we operate.
    
    standards of solvency, including risk-based capital measurements;
    restrictions on the nature, quality and concentration of
    investments;
    restrictions on the types of terms that we can include in the
    insurance policies we offer;
    required methods of accounting;
    required reserves for unearned premiums, losses and other
    purposes;
    permissible underwriting and claims settlement
    practices; and
    assessments for the provision of funds necessary for the
    settlement of covered claims under certain insurance policies
    provided by impaired, insolvent or failed insurance companies.     26




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Our
    reliance on producers subjects us to their credit
    risk.
    Provisions
    of the Michigan Business Corporation Act, our articles of
    incorporation and other corporate governing documents and the
    insurance laws of Michigan and Missouri may discourage takeover
    attempts.
      1 3
 27




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
      Most
    states assess our Insurance Company Subsidiaries to provide
    funds for failing insurance companies and those assessments
    could be material.
    We may
    require additional capital in the future, which may not be
    available or may only be available on unfavorable
    terms.
  and/or
  Our
    status as an insurance holding company with no direct operations
    could adversely affect our ability to meet our debt obligations
    and pay shareholder dividends.
   28




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Our
    performance is dependent on the continued services and
    performance of our senior management and other key
    personnel.
      Although
    we have paid cash dividends in the past, we may not pay cash
    dividends in the future.
    We
    rely on our information technology and telecommunications
    systems to conduct our business.
    Managing
    technology initiatives and obtaining the efficiencies
    anticipated with technology implementation may present
    significant challenges.
   29




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES            ITEM 3.
    LEGAL
    PROCEEDINGS  Accounting for
    Contingencies,
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   30




---



##### 



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

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

Annual MeetingThe Annual Meeting of Shareholders
    will be held at: 
    2:00 p.m.
    May 14, 2009 Corporate Headquarters 
    26255 American Drive
    Southfield,  MI   Shareholder
    Relations and
    Form 10-K
  Form 10-K,
  (248) 204-8178
  (248) 204-8590
  Direct
    Investment Plan
    442-8134
  www.bnymellon.com/shareowner/isd
  Share
    Price and Dividend Information
    December 31, 2008

High


Low


DividendsFirst Quarter

$
9.95


$
7.16


$
0.02Second Quarter


8.60



5.20



0.02Third Quarter


8.25



5.20



0.02Fourth Quarter


7.59



3.97



0.02   31




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  December 31, 2007

High


Low


DividendsFirst Quarter

$
11.68


$
9.10



Second Quarter


12.45



9.94



Third Quarter


11.57



8.02



Fourth Quarter


10.00



8.40



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


Maximum NumberAverage


Shares Purchased


of Shares That MayTotal


Price


as Part of Publicly


Yet Be RepurchasedNumber


Paid per


Announced Plans or


Under the Plans orPeriod

of Shares


Share


Programs


ProgramsOctober 1  October 31, 2008





$








November 1  November 30, 2008


200,000


$
4.51



200,000



2,300,000December 1  December 31, 2008


100,000


$
5.07



100,000



2,200,000Total


300,000


$
4.70



300,000  32




---



##### 



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


12/31/03


12/31/04


12/31/05


12/31/06


12/31/07


12/31/08Meadowbrook Insurance Group, Inc.



100.00




117.97




138.06




233.81




222.46




154.23Russell 2000



100.00




118.33




123.72




146.44




144.15




95.44SNL Insurance $1B-$2.5B



100.00




131.59




151.94




190.73




184.93




152.28  33




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  ITEM 6.
    SELECTED
    FINANCIAL DATA  MEADOWBROOK
    INSURANCE GROUP, INC.
    SELECTED CONSOLIDATED FINANCIAL DATA
  For the Years Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share and ratio data)Income Statement Data:Gross written premiums

$
457,683


$
346,451


$
330,872


$
332,209


$
313,493Net written premiums


375,194



280,211



262,668



258,134



233,961Net earned premiums


369,721



268,197



254,920



249,959



214,493Net commissions and fees


42,904



45,988



41,172



35,916



40,535Net investment income


36,624



26,400



22,075



17,975



14,911Net realized (losses) gains


(11,422
)


150



69



167



339Total revenue


437,827



340,735



318,236



304,017



270,278Net losses and LAE


212,885



150,969



146,293



151,542



135,938Policy acquisition and other underwriting expenses


69,294



53,717



50,479



44,439



33,424Other administrative expenses


35,000



32,269



28,824



26,810



25,588Salaries and employee benefits


62,862



56,433



54,569



51,331



52,297Amortization expense


6,310



1,930



590



373



376Interest expense


7,681



6,030



5,976



3,856



2,281Income before income taxes and equity earnings of affiliates


43,795



39,387



31,505



25,666



20,374Equity earnings of affiliates


269



331



128



1



39Net income


27,397



27,992



22,034



17,910



14,061Earnings per share  Diluted

$
0.61


$
0.85


$
0.75


$
0.60


$
0.48Balance Sheet Data:Total investments and cash and cash equivalents

$
1,085,648


$
651,601


$
527,600


$
460,233


$
402,156Total assets


1,813,916



1,113,966



969,000



901,344



801,696Loss and LAE reserves


885,697



540,002



501,077



458,677



378,157Debt


60,250







7,000



7,000



12,144Debentures


80,930



55,930



55,930



55,930



35,310Shareholders equity


438,170



301,894



201,693



177,365



167,510Book value per share

$
7.64


$
8.16


$
6.93


$
6.19


$
5.76Other Data:GAAP ratios (insurance companies only):Net loss and LAE ratio(1)


62.0
%


61.2
%


62.3
%


65.2
%


67.9
%Expense ratio(1)


31.3
%


34.2
%


34.5
%


33.5
%


33.5
%Combined ratio


93.3
%


95.4
%


96.8
%


98.7
%


101.4
%     (1)
    
    Both the GAAP loss and loss adjustment expense ratio and the
    GAAP expense ratio are calculated based upon unconsolidated
    insurance company operations. The following table sets forth the
    intercompany fees, which are eliminated upon consolidation. 34




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
   Unconsolidated
    GAAP data  Ratio Calculation Table:
  For the Years Ended December 31,2008


2007


2006


2005


2004Net earned premiums

$
369,721


$
268,197


$
254,920


$
249,959


$
214,493Consolidated net losses and LAE

$
212,885


$
150,969


$
146,293


$
151,542


$
135,938Intercompany claim fees


16,296



13,058



12,553



11,523



9,691Unconsolidated net losses and LAE

$
229,181


$
164,027


$
158,846


$
163,065


$
145,629GAAP net loss and LAE ratio


62.0
%


61.2
%


62.3
%


65.2
%


67.9
%Consolidated policy acquisition and other underwriting expenses


69,349


$
53,717


$
50,479


$
44,439


$
33,424Intercompany administrative and other underwriting fees


46,371



37,890



37,442



39,231



38,359Unconsolidated policy acquisition and other underwriting expenses

$
115,720


$
91,607


$
87,921


$
83,670


$
71,783GAAP expense ratio


31.3
%


34.2
%


34.5
%


33.5
%


33.5
%GAAP combined ratio


93.3
%


95.4
%


96.8
%


98.7
%


101.4
%        35




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  This
    Form 10-K
    may provide information including certain statements which
    constitute forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. These include statements regarding the intent, belief,
    or current expectations of management, including, but not
    limited to, those statements that use the words
    believes, expects,
    anticipates, estimates, or similar
    expressions. You are cautioned that any such forward-looking
    statements are not guarantees of future performance and involve
    a number of risks and uncertainties, and results could differ
    materially from those indicated by such forward-looking
    statements. Among the important factors that could cause actual
    results to differ materially from those indicated by such
    forward-looking statements are: the frequency and severity of
    claims; uncertainties inherent in reserve estimates;
    catastrophic events; a change in the demand for, pricing of,
    availability or collectibility of reinsurance; increased rate
    pressure on premiums; ability to obtain rate increases in
    current market conditions; investment rate of return; changes in
    and adherence to insurance regulation; actions taken by
    regulators, rating agencies or lenders; attainment of certain
    processing efficiencies; changing rates of inflation; general
    economic conditions and other risks identified in our reports
    and registration statements filed with the Securities and
    Exchange Commission. We are not under any obligation to (and
    expressly disclaim any such obligation to) update or alter our
    forward-looking statements whether as a result of new
    information, future events or otherwise.
  Business
    Overview
    30-day
   36




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
      Specialty
    Insurance Operations
        rent-a-captive. rent-a-captive rent-a-captive, rent-a-captive rent-a-captive Accounting and Reporting for
    Reinsurance of Short-Duration and Long-Duration
    Contracts.
 37




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
      Agency
    Operations
      For the Years Ended December 31,2008


2007


2006RevenuesNet earned premiums

$
369,721


$
268,197


$
254,920Management fees


21,168



23,963



18,714Claims fees


8,879



9,025



8,776Loss control fees


2,069



2,151



2,216Reinsurance placement


728



929



735Investment income


35,888



25,487



21,115Net realized (losses) gains


(11,422
)


150



69Specialty insurance operations


427,031



329,902



306,545Agency operations


11,064



11,316



12,285Holding Company interest income earned


736



913



960Intersegment revenue


(1,004
)


(1,396
)


(1,554
)Consolidated revenue

$
437,827


$
340,735


$
318,236   Critical
    Accounting Policies
  General
   38




---



##### 



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


IBNR


TotalDirect

$
251,362


$
501,500


$
752,862Assumed-Directly Managed(1)


41,228



59,313



100,541Assumed-Residual Markets(2)


9,893



14,091



23,984Assumed-Retroceded


1,288



300



1,588Assumed-Other


4,384



2,338



6,722Gross


308,155



577,542



885,697Less Ceded


95,016



165,350



260,366Net

$
213,139


$
412,192


$
625,331     (1)
    
    Directly managed represents
    business managed and processed by our underwriting, claims, and
    loss control departments, utilizing our internal systems and
    related controls.(2)
    
    Residual markets represent
    mandatory pooled workers compensation business allocated
    to individual insurance company writers based on the
    insurers market share in a given state.     39




