<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q



(Mark One)
             
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1998

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  
     EXCHANGE ACT OF 1934

For the transition period from               to 
                               -------------    -------------              

                         Commission file number 0-21223


                            PROFESSIONALS GROUP, INC.
             (Exact name of registrant as specified in its charter

        Michigan                                         38-3273911
(State or Other Jurisdiction                (I.R.S. Employer Identification No.)
of Incorporation or Organization)

2600 Professionals Drive, Okemos, Michigan                       48864
 (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:  (517) 349-6500

                Professionals Insurance Company Management Group
          (Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x]   No [ ]

The number of shares  outstanding of the  registrant's  common stock, no par 
value per share, as of August 12, 1998 was 7,623,869.


<PAGE>   2
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                         PAGE NO.
PART I.  FINANCIAL INFORMATION
<S>                                                                                          <C>    
         Item 1.    Financial Statements

                      Condensed Consolidated Balance Sheets at June 30, 1998                   
                      (Unaudited) and December 31, 1997                                         3

                      Condensed Consolidated Statements of Income for the Three                
                      Months and Six Months Ended June 30, 1998 and 1997 (Unaudited)            4
  
                      Condensed Consolidated Statements of Cash Flows for the Six              
                      Months Ended June 30, 1998 and 1997 (Unaudited)                           5
  
                      Notes to Condensed Consolidated Financial Statements (Unaudited)        6-8

         Item 2.    Management's  Discussion and Analysis of Financial Condition and         
                    Results of Operations                                                    9-17


         Item 3.    Quantitative and Qualitative Disclosures About Market Risk                 17

PART II. OTHER INFORMATION

         Item 4.    Submission of Matters to a Vote of Security Holders                        17

         Item 6.    Exhibits and Reports on Form 8-K                                           18

         Signatures                                                                            19
</TABLE>


                                      -2-

<PAGE>   3
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                   PROFESSIONALS GROUP, INC. AND SUBSIDIARIES
           (Formerly Professionals Insurance Company Management Group)
                      Condensed Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                               June 30,               December 31,
                                                                                                1998                     1997
                                                                                           ----------------       -----------------
                                                                                             (Unaudited)
<S>                                                                                            <C>                      <C>
                                         Assets

Investments:                                                                                 
   Fixed maturities available for sale, at fair value
      (amortized cost:  $355,605,000 and $308,941,000)                                         $361,467,000             $313,633,000
   Equity securities available for sale, at fair value
      (cost:  $2,731,000 and $2,704,000)                                                          2,880,000                2,831,000
   Short-term investments, at cost                                                               17,894,000               25,655,000
   Real estate, at cost, net of accumulated depreciation                                            431,000                  442,000
                                                                                               ------------             ------------
               Total investments                                                                382,672,000              342,561,000
Cash                                                                                              1,991,000                2,176,000
Premiums due from policyholders                                                                  18,456,000                7,051,000
Reinsurance balances                                                                             25,272,000               24,257,000
Accrued investment income                                                                         4,965,000                4,785,000
Deferred federal income taxes                                                                    14,121,000               15,003,000
Property and equipment, at cost, net of
  accumulated depreciation                                                                        8,330,000                9,060,000
Deferred policy acquisition costs                                                                 1,418,000                1,376,000
Other assets                                                                                      8,713,000                6,926,000
                                                                                               ------------             ------------
               Total assets                                                                    $465,938,000             $413,195,000
                                                                                               ============             ============

                           Liabilities and Shareholders' Equity

Liabilities:
   Loss and loss adjustment expense reserves                                                   $281,708,000             $239,151,000
   Reserve for extended reporting period claims                                                  15,500,000               15,300,000
   Unearned premiums                                                                             30,531,000               21,665,000
   Long-term debt                                                                                20,000,000               22,500,000
   Accrued expenses and other liabilities                                                         9,726,000               12,653,000
                                                                                               ------------             ------------
               Total liabilities                                                                357,465,000              311,269,000
                                                                                               ------------             ------------
Shareholders' equity:
   Preferred stock, no par value; 5,000,000 shares authorized;
      no shares issued and outstanding                                                            -                        -
   Common stock, no par value; 25,000,000 shares authorized;
      3,505,750 shares issued and outstanding in 1998 and 1997                                    3,506,000                3,506,000
   Additional paid-in capital                                                                    14,569,000               14,569,000
   Retained earnings                                                                             86,430,000               80,671,000
   Accumulated other comprehensive income,
      net of deferred federal income taxes                                                        3,968,000                3,180,000
                                                                                               ------------             ------------
               Total shareholders' equity                                                       108,473,000              101,926,000
                                                                                               ------------             ------------
               Total liabilities and shareholders' equity                                      $465,938,000             $413,195,000
                                                                                               ============             ============

See accompanying notes to the unaudited condensed consolidated financial statements.