---



##### 



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


Net IBNR


TotalWorkers Compensation

$
61,383


$
86,430


$
147,813Residual Markets


9,893



14,091



23,984Commercial Multiple Peril/General Liability


82,317



234,871



317,188Commercial Automobile


36,980



55,808



92,788Other


22,566



20,992



43,558Total

$
213,139


$
412,192


$
625,331   Claim
    Reserving Process and Methodology
  case-by-case
              40




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
         Paid Development Method.
    Incurred Development Method.
    Paid Bornhuetter-Ferguson Method.
   41




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Reported Bornhuetter-Ferguson Method.
    Initial Expected Loss Method.
    Paid Roll-forward Method.
  Incurred Roll-forward Method.
    Construction Defect Method.
     42




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
            Variability
    of Claim Reserve Estimates
     43




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Analysis of
    Loss and Loss Adjustment Expense Development
    Pre-tax Impact on Earnings from a Variance in Future Loss
    Payments and Case Reserves as of December 31, 2008(in thousands)Line of Business

Minimum Reserve Range


Maximum Reserve RangeWorkers Compensation (including Residual Markets)

$
(11,286
)


(6.6
)%

$
6,007



3.5
%Commercial Multiple Peril/General Liability


(35,199
)


(11.1
)%


25,640



8.1
%Commercial Automobile


(5,888
)


(6.3
)%


4,346



4.7
%Other


(2,971
)


(6.8
)%


2,335



5.4
%Total

$
(55,344
)


(8.9
)%

$
38,328



6.1
%  44




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
            Reinsurance
    Recoverables
    rent-a-captive,
 45




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Valuation
    of Investments, Other Than Temporary Impairments of Securities,
    and Unrealized Losses on Investments
      99-20, Recognition of Interest Income and Impairment on
    Purchased and Retained Beneficial Interests in Securitized
    Financial Assets,
     46




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Revenue
    Recognition
                Legal
    Contingencies
  Accounting for
    Contingencies,
 47




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
    Goodwill
  Goodwill and Other Intangible Assets, Goodwill and Other Intangible Assets
  Deferred
    Policy Acquisition Costs
    Federal
    Income Taxes
      Results
    of Operations
  Executive
    Overview
   48




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          ProCentury
    Merger
  30-day
     49




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
      
    launching a new wholesale relationship in the Midwest;
    fulfilling a surplus lines market need for an existing
    workers compensation partner in New England;
    expanding ProCentury products into states through our existing
    admitted market capability;
    capitalizing on enhanced business development capabilities by
    having a more comprehensive risk management offering and shared
    marketing platform;
    reorganization and development of claims expertise in our
    various offices;
    generation of reinsurance cost savings due to the increased size
    and diversity of the merged companies; and
    providing a workers compensation market to select
    qualified ProCentury wholesalers.  Other
    Items
      2008
    compared to 2007:
     50




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        2007
    compared to 2006:
     51




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Specialty
    Insurance Operations
    For the Years Ended December 31,2008


2007


2006Revenue:Net earned premiums

$
369,721


$
268,197


$
254,920Management fees


21,168



23,963



18,714Claims fees


8,879



9,025



8,776Loss control fees


2,069



2,151



2,216Reinsurance placement


728



929



735Investment income


35,888



25,487



21,115Net realized (losses) gains


(11,422
)


150



69Total revenue

$
427,031


$
329,902


$
306,545Pre-tax income:Specialty insurance operations

$
60,897


$
47,898


$
38,292   2008
    compared to 2007:
           52




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          2007
    compared to 2006:
       53




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
              Agency
    Operations
    For the Years Ended December 31,2008


2007


2006Net commission

$
11,064


$
11,316


$
12,285Pre-tax income(1)

$
1,142


$
2,087


$
2,609     (1)
    
    Our agency operations include an
    allocation of corporate overhead, which includes expenses
    associated with accounting, information services, legal, and
    other corporate services. The corporate overhead allocation
    excludes those expenses specific to the holding company. For the
    years ended December 31, 2008, 2007, and 2006, the
    allocation of corporate overhead to the agency operations
    segment was $2.8 million, $2.8 million, and
    $3.3 million, respectively. 54




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   2008
    compared to 2007:
      2007
    compared to 2006:
      Other
    Items
  Reserves
    Minimum Reserve


Maximum ReserveLine of Business

Range


Range


Selected ReservesWorkers Compensation(1)

$
160,511


$
177,804


$
171,797Commercial Multiple Peril/General Liability


281,989



342,828



317,188Commercial Automobile


86,900



97,134



92,788Other


40,587



45,893



43,558Total Net Reserves

$
569,987


$
663,659


$
625,331     (1)
    
    Includes residual markets   55




---



##### 



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


Reserves at


Total


Incurred Losses(1)


Paid Losses(1)


Reserves atDecember 31,


August 1,


Beginning


Current


Prior


Total


Current


Prior


Total


December 31,Line of Business

2007


2008


Reserves


Year


Years


Incurred


Year


Years


Paid


2008Workers Compensation

$
141,359


$
3,259


$
144,618


$
62,753


$
(12,710
)

$
50,043


$
8,877


$
37,971


$
46,848


$
147,813Residual Markets


25,428







25,428



7,749



(2,739
)


5,010



2,319



4,135



6,454



23,984Commercial Multiple Peril / General Liability


87,812



203,613



291,425



64,555



7,293



71,848



3,325



42,760



46,085



317,188Commercial Automobile


69,426



17,234



86,660



52,660



(5,166
)


47,494



14,148



27,218



41,366



92,788Other


17,516



23,633



41,149



41,940



(3,450
)


38,490



28,245



7,836



36,081



43,558Net Reserves


341,541



247,739



589,280


$
229,657


$
(16,772
)

$
212,885


$
56,914


$
119,920


$
176,834



625,331Reinsurance Recoverable


198,461



41,793



240,254



























260,366Consolidated

$
540,002


$
289,532


$
829,534


























$
885,697   56




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Re-estimated


DevelopmentAdditional





Reserves at


as aReserves at


Reserves


Total


December 31,


Percentage ofDecember 31,


at August 1,


Beginning


2008 on


Prior YearLine of Business

2007


2008


Reserves


Prior Years(1)


ReservesWorkers Compensation

$
141,359


$
3,259


$
144,618


$
131,908



(8.8
)%Commercial Multiple Peril/General Liability


87,812



203,613



291,425



298,718



2.5
%Commercial Automobile


69,426



17,234



86,660



81,494



(6.0
)%Other


17,516



23,633



41,149



37,699



(8.4
)%Sub-total


316,113



247,739



563,852



549,819



(2.5
)%Residual Markets


25,428







25,428



22,689



(10.8
)%Total Net Reserves

$
341,541


$
247,739


$
589,280


$
572,508



(2.8
)%     (1)
    
    Paid and incurred loss and LAE
    activity includes that related to ProCentury of
    $247.7 million of net loss and LAE reserves added at
    August 1, 2008. Therefore, incurred and paid loss and LAE
    activity on these reserves do not constitute a full calendar
    year.  Workers
    Compensation Excluding Residual Markets
    Commercial
    Multiple Peril and General Liability
    Commercial
    Automobile
   57




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Other
    Residual
    Markets
    Salaries
    and Employee Benefits
      Variable Compensation
  Other
    Administrative Expenses
     58




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
      Amortization
    Expense
    Interest
    Expense
  Liquidity and Capital Resources
    Income
    Taxes
      Other
    Than Temporary Impairments
   59




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Investments
  Liquidity
    and Capital Resources
       60




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
        Other
    Items
  Debentures
    InterestYear of



Year







Rate at

PrincipalIssuance

Description

Callable


Year Due


Interest Rate Terms

12/31/08(1)

Amount2003

Junior subordinated debentures


2008



2033


Three-month LIBOR, plus 4.05%


5.51
%

$
10,3102004

Senior debentures


2009



2034


Three-month LIBOR, plus 4.00%


6.15
%


13,0002004

Senior debentures


2009



2034


Three-month LIBOR, plus 4.20%


6.35
%


12,0002005

Junior subordinated debentures


2010



2035


Three-month LIBOR, plus 3.58%


5.58
%


20,620Junior subordinated debentures(2)


2007



2032


Three-month LIBOR, plus 4.00%


6.21
%


15,000Junior subordinated debentures(2)


2008



2033


Three-month LIBOR, plus 4.10%


6.25
%


10,000Total


$
80,930     (1)
    
    The underlying three-month LIBOR
    rate varies as a result of the interest rate reset dates used in
    determining the three-month LIBOR rate, which varies for each
    long-term debt item each quarter.(2)
    
    Represents the junior subordinated
    debentures acquired in conjunction with the Merger.     61




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
      Interest
    Rate Swaps
  Accounting for Derivative
    Instruments and Hedging Activities,
    Fixed Amount atCounterparty Interest




December 31,Effective Date

Expiration Date

Debt Instrument

Rate Terms

Fixed Rate


200810/06/2005

05/24/2009

Senior debentures

Three-month LIBOR, plus 4.20%


8.925
%

$
5,00010/06/2005

09/16/2010

Junior subordinated debentures

Three-month LIBOR, plus 3.58%


8.340
%


20,00004/23/2008

05/24/2011

Senior debentures

Three-month LIBOR, plus 4.20%


7.720
%


7,00004/23/2008

06/30/2013

Junior subordinated debentures

Three-month LIBOR, plus 4.05%


8.020
%


10,00004/29/2008

04/29/2013

Senior debentures

Three-month LIBOR, plus 4.00%


7.940
%


13,00007/31/2008

07/31/2013

Term loan(1)

Three-month LIBOR


3.950
%


60,250Junior subordinated08/15/2008

08/15/2013

debentures(2)

Three-month LIBOR


3.780
%


10,000Junior subordinated09/04/2008

09/04/2013

debentures(2)

Three-month LIBOR


3.790
%


15,000     (1)
    
    Relates to our term loan, which has
    an effective date of July 31, 2008 and an expiration date
    of July 31, 2013. We are required to make fixed rate
    interest payments on the current balance of the term loan,
    amortizing in accordance with the term loan amortization
    schedule. We fixed only the variable interest portion of the
    loan. The actual interest payments associated with the term loan
    also include an additional rate of 2.00% in accordance with the
    credit agreement, as of December 31, 2008.(2)
    