</TABLE>

   

                                       -3-

<PAGE>   4
                   PROFESSIONALS GROUP, INC. AND SUBSIDIARIES
           (Formerly Professionals Insurance Company Management Group)
                   Condensed Consolidated Statements of Income
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                   Three Months Ended                 Six Months Ended
                                                        June 30,                          June 30,
                                               ----------------------------      ----------------------------
                                                  1998            1997              1998            1997
                                               ------------    ------------      ------------    ------------
<S>                                           <C>             <C>                <C>             <C>
Revenues and other income:
   Net premiums written                        $22,816,000     $10,581,000       $55,260,000     $24,957,000
   Decrease (increase) in unearned premiums, 
      net of prepaid reinsurance premiums        1,431,000       2,508,000        (6,937,000)        523,000
                                               -----------     -----------       -----------     ----------- 
   Premiums earned, net                         24,247,000      13,089,000        48,323,000      25,480,000
   Net investment income                         5,260,000       4,710,000        10,430,000       8,882,000
   Net realized investment gains (losses)            2,000         (34,000)            4,000         (70,000)
   Other                                           526,000         285,000         1,044,000         339,000
                                               -----------     -----------       -----------     ----------- 
      Total revenues and other income           30,035,000      18,050,000        59,801,000      34,631,000
                                               -----------     -----------       -----------     ----------- 

Expenses:
   Losses and loss adjustment expenses, net     19,332,000      11,249,000        38,624,000      21,633,000
   Increase in reserve for extended reporting
      period claims                                100,000         100,000           200,000         200,000
   Policy acquisition and other underwriting 
      expenses                                   6,571,000       2,650,000        13,072,000       5,285,000
   Interest expense                                334,000         370,000           694,000         370,000
                                               -----------     -----------       -----------     ----------- 
      Total expenses                            26,337,000      14,369,000        52,590,000      27,488,000
                                               -----------     -----------       -----------     ----------- 

      Income from operations before federal
        income taxes                             3,698,000       3,681,000         7,211,000       7,143,000

Federal income taxes                               748,000       1,004,000         1,452,000       1,845,000
                                               -----------     ------------      ------------    ----------- 

      Net income                                $2,950,000      $2,677,000        $5,759,000      $5,298,000
                                               ===========     ===========       ===========     =========== 


Net income per common share                          $0.84           $0.76             $1.64           $1.51
                                               ===========     ===========       ===========     =========== 

Net income per common share - 
  assuming dilution                                  $0.84           $0.76             $1.64           $1.51
                                               ===========     ===========       ===========     =========== 

Weighted average shares outstanding              3,505,750       3,505,750         3,505,750       3,505,750
                                               ===========     ===========       ===========     =========== 

Weighted average shares outstanding - 
  assuming dilution                              3,511,921       3,506,755         3,511,879       3,506,567
                                               ===========     ===========       ===========     =========== 


See accompanying notes to the unaudited condensed consolidated financial statements.

</TABLE>

                                      -4-



<PAGE>   5
                   PROFESSIONALS GROUP, INC. AND SUBSIDIARIES
           (Formerly Professionals Insurance Company Management Group)
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)