    Relates to the debentures acquired
    from the ProCentury merger. We fixed only the variable interest
    portion of the debt. The actual interest payments associated
    with the debentures also include an additional rate of 4.10% and
    4.00% on the $10.0 million and $15.0 million
    debentures, respectively. 62




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
       Credit
    Facilities
        Investment
    Portfolio
      Shareholders
    Equity
   63




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
          ProCentury
    Merger
  30-day
      USSU
    Acquisition
   64




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Adjusted
    Expense Ratio
    For the Years Ended December 31,2008


2007


2006Net earned premiums

$
369,721


$
268,197


$
254,920Less:  Consolidated net loss and LAE


212,885



150,969



146,293Intercompany claim fees


16,296



13,058



12,553Unconsolidated net loss and LAE


229,181



164,027



158,846Consolidated policy acquisition and other underwriting expenses


69,349



53,717



50,479Intercompany administrative and other underwriting fees


46,371



37,890



37,442Unconsolidated policy acquisition and other underwriting expenses


115,720



91,607



87,921Underwriting income

$
24,820


$
12,563


$
8,153GAAP combined ratio as reported


93.3
%


95.4
%


96.8
%Specialty risk management operations pre-tax income

$
60,897


$
47,898


$
38,292Less:  Underwriting income


24,820



12,563



8,153Net investment income and realized (losses) gains


25,202



26,550



22,144Fee-based operations pre-tax income


10,875



8,785



7,995Agency operations pre-tax income


1,142



2,087



2,609Total fee-for-service pre-tax income

$
12,017


$
10,872


$
10,604GAAP expense ratio as reported


31.3
%


34.2
%


34.5
%Adjustment to include pre-tax income from total fee-for-service
    income(1)


3.3
%


4.1
%


4.2
%GAAP expense ratio as adjusted


28.0
%


30.1
%


30.3
%GAAP loss and LAE ratio as reported


62.0
%


61.2
%


62.3
%GAAP combined ratio as adjusted


90.0
%


91.3
%


92.6
% 65




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  For the Years Ended December 31,2008


2007


2006Reconciliation of consolidated pre-tax income:Specialty risk management operations pre-tax income:Fee-based operations pre-tax income

$
10,875


$
8,785


$
7,995Underwriting income


24,820



12,563



8,153Net investment income and realized (losses) gains


25,202



26,550



22,144Total specialty risk management operations pre-tax income


60,897



47,898



38,292Agency operations pre-tax income


1,142



2,087



2,609Less:  Holding company expenses


4,253



2,638



2,830Interest expense


7,681



6,030



5,976Amortization expense


6,310



1,930



590Consolidated pre-tax income

$
43,795


$
39,387


$
31,505     (1)
    
    Adjustment to include pre-tax income from total fee-for-service
    income is calculated by dividing total fee-for-service income by
    net earned premiums.  Regulatory
     66




---



##### 



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


One to


Three to


More ThanTotal


One Year


Three Years


Five Years


Five YearsNon-regulated companies:Term Loan

$
60,250


$
10,375


$
26,000


$
23,875


$
Lines of Credit(1)


















Note Payable, non-interest bearing


2,150



2,150











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


13,000















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


12,000















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


20,620















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


10,310















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


15,000















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


10,000















10,000Total Debt


143,330



12,525



26,000



23,875



80,930Interest on Term Loan(4)


9,440



3,412



4,721



1,307



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


7,224



1,032



2,064



2,064



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


6,906



987



1,973



1,973



1,973Junior subordinated debentures due 2035; issued
    $20.6 million


11,918



1,703



3,405



3,405



3,405Junior subordinated debentures due 2033; issued
    $10.3 million


5,733



819



1,638



1,638



1,638Junior subordinated debentures due 2032; issued
    $15.0 million(3)


8,180



1,169



2,337



2,337



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


5,516



788



1,576



1,576



1,576Total Interest Payable


54,917



9,910



17,714



14,300



12,993Operating lease obligations(5)


16,651



4,031



7,287



5,113



220Regulated companies:Losses and loss adjustment expenses(6)


885,697



249,990



330,398



156,740



148,569Total

$
1,100,595


$
276,456


$
381,399


$
200,028


$
242,712     (1)
    
    Relates to our revolving line of credit, which currently does
    not have an outstanding balance. 67




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
   (2)
    
    Five year call feature associated with debentures, estimated
    seven year repayment. For a description of our debentures and
    related interest rate terms, as well as actual rates in
    accordance with our interest rate swap transactions, refer to
    Note 8  Debtand Note 9 
    Derivative Instruments.(3)
    
    Relates to the junior subordinated debentures acquired in
    conjunction with the ProCentury merger.(4)
    
    For a description of our term loan and its interest rate terms,
    as well as actual rates in accordance with our interest rate
    swap transaction, refer to Note 8  Debtand Note 9  Derivative Instruments.(5)
    
    Consists of rental obligations under real estate leases related
    to branch offices. In addition, includes amounts related to
    equipment leases.(6)
    
    The loss and loss adjustment expense payments do not have
    contractual maturity dates and the exact timing of payments
    cannot be predicted with certainty. However, based upon
    historical payment patterns, we have included an estimate of our
    gross losses and loss adjustment expenses. In addition, we have
    anticipated cash receipts on reinsurance recoverables on unpaid
    losses and loss adjustment expenses of $260.4 million, of
    which we estimate that these payments to be paid for losses and
    loss adjustment expenses for the periods less than one year, one
    to three years, three to five years, and more than five years to
    be $55.6 million, $92.2 million, $65.3 million,
    and $47.3 million, respectively, resulting in net losses
    and loss adjustment expenses of $194.4 million,
    $238.2 million, $91.4 million, and
    $101.3 million, respectively.    Variable
    Compensation
      2007-2009 2009-2011
 68




---



##### 



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

Usual Range

ValueCompany: WilliamsburgGross Agents Balances to Policyholders Surplus

Under 40%

40%(1)Company: ProCentury Insurance CompanyAdjusted Liabilities to Liquid Assets

Under 105%

106%(2)Company: Century Surety CompanyGross Change in Policyholders Surplus

Over -10% or Under 50%

(20)%(3)Change in Adjusted Policyholders Surplus

Over -10% or Under 25%

(20)%(3)     (1)
    
    The Gross Agents Balances to Policyholders Surplus
    on Williamsburg was impacted by our Intercompany Reinsurance
    Pooling Agreement. Williamsburgs assumed premium
    receivable increased 69




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  $6.3 million as a result of the intercompany pooling.
    Excluding the intercompany pooling, this ratio would have been
    within the usual range for 2008.(2)
    
    Adjusted Liabilities to Liquid Assets on ProCentury Insurance
    Company is outside the usual range primarily from the result of
    a reinsurance pooling agreement whereby its parent, Century
    Surety Company, has withheld $30.4 million in accordance
    with a provision included in the agreement for funds held to
    secure unearned premiums and liabilities for loss and loss
    adjustment expenses.(3)
    
    Both the Gross Change in Policyholders Surplus and Change
    in Adjusted Policyholders Surplus are outside the usual
    range for Century Surety Company primarily as a result of paying
    its parent the maximum ordinary dividend of $27.4 million
    in 2008.  Reinsurance
    Considerations
        Reinsurance Premium Ceded


Reinsurance Recoverable


A.M. BestReinsurer

December 31, 2008


December 31, 2008


Rating(In thousands)


(In thousands)Munich Reinsurance America

$
10,004


$
20,152



A+Motors Insurance Corporation


9,482



19,694



A−Lloyds Syndicate Number 2003


7,535



9,157



ASwiss Reinsurance Corporation


6,834



12,014



AAspen Insurance UK Ltd.


4,636



16,457



A   rent-a-captive
    Off-Balance
    Sheet Arrangements
  Regulation S-K.
 70




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Convertible
    Note
    Recent
    Accounting Pronouncements
  Fair Value
    Measurements.
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115. instrument-by-instrument
  Business Combinations.
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities. Accounting for
 71




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Derivative Instruments and Hedging Activities.
  FAS 142-3, Determination of the Useful Life of Intangible
    Assets. FAS 142-3 Goodwill and Other Intangible
    Assets.
  The Hierarchy of Generally Accepted Accounting
    Principles. The
    Meaning of Present Fairly in Conformity With Generally Accepted
    Accounting Principles.
  Accounting for Financial Guarantee Insurance
    Contracts-an interpretation of FASB Statement
    No. 60. Accounting and Reporting by Insurance
    Enterprises. Accounting for
    Contingencies.
  No. EITF 99-20-1, Amendments to the Impairment and Interest Income
    Measurement Guidance of EITF Issue
    No. 99-20 EITF 99-20-1), EITF 99-20-1 EITF 99-20, Recognition of Interest Income and Impairment of
    Purchased Beneficial Interests and Beneficial Interests That
    Continue to Be Held by a Transferor in Securitized Financial
    Assets (EITF 99-20). EITF 99-20-1 EITF 99-20-1
 72




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  MANAGEMENTS
    DISCUSSION AND ANALYSIS  continued
  Accounting for Certain Investments in Debt and Equity
    Securities. EITF 99-20-1, EITF 99-20-1
  Related
    Party Transactions
  Related Party Transaction
 73




---



##### 



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


Rates Unchanged


Rates Up 100bpsFair Value

$
1,027,299


$
984,169


$
931,577Yield to Maturity or Call


3.97
%


4.91
%


5.86
%Effective Duration


4.23



4.81



5.12        74




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
    Accounting for Derivative
    Instruments and Hedging Activities, Derivative Instruments
    Item 8.
    Financial
    Statements and Supplementary Data  Quarterly Financial Data (Unaudited)
  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
 75




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
        Form 10-K
  Changes
    in Internal Control over Financial Reporting
    Item 9B.
    Other
    Information    PART III
    Item 10.
    Directors,
    Executive Officers, and Corporate Governance  Information about the Nominees, the Incumbent
    Directors and Other Executive Officers, Corporate
    Governance, Code of Conduct, Report of
    the Audit Committee, and Section 16(a)
    Beneficial Ownership Reporting Compliance
 76




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Item 11.
    Executive
    Compensation  Compensation of Executive Officers,
    Director Compensation, Report of the
    Compensation Committee of the Board on Executive
    Compensation, Compensation Committee
    Interlocks and Insider Participation
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Security Ownership of Certain Beneficial Owners
    and Management
  Equity Compensation Plan InformationNumber of SecuritiesRemaining Available forNumber of Securities to


Weighted-Average


Future Issuance Underbe Issued Upon Exercise


Exercise Price of


Equity Compensationof Outstanding Options,


Outstanding Options,


Plans (ExcludingWarrants and Rights


Warrants and Rights


Securities in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders


64,750


$
16.03



779,601Equity compensation plans not approved by security holders










Total


64,750


$
16.03



779,601   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  Certain Relationships and Related Party
    Transactions Independence
    Determination
  Item 14.
    Principal
    Accountant Fees and Services  The Second Proposal on Which You are Voting on
    Ratification of Appointment of Independent Registered Public
    Accounting Firm
 77




---



##### 



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


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


79Report of Independent Registered Public
    Accounting Firm on Internal Control over Financial Reporting


80Consolidated Balance Sheet 
    December 31, 2008 and 2007


81Consolidated Statement of Income  For
    Years Ended December 31, 2008, 2007, and 2006


82Consolidated Statement of Comprehensive
    Income  For Years Ended December 31, 2008, 2007,
    and 2006


83Consolidated Statement of Shareholders
    Equity  For Years Ended December 31, 2008, 2007,
    and 2006


84Consolidated Statement of Cash Flows 
    For Years Ended December 31, 2008, 2007, and 2006


85Notes to Consolidated Financial Statements


86-1252.


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


126Schedule II Condensed Financial Information
    of Registrant


127-130Schedule III Supplementary Insurance
    Information


131-133Schedule IV Reinsurance


134Schedule V Valuation and Qualifying
    accounts


135Schedule VI Supplemental Information
    Concerning Property and Casualty Insurance Operations


1363.


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   78




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board
    of Directors and Shareholders of
    Meadowbrook Insurance Group, Inc.:
         /s/ Ernst
&
Young LLP
    79




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                  /s/ Ernst
&
Young LLP
     80




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    BALANCE SHEET
  December 31,2008


2007(In thousands,except share data)ASSETSInvestmentsDebt securities available for sale, at fair value (amortized
    cost of $977,613 and $604,829 in 2008 and 2007, respectively)

$
986,483


$
610,756Equity securities available for sale, at fair value (cost of
    $27,660 and $0 in 2008 and 2007, respectively)


22,577



Cash and cash equivalents


76,588



40,845Accrued investment income


10,441



6,473Premiums and agent balances receivable (net of allowance of
    $2,945 and $2,747 in 2008 and 2007, respectively)


117,675



87,341Reinsurance recoverable on:Paid losses


8,337



1,053Unpaid losses


260,366



198,461Prepaid reinsurance premiums


31,885



17,763Deferred policy acquisition costs


56,454



26,926Deferred income taxes, net


22,718



14,936Goodwill


119,028



43,497Other intangible assets


46,951



17,078Other assets


54,413



48,837Total assets

$
1,813,916


$
1,113,966LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesLosses and loss adjustment expenses

$
885,697


$
540,002Unearned premiums


282,086



153,927Debt


60,250



Debentures


80,930



55,930Accounts payable and accrued expenses


27,839



22,604Reinsurance funds held and balances payable


27,793



16,416Payable to insurance companies


3,221



6,231Other liabilities


7,930



16,962Total liabilities


1,375,746



812,072Shareholders EquityCommon stock, $0.01 stated value; authorized
    75,000,000 shares; 57,341,989 and 36,996,287 shares
    issued and outstanding


573



370Additional paid-in capital


314,641



194,621Retained earnings


127,157



104,274Note receivable from officer


(852
)


(870
)Accumulated other comprehensive (loss) income


(3,349
)


3,499Total shareholders equity


438,170



301,894Total liabilities and shareholders equity

$
1,813,916


$
1,113,966    81




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF INCOME
  For the Years Ended December 31,2008


2007


2006(In thousands, except share and per share data)RevenuesPremiums earnedGross

$
455,782


$
337,099


$
327,287Ceded


(86,061
)


(68,902
)


(72,367
)Net earned premiums


369,721



268,197



254,920Net commissions and fees


42,904



45,988



41,172Net investment income


36,624



26,400



22,075Net realized (losses) gains


(11,422
)


150



69Total revenues


437,827



340,735



318,236ExpensesLosses and loss adjustment expenses


282,822



191,885



212,383Reinsurance recoveries


(69,937
)


(40,916
)


(66,090
)Net losses and loss adjustment expenses


212,885



150,969



146,293Salaries and employee benefits


62,862



56,433



54,569Policy acquisition and other underwriting expenses


69,294



53,717



50,479Other administrative expenses


35,000



32,269



28,824Amortization expense


6,310



1,930



590Interest expense


7,681



6,030



5,976Total expenses


394,032



301,348



286,731Income before taxes and equity earnings


43,795



39,387



31,505Federal and state income tax expense


16,667



11,726



9,599Equity earnings of affiliates


269



331



128Net income

$
27,397


$
27,992


$
22,034Earnings Per ShareBasic

$
0.61


$
0.85


$
0.76Diluted

$
0.61


$
0.85


$
0.75Weighted average number of common sharesBasic


44,810,944



33,007,200



28,963,228Diluted


44,995,712



33,101,965



29,566,141    82




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF COMPREHENSIVE INCOME
  For the Years Ended December 31,2008


2007


2006(In thousands)Net income

$
27,397


$
27,992


$
22,034Other comprehensive income, net of tax:Unrealized (losses) gains on securities


(12,960
)


4,810



152Net deferred derivative (loss) gain  hedging activity


(5,457
)


(484
)


121Less: reclassification adjustment for investment losses included
    in net income


11,569



10



20Other comprehensive (loss) income


(6,848
)


4,336



293Comprehensive income

$
20,549


$
32,328


$
22,327    83




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF SHAREHOLDERS EQUITY
  For the Years Ended December 31, 2008, 2007, and 2006AccumulatedOtherAdditional





Note


Comprehensive


TotalCommon


Paid-In


Retained


Receivable


Income


ShareholdersStock


Capital


Earnings


from Officer


(Loss)


Equity(In thousands)Balances January 1, 2006

$
287


$
124,819


$
54,248


$
(859
)

$
(1,130
)

$
177,365Unrealized appreciation on available for sale securities


















172



172Net deferred derivative gain  hedging activity


















121



121Long term incentive plan; stock award






897















897Stock-based employee compensation






121















121Issuance of 791,038 shares of common stock


8



4,153















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


(4
)


(3,162
)














(3,166
)Note receivable from an officer














(12
)






(12
)Net income










22,034











22,034Balances December 31, 2006


291



126,828



76,282



(871
)


(837
)


201,693Unrealized appreciation on available for sale securities


















4,820



4,820Net deferred derivative loss  hedging activity


















(484
)


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






772















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


4



(1,845
)














(1,841
)Stock-based employee compensation






2















2Issuance of 244,574 shares of common stock


3



1,373















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


(1
)


(1,020
)














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


64



58,520















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


9



9,991















10,000Note receivable from an officer














1







1Net income










27,992











27,992Balances December 31, 2007


370



194,621



104,274



(870
)


3,499



301,894Unrealized depreciation on available for sale securities


















(1,391
)


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


















(5,457
)


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










(3,797
)










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






1,902















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






149















148Retirement of 7,000 shares of common stock






(65
)














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


(8
)


(4,217
)


(717
)










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


211



122,514















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






(263
)














(263
)Note receivable from an officer














18







18Net income










27,397











27,397Balances December 31, 2008

$
573


$
314,641


$
127,157


$
(852
)

$
(3,349
)

$
438,170    84




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  CONSOLIDATED
    STATEMENT OF CASH FLOWS
  For the Years Ended December 31,2008


2007


2006(In thousands)Cash Flows From Operating ActivitiesNet income

$
27,397


$
27,992


$
22,034Adjustments to reconcile net income to net cash provided by
    operating activities:Amortization of other intangible assets


6,310



1,930



590Amortization of deferred debenture issuance costs


496



353



236Depreciation of furniture, equipment, and building


3,953



3,147



2,553Net accretion of discount and premiums on bonds


3,080



2,707



2,646Loss on investments


11,569



16



30Gain on sale of fixed assets


(88
)


(88
)


(88
)Stock-based employee compensation






2



121Incremental tax benefits from stock options exercised


(80
)


(728
)


(1,532
)Long term incentive plan expense


817



772



897Deferred income tax expense


2,742



(1,538
)


741Changes in operating assets and liabilities:Decrease (increase) in:Premiums and agent balances receivable


6,162



2,111



(771
)Reinsurance recoverable on paid and unpaid losses


(23,667
)


3,166



(98
)Prepaid reinsurance premiums


3,572



2,662



4,162Deferred policy acquisition costs


(2,092
)


976



(1,531
)Other assets


6,848



13



(1,044
)Increase (decrease) in:Losses and loss adjustment expenses


56,163



38,925



42,400Unearned premiums


1,901



9,352



3,585Payable to insurance companies


(3,009
)


789



(1,242
)Reinsurance funds held and balances payable


(2,533
)


1,292



(116
)Other liabilities


1,376



(5,244
)


718Total adjustments


73,520



60,615



52,257Net cash provided by operating activities


100,917



88,607



74,291Cash Flows From Investing ActivitiesPurchase of debt securities available for sale


(171,750
)


(393,676
)


(201,920
)Proceeds from sale of equity securities available for sale


79







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


168,582



272,337



116,978Capital expenditures


(3,007
)


(3,109
)


(4,850
)Purchase of books of business


(2,454
)


(3,344
)


(834
)Acquisition of U.S. Specialty Underwriters, Inc.(1)


(20,971
)


(12,644
)


Merger with ProCentury, net of cash acquired


(82,039
)






Loan receivable


(1,656
)


(310
)


(202
)Net cash (withheld) deposited in funds held


(3,055
)


344



529Net cash used in investing activities


(116,271
)


(140,402
)


(90,299
)Cash Flows From Financing ActivitiesProceeds from lines of credit


73,000



19,025



14,078Payment of lines of credit


(12,750
)


(26,025
)


(14,078
)Book overdrafts


(384
)


(39
)


142Dividend paid on common stock


(3,797
)






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






(1,841
)


Stock options exercised


4



(374
)


(538
)Share repurchases of common stock


(4,942
)






Incremental tax benefits from stock options exercised


80



728



1,532Net proceeds received from public equity offering






58,585



Other financing activities


(114
)


(295
)


(290
)Net cash provided by financing activities


51,097



49,764



846Net increase (decrease) in cash and cash equivalents


35,743



(2,031
)


(15,162
)Cash and cash equivalents, beginning of year


40,845



42,876



58,038Cash and cash equivalents, end of year

$
76,588


$
40,845


$
42,876Supplemental Disclosure of Cash Flow Information:Interest paid

$
6,513


$
5,894


$
5,616Net income taxes paid

$
10,855


$
11,557


$
9,159Supplemental Disclosure of Non Cash Investing and Financing
    Activities:Tax benefit from stock options

$
80


$
728


$
1,532Stock-based employee compensation

$



$
2


$
121Common stock portion of purchase price for acquisition of U.S.
    Specialty Underwriters, Inc.