<TABLE>
<CAPTION>
  
                                                                                                Six Months Ended June 30,
                                                                                           -----------------------------------------
                                                                                                1998                     1997
                                                                                           ----------------        -----------------
<S>                                                                                       <C>                      <C>
Net cash provided by operating activities                                                      $42,507,000               $4,228,000
                                                                                           ----------------           --------------
Cash flows from investing activities:
   Proceeds from sale or maturity of short-term investments                                    296,017,000              154,268,000
   Purchases of short-term investments                                                        (287,782,000)            (153,148,000)
   Proceeds from maturity of securities available for sale                                        -                         370,000
   Proceeds from sale of securities available for sale                                          34,912,000               29,975,000
   Purchases of securities available for sale                                                  (82,351,000)             (55,938,000)
   Purchases of property and equipment                                                            (388,000)                (126,000)
   Payment on liability for purchased book of business                                            (600,000)                (747,000)
                                                                                           ---------------            -------------
      Net cash used in investing activities                                                    (40,192,000)             (25,346,000)
                                                                                           ---------------            -------------
Cash flows from financing activities:
   Proceeds from issuance of long-term debt                                                         -                    22,500,000
   Repayment of long-term debt                                                                  (2,500,000)                  -
                                                                                           ---------------            -------------
      Net cash provided by (used in) financing activities                                       (2,500,000)              22,500,000
                                                                                           ---------------            -------------
Net increase (decrease) in cash                                                                   (185,000)               1,382,000

Cash, beginning of period                                                                        2,176,000                2,023,000
                                                                                           ---------------            -------------
Cash, end of period                                                                             $1,991,000               $3,405,000
                                                                                           ===============            =============


See accompanying notes to the unaudited condensed consolidated financial statements.

</TABLE>

                                      -5-


<PAGE>   6




                   PROFESSIONALS GROUP, INC. AND SUBSIDIARIES
           (Formerly Professionals Insurance Company Management Group)
        Notes to Condensed Consolidated Financial Statements (Unaudited)


(1)      Basis of Presentation

         Professionals Group, Inc. (formerly Professionals Insurance Company
         Management Group) ("Professionals Group," and with its direct and
         indirect subsidiaries, the "Company") is a business corporation that
         was incorporated under the laws of the State of Michigan on January 31,
         1996 and functions as an insurance holding company. Professionals Group
         has five direct wholly-owned subsidiaries and two indirect wholly-owned
         subsidiaries. The direct wholly-owned subsidiaries are ProNational
         Insurance Company (formerly PICOM Insurance Company) ("ProNational"),
         PICOM Insurance Agency, Inc. ("PIA"), PICOM Financial Services
         Corporation ("PFSC"),  PPTF Merger Insurance Company ("PPTF Merger")
         and American Insurance Management Corporation ("AIMC"). The indirect
         wholly-owned entities, all of which are wholly-owned subsidiaries of
         ProNational, are PICOM Claims Services Corporation ("PCSC") and
         ProNational Casualty Company ("ProNational Casualty").
        
         ProNational is a stock, property and casualty insurer that offers
         professional liability insurance to providers of health care services
         in Michigan, Illinois, Indiana, Ohio and Pennsylvania. PIA is an
         inactive Michigan insurance agency. PFSC is an inactive business
         corporation. PPTF Merger is a stock, property and casualty insurer
         that was created for the sole purpose of merging Physicians Protective
         Trust Fund, a Florida domiciled medical malpractice self-insurance
         trust fund, with and into ProNational (see note 5). AIMC is an Indiana
         corporation that serves as the attorney-in-fact for American Medical
         Insurance Exchange, an inactive Indiana interinsurance reciprocal
         exchange. PCSC provides claims management services on a fee for
         service basis. ProNational Casualty is a stock, property and casualty
         insurer that is currently not issuing policies.
        
         The accompanying unaudited condensed consolidated financial statements
         of the Company have been prepared in conformity with generally accepted
         accounting principles and with the instructions for Form 10-Q and Rule
         10-01 of Regulation S-X as they apply to interim financial information.
         Accordingly, they do not include all of the information and footnotes
         required by generally accepted accounting principles for complete
         financial statements. All significant intercompany transactions have
         been eliminated in consolidation.

         In the opinion of management, all adjustments (consisting of normal
         recurring adjustments) considered necessary for a fair presentation of
         financial position and results of operations have been included. The
         operating results for the three month and six month periods ended June
         30, 1998 are not necessarily indicative of the results to be expected
         for the year ending December 31, 1998.

                                      -6-

<PAGE>   7



                   PROFESSIONALS GROUP, INC. AND SUBSIDIARIES
           (Formerly Professionals Insurance Company Management Group)
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued


(2)      Net Income Per Share

         Net income per share is computed by dividing net income by the weighted
         average number of shares of common stock and common stock equivalents
         (stock options) outstanding during each period after giving effect to
         stock dividends and treasury shares, calculated on a daily basis.