$



$
10,000


$
Common stock portion of purchase price for merger with
    ProCentury Corporation

$
122,725


$



$
     (1)
    
    Effective January 31, 2008,
    the Company exercised its option to purchase the remainder of
    the economics related to the acquisition of the USSU business.   85




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 1.
    Summary
    of Significant Accounting Policies  Basis of
    Presentation and Principles of Consolidation
  Note 2 
    ProCentury Merger
        Business
   86




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of
    Estimates
    Cash and
    Cash Equivalents
    Investments
      Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
   87




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    99-20, Recognition of Interest Income and Impairment on
    Purchased and Retained Beneficial Interests in Securitized
    Financial Assets,
  Losses
    and Loss Adjustment Expenses and Reinsurance
    Recoverables
            Revenue
    Recognition
   88




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            sub-producer
    Deferred
    Policy Acquisition Costs
    Participating
    Policyholder Dividends
   89




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Furniture
    and Equipment
    Goodwill
    and Other Intangible Assets
  Goodwill and Other Intangible
    Assets, Goodwill and Other Intangible Assets
  Income
    Taxes
        and/or
 90




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Options
    Long Term
    Incentive Plan
  Stock Options, Long Term Incentive Plan, and Deferred
    Compensation Plan
  Deferred
    Compensation Plan
    Earnings
    Per Share
   91




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Comprehensive
    Income
    Derivative
    Instruments
  Accounting for
    Derivative Instruments and Hedging Activities,
    Fair
    Value Disclosures
  Accounting for Certain
    Investments in Debt and Equity Securities, Derivative Instruments Accounting for Derivative
    Instruments and Hedging Activities,
  Shareholder
    Rights Plan (Rights Agreement)
   92




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Recent
    Accounting Pronouncements
  Fair Value
    Measurements  Fair Value
    Measurements.
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115 instrument-by-instrument
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51
 93




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Disclosures about Derivative Instruments and Hedging
    Activities Accounting for
    Derivative Instruments and Hedging Activities.
  FAS 142-3, Determination of the Useful Life of Intangible
    Assets. FAS 142-3 Goodwill and Other Intangible
    Assets.
  The Hierarchy of Generally Accepted Accounting
    Principles. The
    Meaning of Present Fairly in Conformity With Generally Accepted
    Accounting Principles.
  Accounting for Financial Guarantee Insurance
    Contracts-an interpretation of FASB Statement No. 60. Accounting and Reporting by
    Insurance Enterprises. Accounting for
    Contingencies.
  No. EITF 99-20-1, Amendments to the Impairment and Interest Income
    Measurement Guidance of EITF Issue
    No. 99-20 EITF 99-20-1), EITF 99-20-1 EITF 99-20, Recognition of Interest Income and Impairment of
    Purchased Beneficial Interests and
 94




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Beneficial Interests That Continue to Be Held by a Transferor
    in Securitized Financial Assets (EITF 99-20). EITF 99-20-1 EITF 99-20-1 Accounting for
    Certain Investments in Debt and Equity Securities. EITF 99-20-1, EITF 99-20-1
  2.
    Procentury
    Merger  30-day
      hard-to-place
      Business
    Combinations,
 95




---



##### 



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


Subsequent


AsCalculated


Purchase


Adjusted atat August 1,


Accounting


December 31,2008


Adjustments


2008Cash consideration portion of purchase price

$
99,073


$



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


122,725







122,725Transaction related costs of Meadowbrook


5,383



566



5,949Purchase price

$
227,181


$
566


$
227,747    96




---



##### 



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


SubsequentCalculated at


Purchase


As Adjusted atAugust 1,


Accounting


December 31,2008


Adjustments


2008(In thousands)ASSETSCash

$
23,248


$



$
23,248Investments


412,542







412,542Agent balances


36,497







36,497Deferred policy acquisition costs


27,435







27,435Federal income taxes recoverable


7,386







7,386Deferred taxes(1)


16,551



(9,100
)


7,451Reinsurance recoverables


45,522







45,522Prepaid insurance premiums


17,695







17,695Goodwill


48,812



10,678



59,490Other intangible assets


26,000







26,000Other assets


28,176



(1,012
)


27,164Total Assets

$
689,864


$
566


$
690,430LIABILITIESLosses and loss adjustment expenses

$
289,533


$



$
289,533Unearned premiums


126,259







126,259Reinsurance funds held and balances payable


13,911







13,911Debentures


25,000







25,000Other liabilities


7,980







7,980Total Liabilities


462,683







462,683Purchase price

$
227,181


$
566


$
227,747     (1)
    
    Relates to a deferred tax liability adjustment in relation to
    the other intangible assets related to the agent relationships
    and the trade name. The deferred tax liability reflects the
    value of the tax benefit related to the amortization embedded
    within the value that is not deductible as a result of the stock
    nature of the transaction. 97




---



##### 



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


2007(In thousands)Revenues

$
561,049


$
578,585Expenses(1)


520,211



503,156Income before taxes and equity earnings


40,838



75,429Income tax expense


15,596



23,012Net income

$
25,242


$
52,417Net income per diluted share

$
0.43


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


58,153,667



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


Gross


Gross


EstimatedAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


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

$
51,248


$
5,015


$



$
56,263Obligations of states and political subdivisions


475,369



8,429



(3,876
)


479,922Corporate securities


146,605



1,840



(4,949
)


143,496Mortgage and asset-backed securities


304,391



10,504



(8,093
)


306,802Total Debt Securities available for sale


977,613



25,788



(16,918
)


986,483Equity Securities:Preferred stock


12,945



58



(2,524
)


10,479Common stock


14,715







(2,617
)


12,098Total Equity Securities available for sale


27,660



58



(5,141
)


22,577Total Securities available for sale

$
1,005,273


$
25,846


$
(22,059
)

$
1,009,060   98




---



##### 



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


Gross


Gross


EstimatedAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


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

$
53,436


$
1,541


$
(29
)

$
54,948Obligations of states and political subdivisions


287,392



3,329



(323
)


290,398Corporate securities


116,406



1,941



(928
)


117,419Mortgage and asset-backed securities


147,595



1,011



(615
)


147,991Total Debt Securities available for sale

$
604,829


$
7,822


$
(1,895
)

$
610,756     December 31,2008


2007Unrealized appreciation

$
25,846


$
7,822Unrealized depreciation


(22,059
)


(1,895
)Net unrealized appreciation


3,787



5,927Deferred federal income tax expense


(1,325
)


(2,075
)Net unrealized appreciation on investments, net of deferred
    federal income taxes

$
2,462


$
3,852     December 31,2008


2007


2006Realized (losses) gains:Debt securities:Gross realized gains

$
352


$
88


$
Gross realized losses


(3,266
)


(252
)


(30
)Total debt securities


(2,914
)


(164
)


(30
)Equity Securities:Gross realized gains










Gross realized losses


(8,655
)






Total equity securities


(8,655
)






Net realized (losses) gains

$
(11,569
)

$
(164
)

$
(30
)      99




---



##### 



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


EstimatedCost


Fair ValueDue in one year or less

$
114,600


$
114,608Due after one year through five years


209,903



213,088Due after five years through ten years


296,164



300,295Due after ten years


52,555



51,690Mortgage-backed securities, collateralized obligations and
    asset-backed


304,391



306,802$
977,613


$
986,483     2008


2007


2006Net Investment Income Earned From:Debt securities

$
33,906


$
23,746


$
19,376Equity securities


1,105



25



Cash and cash equivalents


2,485



3,224



3,279Total gross investment income


37,496



26,995



22,655Less investment expenses


872



595



580Net investment income

$
36,624


$
26,400


$
22,075     Other
    Than Temporary Impairments of Securities and Unrealized Losses
    on Investments
     100




---



##### 



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


Greater than 12 months


TotalFair Value of





Fair Value of





Fair Value ofInvestments





Investments





Investmentswith


Gross


with


Gross


with


GrossUnrealized


Unrealized


Unrealized


Unrealized


Unrealized


UnrealizedLosses


Losses


Losses


Losses


Losses


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

$



$



$



$



$



$
Obligations of states and political subdivisions


130,948



(3,516
)


4,778



(360
)


135,726



(3,876
)Corporate securities


72,962



(4,021
)


8,141



(928
)


81,103



(4,949
)Mortgage and asset-backed securities


43,891



(5,701
)


11,600



(2,392
)


55,491



(8,093
)Equity Securities:


21,166



(5,141
)










21,166



(5,141
)Totals

$
268,967


$
(18,379
)

$
24,519


$
(3,680
)

$
293,486


$
(22,059
)   December 31, 2007Less than 12 months


Greater than 12 months


TotalFair Value of





Fair Value of





Fair Value ofInvestments





Investments





Investmentswith


Gross


with


Gross


with


GrossUnrealized


Unrealized


Unrealized


Unrealized


Unrealized


UnrealizedLosses


Losses


Losses


Losses


Losses


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

$



$



$
5,963


$
(29
)

$
5,963


$
(29
)Obligations of states and political subdivisions


19,400



(68
)


45,177



(255
)


64,577



(323
)Corporate securities


15,564



(415
)


30,601



(513
)


46,165



(928
)Mortgage and asset-backed securities


9,116



(95
)


47,963



(520
)


57,079



(615
)Totals

$
44,080


$
(578
)

$
129,704


$
(1,317
)

$
173,784


$
(1,895
)   4.
    Fair
    Value Measurements  Accounting for
    Certain Investments in Debt and Equity Securities. Accounting for Derivative Instruments and Hedging
    Activities.
   101




---



##### 



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

SignificantMarkets for

Other

SignificantIdentical

Observable

UnobservableAssets

Inputs

InputsTotal

(Level 1)

(Level 2)

(Level 3)Available-for-Sale
    Securities

$
1,009,060


$
24,415


$
972,654


$
11,991Derivatives  interest rate

$
(8,940
)

$



$
(8,940
)

$
  102




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair ValueMeasurementUsingSignificantUnobservableInputs - Level 3Balance as of January 1, 2008

$
Total gains or losses (realized/unrealized):Included in earnings


96Included in other comprehensive income


344Purchases, issuances and settlements(1)


11,551Transfers in and out of Level 3


Balance as of December 31, 2008

$
11,991The amount of total gains or losses for the period included in
    earnings (or changes in net assets) attributable to the change
    in unrealized gains or losses relating to assets still held at
    the reporting date

$
     (1)
    
    Relates to the invested assets acquired in conjunction with the
    ProCentury merger, and a $6.1 million purchase of MBS. 103




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Liability
    for Losses and Loss Adjustment Expenses    For the Years Ended December 31,2008


2007


2006Balance, beginning of year

$
540,002


$
501,077


$
458,677Less reinsurance recoverables


198,461



198,422



187,254Net balance, beginning of year


341,541



302,655



271,423Additional net reserves acquired at August 1, 2008(1)


247,739







Total beginning reserves


589,280



302,655



271,423Incurred related to:Current year


229,657



158,060



149,012Prior years


(16,772
)


(7,091
)


(2,719
)Total incurred


212,885



150,969



146,293Paid related to:Current year


56,914



30,303



31,790Prior years


119,920



81,780



83,271Total paid


176,834



112,083



115,061Net balance, end of year


625,331



341,541



302,655Plus reinsurance recoverables


260,366



198,461



198,422Balance, end of year

$
885,697


$
540,002


$
501,077     (1)
    
    Amount represents the fair value of the reserves acquired from
    ProCentury. Please refer to Note 2 
    ProCentury Mergerfor related disclosures.       104




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      6.
    Reinsurance  Accounting and Reporting for
    Reinsurance for Short-Duration and Long-Duration
    Contracts.
        rent-a-captive
     105




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               106




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                   107




---



##### 



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


2007


2006Written


Earned


Written


Earned


Written


EarnedDirect

$
449,618


$
441,709


$
307,266


$
266,049


$
246,985


$
251,288Assumed(1)


8,065



14,073



39,184



71,050



83,887



75,999Ceded


(82,489
)


(86,061
)


(66,239
)


(68,902
)


(68,204
)


(72,367
)Net

$
375,194


$
369,721


$
280,211


$
268,197


$
262,668


$
254,920     One reinsurer, with a financial strength rating of
    A+ (Superior) rated by A.M. Best, accounts for
    12.1% of ceded premiums in 2008.(1)
    
    For the years ended December 31, 2008, 2007, and 2006,
    $925,000, $31.0 million, and $72.6 million, relates to
    assumed business the Company manages directly, respectively. The
    related transactions of this business are processed through the
    Companys internal systems and related controls. In
    addition, the Company does not assume any foreign reinsurance. 108




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Segment
    Information    Specialty
    Insurance Operations
      Agency
    Operations
   109




---



##### 



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


2007


2006RevenuesNet earned premiums

$
369,721


$
268,197


$
254,920Management fees


21,168



23,963



18,714Claims fees


8,879



9,025



8,776Loss control fees


2,069



2,151



2,216Reinsurance placement


728



929



735Investment income


35,888



25,487



21,115Net realized (losses) gains


(11,422
)


150



69Specialty insurance operations


427,031



329,902



306,545Agency operations


11,064



11,316



12,285Holding Company interest income earned


736



913



960Intersegment revenue


(1,004
)


(1,396
)


(1,554
)Consolidated revenue

$
437,827


$
340,735


$
318,236Pre-tax income:Specialty insurance operations

$
60,897


$
47,898


$
38,292Agency operations(1)


1,142



2,087



2,609Non-allocated expenses


(18,244
)


(10,598
)


(9,396
)Consolidated pre-tax income

$
43,795


$
39,387


$
31,505     (1)
    
    The Companys agency operations include an allocation of
    corporate overhead, which includes expenses associated with
    accounting, information services, legal, and other corporate
    services. The corporate overhead allocation excludes those
    expenses specific to the holding company. For the years ended
    December 31, 2008, 2007, and 2006, the allocation of
    corporate overhead to the agency operations segment was
    $2.8 million, $2.8 million, and $3.3 million,
    respectively.    For the Years Ended December 31,2008


2007


2006Holding company expenses

$
(4,253
)

$
(2,638
)

$
(2,830
)Amortization


(6,310
)


(1,930
)


(590
)Interest expense


(7,681
)


(6,030
)


(5,976
)$
(18,244
)

$
(10,598
)

$
(9,396
)   8.
    Debt  Credit
    Facilities
   110




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Derivative Instruments
    Debentures
    InterestRate atYear







12/31/08


PrincipalDescription

Callable


Year Due


Interest Rate Terms

(1)


AmountJunior subordinated debentures


2008



2033


Three-month LIBOR, plus 4.05%


5.51
%

$
10,310Senior debentures


2009



2034


Three-month LIBOR, plus 4.00%


6.15
%


13,000Senior debentures


2009



2034


Three-month LIBOR, plus 4.20%


6.35
%


12,000Junior subordinated debentures


2010



2035


Three-month LIBOR, plus 3.58%


5.58
%


20,620Junior subordinated debentures(2)


2007



2032


Three-month LIBOR, plus 4.00%


6.21
%


15,000Junior subordinated debentures(2)


2008



2033


Three-month LIBOR, plus 4.10%


6.25
%


10,000Total















$
80,930     (1)
    
    The underlying three-month LIBOR rate varies as a result of the
    interest rate reset dates used in determining the three-month
    LIBOR rate, which varies for each long-term debt item each
    quarter.(2)
    
    Represents the junior subordinated debentures acquired in
    conjunction with the Merger.   111




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            9.
    Derivative
    Instruments  Accounting for
    Derivative Instruments and Hedging Activities,
    FixedAmount atExpiration




Counterparty




December 31,Effective Date


Date


Debt Instrument

Interest Rate Terms

Fixed Rate


200810/06/2005



05/24/2009


Senior debentures

Three-month LIBOR, plus 4.20%


8.925
%

$
5,00010/06/2005



09/16/2010


Junior subordinated debentures

Three-month LIBOR, plus 3.58%


8.340
%


20,00004/23/2008



05/24/2011


Senior debentures

Three-month LIBOR, plus 4.20%


7.720
%


7,00004/23/2008



06/30/2013


Junior subordinated debentures

Three-month LIBOR, plus 4.05%


8.020
%


10,00004/29/2008



04/29/2013


Senior debentures

Three-month LIBOR, plus 4.00%


7.940
%


13,00007/31/2008



07/31/2013


Term loan(1)

Three-month LIBOR


3.950
%


60,25008/15/2008



08/15/2013


Junior subordinated debentures(2)

Three-month LIBOR


3.780
%


10,00009/04/2008



09/04/2013


Junior subordinated debentures(2)

Three-month LIBOR


3.790
%


15,000  112




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    Relates to the Companys term loan, which has an effective
    date of July 31, 2008 and an expiration date of
    July 31, 2013. The Company is required to make fixed rate
    interest payments on the current balance of the term loan,
    amortizing in accordance with the term loan amortization
    schedule. The Company fixed only the variable interest portion
    of the loan. The actual interest payments associated with the
    term loan also include an additional rate of 2.00% in accordance
    with the credit agreement, as of December 31, 2008.(2)
    
    Relates to the debentures acquired from the ProCentury merger.
    The Company fixed only the variable interest portion of the
    debt. The actual interest payments associated with the
    debentures also include an additional rate of 4.10% and 4.00% on
    the $10.0 million and $15.0 million debentures,
    respectively.        10.
    Regulatory
    Matters and Rating Issues   113




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ProCenturyInsurance2008:

Star


Savers


Williamsburg


Ameritrust


Century


CompanyStatutory capital and surplus

$
199,889


$
42,718


$
21,945


$
19,177


$
122,948


$
31,228RBC authorized control level

$
36,244


$
6,499


$
3,382


$
2,893


$
33,918


$
2,860Statutory net income

$
27,179


$
6,546


$
2,783


$
2,671


$
(11,227
)

$
2,371   2007:

Star


Savers


Williamsburg


AmeritrustStatutory capital and surplus

$
188,381


$
41,633


$
21,846


$
18,989RBC authorized control level

$
34,419


$
6,278


$
3,272


$
2,786Statutory net income

$
13,893


$
5,460


$
2,775


$
2,479            114




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Deferred
    Policy Acquisition Costs    For the Years Ended December 31,2008


2007


2006Balance, beginning of period

$
26,926


$
27,902


$
26,371Additional deferred policy acquisition costs at August 1,
    2008(1)


27,436







Acquisition costs deferred


54,652



37,395



39,201Amortized to expense during the period


(52,560
)


(38,371
)


(37,670
)Balance, end of period

$
56,454


$
26,926


$
27,902     (1)
    
    Deferred policy acquisition costs activity for 2008 includes
    that related to ProCentury of $27.4 million added at
    August 1, 2008.    12.
    Income
    Taxes    For the Years Ended December 31,2008


2007


2006Current tax expense

$
13,925


$
13,264


$
8,858Deferred tax expense (benefit)


2,742



(1,538
)


741Total provision for income tax expense

$
16,667


$
11,726


$
9,599     For the Years Ended December 31,2008


2007


2006Tax provision at statutory rate

$
15,338


$
13,760


$
11,027Tax effect of:Tax exempt interest


(3,840
)


(2,832
)