(3)      Comprehensive Income

         As of January 1, 1998, the Company adopted Statement of Financial
         Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income."
         This standard establishes new rules for the reporting and display of
         comprehensive income and its components; however, the adoption of SFAS
         No. 130 had no impact on the Company's results of operations or
         shareholders' equity. SFAS No. 130 requires unrealized gains or losses
         on the Company's available-for-sale securities, which prior to adoption
         were reported separately in shareholders' equity, to be included in
         other comprehensive income. Prior period financial statements have been
         reclassified to conform to the requirements of SFAS No. 130.

         The components of comprehensive income, net of tax, for the three month
         and six-month periods ended June 30, 1998 and 1997 are as follows:


<TABLE>
<CAPTION>

                               
                                                Three Months Ended        Six Months Ended
                                                     June 30,                 June 30,
                                                -------------------       -----------------
                                                1998           1997       1998         1997
                                                ----           ----       ----         ----
                                                                (In thousands)

                  <S>                         <C>              <C>        <C>         <C>      
                  Net income                  $2,950           2,677       5,759       5,298
                  Unrealized holding gains,
                   net of tax                    746           2,579         788          53
                                              ------           -----      ------      ------

                  Comprehensive income        $3,696           5,256       6,547       5,351
                                              ======           =====      ======      ======

</TABLE>

         Accumulated other comprehensive income, net of tax, included in
         shareholders' equity at June 30, 1998 and December 31, 1997 consists
         exclusively of unrealized holding gains, net of tax.


                                      -7-
<PAGE>   8



                   PROFESSIONALS GROUP, INC. AND SUBSIDIARIES
           (Formerly Professionals Insurance Company Management Group)
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued


(4)      New Accounting Pronouncements

         The Financial Accounting Standards Board ("FASB") has issued SFAS No.
         131 "Disclosures About Segments of an Enterprise and Related
         Information," which is effective for fiscal years beginning after
         December 15, 1997. This standard requires that an enterprise report
         financial and descriptive information about its reportable operating
         segments. Operating segments are components of an enterprise about
         which separate financial information is available that is evaluated
         regularly by the chief operating decision maker in deciding how to
         allocate resources and in assessing performance. Generally, financial
         information is required to be reported on the basis that it is used
         internally for evaluating segment performance and deciding how to
         allocate resources to segments. The Company is not required to report
         pursuant to SFAS No. 131 until December 31, 1998 and has not determined
         what effects the adoption of SFAS No. 131 will have on its consolidated
         footnote disclosures.

(5)      Subsequent Event

         On July 1, 1998, Professionals Group consummated its merger with
         Physicians Protective Trust Fund, a medical malpractice self-insurance
         trust fund located in Coral Gables, Florida ("PPTF"). Pursuant to the
         merger agreement, Professionals Group issued 4,087,525 shares of
         Professionals Group common stock to the eligible members of PPTF and
         paid cash of approximately $66,000 in lieu of fractional shares.
         Additionally, 30,594 shares (representing 20% of the 153,000 total
         shares to be issued over a period of five years) of Professionals Group
         common stock were issued to directors and management of PPTF, as
         contemplated by the merger agreement. The transaction will be accounted
         for as a "pooling of interests" business combination under generally
         accepted accounting principles, whereby Professionals Group will carry
         forward to its accounts the assets and liabilities of PPTF at their
         respective amounts as reported by PPTF. As a result of such business
         combination, Professionals Group's consolidated assets and shareholders
         equity increased to approximately $873.7 million and $223.1 million,
         respectively on a proforma basis as of March 31, 1998.

         June 30, 1998 financial results for PPTF are not currently available
         because Professionals Group has not yet completed a reserve analysis
         of the carried reserves of PPTF at June 30, 1998, and may increase
         reserves in order to better reflect the application of ProNational's
         reserving practices.  Pooling accounting will also require a
         restatement of 1996 and 1997 financial statements to reflect the
         proforma combined operations of Professionals Group and PPTF.