(2,021
)Deferred tax asset valuation allowance


4,688







State income taxes, net of federal benefit


365



610



352Other, net


116



188



241Federal and state income tax expense

$
16,667


$
11,726


$
9,599Effective tax expense rate


38.0
%


29.8
%


30.5
%    115




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for Income Taxes,
    2008


2007Deferred


Deferred


Deferred


DeferredTax


Tax


Tax


TaxAssets


Liabilities


Assets


LiabilitiesUnpaid losses and loss adjustment expenses

$
25,705


$



$
15,487


$
Unearned premium reserves


17,519







9,540



Unrealized loss / gains on investments


1,803











1,884Deferred policy acquisition costs






19,759







9,424Allowance for doubtful accounts


1,031







959



Goodwill






3,524







2,500Long term incentive plan


636







547



Amortization of intangible assets






8,426



789



Other than temporary impairment losses on investments


16,171











Deferred gain on sale-leaseback transaction


169







200



Other


58







1,222



Total deferred taxes


63,092



31,709



28,744



13,808Net deferred tax assets before valuation allowance


31,383







14,936Valuation allowance


(8,665
)






Net deferred tax assets

$
22,718






$
14,936   and/or
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
 116




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        13.  Stock
    Options, Long Term Incentive Plan, and Deferred Compensation
    Plan
  Stock
    Options
      2008


2007


2006Weighted-





Weighted-





Weighted-Average





Average





AverageExercise





Exercise





ExerciseOptions


Price


Options


Price


Options


PriceOutstanding  beginning of year


132,052


$
14.51



391,678


$
7.38



1,605,901


$
5.42Exercised


(31,745
)

$
2.17



(244,574
)

$
2.65



(791,038
)

$
3.32Expired and/or forfeited


(35,557
)

$
22.75



(15,052
)

$
21.68



(423,185
)

$
7.54Outstanding  end of year


64,750


$
16.03



132,052


$
14.51



391,678


$
7.38Exercisable at end of year


64,750


$
16.03



106,182


$
14.51



324,704


$
7.62     Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageRange of




Remaining


Exercise





ExerciseExercise Prices

Options


Life (Years)


Price


Options


Price$6.48


1,500



0.9


$
6.48



1,500


$
6.48$10.91 to $24.6875


63,250



0.0


$
16.26



63,250


$
16.2664,750



0.1


$
16.03



64,750


$
16.03   Long
    Term Incentive Plan
   117




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007-2009 2009-2011
  2007-2008
  Deferred
    Compensation Plan
    14.
    Shareholders
    Equity  Note 2 ~ ProCentury Merger
   118




---



##### 



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


2007


2006Net income, as reported

$
27,397


$
27,992


$
22,034Common shares:BasicWeighted average shares outstanding


44,810,944



33,007,200



28,963,228DilutedWeighted average shares outstanding


44,810,944



33,007,200



28,963,228Dilutive effect of:Stock options


71



16,495



126,660Share awards under long term incentive plan


184,697



78,270



476,252Total


44,995,712



33,101,965



29,566,140Net income per common shareBasic

$
0.61


$
0.85


$
0.76Diluted

$
0.61


$
0.85


$
0.75   16.
    Goodwill
    and Other Intangible Assets  Goodwill
   119




---



##### 



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


Operations


TotalBalance at December 31, 2007

$
6,469


$
37,028


$
43,497Transfer between reporting units


(3,024
)


3,024



Additions to goodwill  USSU acquisition






16,041



16,041Additions to goodwill  ProCentury merger






59,490



59,490Balance at December 31, 2008

$
3,445


$
115,583


$
119,028     Goodwill
    related to ProCentury Merger
      ProCentury Merger
  Goodwill
    related to USSU Acquisition
   120




---



##### 



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

$
5,7372010


4,9072011


4,6322012


4,6922013


3,986Total amortization expense

$
23,954   17.
    U.S.
    Specialty Underwriters, Inc. Acquisition     121




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      18.
    Commitments
    and Contingencies    2009

$
4,0312010


3,8252011


3,4622012


2,7902013


2,323Thereafter


220Total minimum lease commitments

$
16,651          122




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for
    Contingencies,
  19.
    Sale-Leaseback
    Transaction      20.
    Related
    Party Transactions     123




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      21.
    Employee
    Benefit Plans  1 2 and/or
 124




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  22.
    Quarterly
    Financial Data (Unaudited)    1st


2nd


3rd


4thQuarter


Quarter


Quarter


Quarter2008:Gross premiums written

$
90,468


$
94,370


$
134,418


$
138,427Net premiums written


71,399



76,071



112,465



115,259Net premiums earned


66,022



77,031



104,243



122,425Net commissions and fees


12,031



9,632



12,309



8,932Net investment income


7,148



6,917



10,622



11,937Net realized losses


(31
)


(146
)


(7,290
)


(3,955
)Net losses and LAE incurred


37,661



43,542



63,932



67,750Policy acquisition and other underwriting expenses


13,147



12,716



19,470



23,961Other administrative expenses


8,832



7,961



8,055



10,153Salaries and employee benefits


12,755



14,143



17,056



18,908Amortization expense


1,551



1,563



1,531



1,665Interest expense


1,311



1,254



2,333



2,783Net income


7,058



8,437



4,195



7,706Diluted earnings per share

$
0.19


$
0.23


$
0.09


$
0.13GAAP combined ratio(1)


93.9
%


90.5
%


96.7
%


91.8
%2007:Gross premiums written

$
89,504


$
78,000


$
90,729


$
88,218Net premiums written


71,972



65,670



73,203



69,366Net premiums earned


65,204



67,191



67,337



68,465Net commissions and fees


11,551



10,743



13,319



10,375Net investment income


6,156



6,229



6,788



7,227Net realized (losses) gains


(6
)


20



(200
)


36Net losses and LAE incurred


36,646



39,707



37,015



37,601Policy acquisition and other underwriting expenses


13,643



13,169



12,927



13,978Other administrative expenses


7,393



7,598



8,890



8,087Salaries and employee benefits


13,532



12,900



15,750



14,251Amortization expense


144



543



622



621Interest expense


1,488



1,667



1,476



1,400Net income


6,923



6,186



7,555



7,328Diluted earnings per share

$
0.23


$
0.20


$
0.21


$
0.20GAAP combined ratio(1)


96.3
%


97.4
%


93.8
%


94.0
%     (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. 125




---



##### 



Schedule I
    Meadowbrook Insurance Group, Inc.
    Summary of investments-other than investments in related
    parties
    As of December 31, 2008 Amount atWhichShown in theBalanceType of Investment

Cost


Value


Sheet(In thousands)Fixed Maturities:US government and government agencies and authorities

$
51,248


$
56,263


$
56,263States and political subdivisions


475,369



479,922



479,922Corporate securities


146,605



143,496



143,496Mortgage and asset-backed securities


304,391



306,802



306,802Total Fixed Maturities

$
977,613


$
986,483


$
986,483Equity Securities:Preferred Stock


12,945



10,479



10,479Common Stock


14,715



12,098



12,098Total Equity Securities


27,660



22,577



22,577Total Investments

$
1,005,273


$
1,009,060


$
1,009,060  126




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    BALANCE SHEET December 31,2008


2007(In thousands)ASSETSInvestments

$
45


$
32,643Investment in subsidiaries


501,533



317,544Cash and cash equivalents


182



492Goodwill


62,514



3,024Other assets


40,277



27,811Total assets

$
604,551


$
381,514LIABILITIESOther liabilities

$
3,747


$
2,231Payable to subsidiaries


46,454



21,459Debt


60,250



Debentures


55,930



55,930Total liabilities


166,381



79,620SHAREHOLDERS EQUITYCommon stock


573



370Additional paid-in capital


314,641



194,621Retained earnings


127,157



104,274Note receivable from officer


(852
)


(870
)Accumulated other comprehensive (loss) gain


(3,349
)


3,499Total shareholders equity


438,170



301,894Total liabilities and shareholders equity

$
604,551


$
381,514  127




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    INCOME STATEMENT
  For the Years Ended December 31,2008


2007


2006Revenue

$
2,636


$
3,318


$
2,690Operating expenses:Interest expense


7,298



6,558



6,375Other expenses


5,386



4,332



3,970Total operating expenses


12,684



10,890



10,345Loss before income taxes and subsidiary equity


(10,048
)


(7,572
)


(7,654
)Federal and state income tax benefit


(3,561
)


(2,878
)


(2,878
)Loss before subsidiary equity earnings


(6,487
)


(4,694
)


(4,776
)Subsidiary equity earnings


33,884



32,686



26,810Net income

$
27,397


$
27,992


$
22,034  128




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    STATEMENT OF COMPREHENSIVE INCOME
  For the Years Ended December 31,2008


2007


2006Net income

$
27,397


$
27,992


$
22,034Other comprehensive income, net of tax:Unrealized gains (losses) on securities:


(12,960
)


4,810



152Net deferred derivative (loss) gain  hedging activity


(5,457
)


(484
)


121Less: reclassification adjustment for gains included in net
    income


11,569



10



20Other comprehensive income (loss)


(6,848
)


4,336



293Comprehensive income

$
20,549


$
32,328


$
22,327  129




---



##### 



SCHEDULE II
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    MEADOWBROOK INSURANCE GROUP, INC.
    PARENT COMPANY ONLY
    STATEMENT OF CASH FLOWS
  For the Years Ended December 31,2008


2007


2006Net cash provided by (used in) operating activities:

$
4,278


$
1,320


$
(1,488
)Cash Flow from Investing Activities:Net purchase of investments


(32,979
)


(32,643
)


Dividends from subsidiaries


18,862



1,729



4,629Investment in subsidiaries


(42,004
)


(19,350
)


(4,600
)Net cash (used in) provided by investing activities


(56,121
)


(50,264
)


29Cash Flow from Financing Activities:Proceeds from borrowings


73,000



19,025



12,500Principal payments on borrowings


(12,750
)


(26,025
)


(10,500
)Net proceeds from issuance of debentures










Stock options exercised


4



(374
)


(538
)Dividends paid on common stock


(3,797
)






Share repurchases of common stock


(4,942
)






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






(1,841
)


Net proceeds from public equity offering






58,585



Other financing activities


18



1



(12
)Net cash provided by financing activities


51,533



49,371



1,450(Decrease) increase in cash and cash equivalents


(310
)


428



(9
)Cash and cash equivalents, beginning of year


492



64



73Cash and cash equivalents, end of year

$
182



492


$
64Supplemental Disclosure for Non-cash Investing and Financing
    ActivitiesCommon stock portion of purchase price for acquisition of
    U.S. Specialty Underwriters, Inc.

$



$
10,000


$
Common stock portion of purchase price for merger with
    ProCentury Corporation

$
122,725


$



$
  130




---



##### 



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





OtherDeferred


Losses,





PolicyPolicy


Claims &





Claims &Acquisition


Loss


Unearned


Benefits


PremiumCosts


Expenses


Premium


Payable


RevenueSpecialty Risk Management Operations

$
56,454


$
885,697


$
282,086






$
369,721Agency Operations


















Other


















$
56,454


$
885,697


$
282,086






$
369,721   Benefits,


AmortizationClaims,


of DeferredNet


Losses &


Policy


OtherInvestment


Settlement


Acquisition


Operating


PremiumIncome


Expenses


Costs


Expenses


WrittenSpecialty Risk Management Operations

$
35,888


$
212,885


$
52,560


$
100,689


$
375,194Agency Operations














9,922



Other


736











17,976



$
36,624


$
212,885


$
52,560


$
128,587


$
375,194  131




---



##### 



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





OtherDeferred


Losses,





PolicyPolicy


Claims &





Claims &Acquisition


Loss


Unearned


Benefits


PremiumCosts


Expenses


Premium


Payable


RevenueSpecialty Risk Management Operations

$
26,926


$
540,002


$
153,927






$
268,197Agency Operations


















Other


















$
26,926


$
540,002


$
153,927






$
268,197   Benefits,


AmortizationClaims,


of DeferredNet


Losses &


Policy


OtherInvestment


Settlement


Acquisition


Operating


PremiumIncome


Expenses


Costs


Expenses


WrittenSpecialty Risk Management Operations

$
25,487


$
150,969


$
38,371


$
92,664


$
280,211Agency Operations














9,229



Other


913











10,115



$
26,400


$
150,969


$
38,371


$
112,008


$
280,211  132




---



##### 



Schedule III
  Meadowbrook
    Insurance Group, Inc.
 Supplementary
    Insurance Information
    December 31, 2006
    (In thousands)
  FuturePolicyBenefits,





OtherDeferred


Losses,





PolicyPolicy


Claims &





Claims &Acquisition


Loss


Unearned


Benefits


PremiumCosts


Expenses


Premium


Payable


RevenueSpeciality Risk Management Operations

$
27,902


$
501,077


$
144,575






$
254,920Agency Operations


















Other


















$
27,902


$
501,077


$
144,575






$
254,920   Benefits,


AmortizationClaims,


of DeferredNet


Losses &


Policy


OtherInvestment


Settlement


Acquisition


Operating


PremiumIncome


Expenses


Costs


Expenses


WrittenSpeciality Risk  Management Operations

$
21,115


$
146,293


$
37,670


$
84,632


$
262,668Agency Operations














9,334



Other


960











8,802



$
22,075


$
146,293


$
37,670


$
102,768


$
262,668  133




---



##### 



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


Assumed





of AmountGross


to Other


from Other


Net


Assumed toProperty and Liability Insurance

Amount


Companies


Companies


Amount


Net(In thousands)2008

$
441,709


$
86,061


$
14,073


$
369,721



3.81
%2007

$
266,049


$
68,902


$
71,050


$
268,197



26.49
%2006

$
251,288


$
72,367


$
75,999


$
254,920



29.81
%  134




---



##### 



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


DeductionsBalance at


Charged to


Charged to


from


Balance atBeginning of


Costs and


Other


Allowance


End ofAllowance for Doubtful Accounts

Period


Expense


Accounts


Account


Period(In thousands)2008

$
2,747


$
772






$
574


$
2,9452007

$
2,948


$
716






$
917


$
2,7472006

$
3,901


$
593






$
1,546


$
2,948  135




---



##### 



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


Any,Deferred


Losses and


DeductedPolicy


Loss


from





Net


NetAcquisition


Adjustment


Previous


Unearned


Premiums


InvestmentAffiliation with Registrant

Costs


Expenses(2)


Column(1)


Premiums(2)


Earned


Income(a) Consolidated Property and Casualty Subsidiaries2008

$
56,454


$
885,697


$



$
282,086


$
369,721


$
35,8882007

$
26,926


$
540,002






$
153,927


$
268,197


$
25,4872006

$
27,902


$
501,077






$
144,575


$
254,920


$
21,115   Amortizationof Deferred


Paid LossesLosses and Loss


Policy


and Loss


NetAdjustment Expense


Acquisition


Adjustment


PremiumsCurrent Year


Prior Years


Expenses


Expenses


Written2008

$
229,657


$
(16,772
)

$
52,560


$
176,834


$
375,1942007

$
158,061


$
(7,091
)

$
38,371


$
112,084


$
280,2112006

$
149,012


$
(2,719
)

$
37,670


$
115,061


$
262,668     (1)
    
    The Company does not employ any discounting techniques.(2)
    
    Reserves for losses and loss adjustment expenses are shown gross
    of $260.4 million, $198.5 million and
    $198.4 million of reinsurance recoverable on unpaid losses
    in 2008, 2007 and 2006, respectively. Unearned premiums are
    shown gross of ceded unearned premiums of $31.9 million,
    $17.8 million and $20.4 million in 2008, 2007 and
    2006, respectively. 136




---



##### 



MEADOWBROOK
    INSURANCE GROUP, INC.
  Exhibit Index
  Exhibit



FilingNo.

Description

Basis3
.1

Amended and Restated Articles of Incorporation of the Company


(15)3
.2

Amended and Restated Bylaws of the Company


(16)4
.1

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


(6)4
.2

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


(11)4
.3

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


(22)4
.4

Amended and Restated Declaration of Trust, dated as of
    December 4, 2002, by and among State Street Bank and
    Trust Company of Connecticut, ProFinance Holdings
    Corporation and Steven R. Young and John Marazza, as
    Administrators


(22)4
.5

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


(22)4
.6

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


(22)4
.7

Amended and Restated Declaration of Trust, dated as of
    May 16, 2003, by and among U.S. Bank National
    Association, ProFinance Holdings Corporation and Steven R. Young
    and John Marazza, as Administrators


(22)4
.8

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


(22)10
.1

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


(7)10
.2

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


(1)10
.3

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


(4)10
.4

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


(7)10
.5

Agency Agreement by and between Meadowbrook, Inc., Preferred
    Insurance Agency, Inc., TPA Insurance Agency, Inc., Preferred
    Comp Insurance Agency of New Hampshire, TPA Insurance Agency of
    New Hampshire, Inc., Meadowbrook of Nevada, Inc., d/b/a
    Meadowbrook Insurance Services, Meadowbrook of Florida, Inc.,
    Association Self-Insurance Services, Inc., Commercial Carriers
    Insurance Agency, Inc., and Star Insurance Company, Savers
    Property and Casualty Insurance Company, Williamsburg National
    Insurance Company, and Ameritrust Insurance Corporation, dated
    January 1, 2003


(5)10
.6

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


(6)10
.7

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


(6)10
.8

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


(6)10
.9

Meadowbrook Insurance Group, Inc. Long Term Incentive Plan.


(8)10
.10

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


(8)10
.11

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


(8) 137




---



##### 



Exhibit



FilingNo.

Description

Basis10
.12

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


(8)10
.13

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


(9)10
.14

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


(9)10
.15

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


(9)10
.16

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


(9)10
.17

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


(9)10
.18

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


(9)10
.19

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


(9)10
.20

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


(9)10
.21

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


(10)10
.22

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


(10)10
.23

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


(11)10
.24

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


(11)10
.25

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


(11)10
.26

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


(12)10
.27

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


(13)10
.28

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


(13)10
.29

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


(14)10
.30

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


(17)10
.31

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


(18)10
.32

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


(18)10
.33

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


(18) 138




---



##### 



Exhibit



FilingNo.

Description

Basis10
.34

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


(18)10
.35

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


(18)10
.36

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


(19)10
.37

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


(20)10
.38

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


(21)10
.39

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


(21)10
.40

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


(21)10
.41

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


(21)14


Compliance Program / Code of Conduct21


List of Subsidiaries23


Consent of Independent Registered Public Accounting Firm24


Power of Attorney28
.1

Star Insurance Companys 2008 Schedule P


(2)28
.2

Savers Property & Casualty Insurance Companys
    2008 Schedule P


(2)28
.3

Williamsburg National Insurance Companys 2008
    Schedule P


(2)28
.4

Ameritrust Insurance Corporations 2008 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, 2002.(6)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending September 30, 2003.(7)
    
    Filed as Appendix to Meadowbrook
    Insurance Group, Inc. 2004 Proxy Statement.(8)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2004. 139




---



##### 



(9)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2004.(10)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2005.(11)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on September 22, 2005.(12)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2005.(13)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on May 31, 2006.(14)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2006.(15)
    
    Filed as Exhibit to
    Form 10-Q
    for the period ending June 30, 2007.(16)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2007.(17)
    
    Filed as Exhibit to
    Form 10-K
    for the year ending December 31, 2007.(18)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on July 31, 2008.(19)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    as filed by ProCentury Corporation on July 31, 2008.(20)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on September 8, 2008.(21)
    
    Filed as Exhibit to Current Report
    on
    Form 8-K
    filed on January 7, 2009.(22)
    
    Incorporated by reference to
    ProCentury Corporations Registration Statement on
    Form S-1,
    as amended. 140




---



##### 



SIGNATURES
      
      
           Signature

Title

Date**Merton
    J. Segal

Chairman and Director

March 16, 2009-s- Robert S. CubbinRobert
    S. Cubbin

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

March 16, 2009**Joseph
    S. Dresner

Director

March 16, 2009**Hugh
    W. Greenberg

Director

March 16, 2009**Florine
    Mark

Director

March 16, 2009**Robert
    H. Naftaly

Director

March 16, 2009 141




---



##### 



Signature

Title

Date**David
    K. Page

Director

March 16, 2009**Robert
    W. Sturgis

Director

March 16, 2009**Bruce
    E. Thal

Director

March 16, 2009**Herbert
    Tyner

Director

March 16, 2009**Jeffrey
    A. Maffett

Director

March 16, 2009**Robert
    F. Fix

Director

March 16, 2009**By: -s- Robert S. CubbinRobert
    S. Cubbin,
    Attorney-in-fact  142