                                      -8-

<PAGE>   9
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         The following discussion and analysis should be read in conjunction
with the condensed consolidated financial statements and the notes thereto
included elsewhere in this report and the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. The following discussion of the financial
condition and results of operations of the Company contains certain
forward-looking statements relating to anticipated future financial conditions
and operating results of the Company and its current business plans. In the
future, the financial condition and operating results of the Company could
differ materially from those discussed herein and its current business plans
could be altered in response to market conditions and other factors beyond the
Company's control. Important factors that could cause or contribute to such
differences or changes include those discussed in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997. (e.g., See the disclosures under
"Item 1. Business - Forward Looking Statements" and under "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.")


Financial Condition -- June 30, 1998 Compared to December 31, 1997:

         Total assets increased 12.8% to $465.9 million at June 30, 1998, as
compared to $413.2 million at December 31, 1997, primarily due to increases in
invested assets, premiums due from policyholders and prepaid reinsurance
premiums (included in other assets in the accompanying condensed consolidated
balance sheets). Invested assets increased 11.7% to $382.7 million, or
approximately 82% of the Company's total assets at June 30, 1998. This compares
to invested assets of $342.6 million, or approximately 83% of the Company's
total assets at December 31, 1997. The increase in invested assets was primarily
due to a $30.6 million reinsurance premium received as a result of an assumed
reinsurance transaction with Physicians Protective Trust Fund ("PPTF"), a
Florida domiciled medical malpractice self-insurance trust fund, as well as
positive cash flows from operations. The increases in premiums due from
policyholders and prepaid reinsurance premiums reflect the timing of renewals
for the Company's Illinois professional liability book of business, which
generally have a common renewal date of January 1.

         The Company's investment portfolio continues to be dominated by fixed
maturity securities at June 30, 1998, and primarily consists of U.S. government
and agency bonds, high-quality corporate bonds, mortgage-backed securities,
redeemable preferred stocks and tax-exempt U.S. municipal bonds. The entire
fixed maturity portfolio, which is classified as available-for-sale, and is
carried at fair value, is sensitive to interest rate changes. At June 30, 1998,
the fixed maturity portfolio had a fair value that was $5.9 million more than
the $355.6 million amortized cost of such portfolio. At December 31, 1997, the
fixed maturity portfolio had a fair value that was $4.7 million higher than the
$308.9 million amortized cost of such portfolio.

         Loss and loss adjustment expense reserves represented approximately 79%
and 77% of the Company's consolidated liabilities at June 30, 1998 and December
31, 1997, respectively. 




                                     -9-
<PAGE>   10
These reserves are determined on the basis of individual claims and actuarially
determined estimates of future losses based on the Company's past loss
experience and projections as to future claims frequency, severity,
inflationary trends and settlement patterns. Estimating professional liability  
reserves is a complex process which is heavily dependent on judgment and
involves many uncertainties. As a result, reserve estimates may vary
significantly from the eventual outcome. It has been the practice of the
Company to establish its loss and loss adjustment expense reserves
conservatively, as it relates to immaturely developed accident years, to
minimize potential uncertainties. The Company's reserves have been established
within the range of acceptable values estimated semi-annually by the Company's
consulting actuary and are recorded based on such actuarial estimates. The
assumptions used in establishing the Company's reserves are regularly reviewed
by management and revised as new data becomes available. Any adjustments
necessary are generally reflected in current operations.

         Loss and loss adjustment expense reserves increased 17.8% to $281.7
million at June 30, 1998, from $239.2 million at December 31, 1997. This
increase was primarily attributable to $30.6 million of reserves assumed from
PPTF, as well as a $5.7 million increase in the reserves assumed from Michigan
Educational Employees Mutual Insurance Company ("MEEMIC"). The remaining $6.2
million of the increase was due to an increase in outstanding professional
liability claims at June 30, 1998 as compared to December 31, 1997 and increases
to case reserves.

         The unearned premium reserve increased to $30.5 million at June 30,
1998, from $21.7 million at December 31, 1997. The increase was due to the
timing of renewals for the Company's Illinois professional liability book of
business, which generally have a common renewal date of January 1, and an
increase in the Company's net retention from $250,000 to $500,000, effective
January 1, 1998.

         Shareholders' equity increased 6.4% to $108.5 million at June 30, 1998,
as compared to $101.9 million at December 31, 1997. The increase in
shareholders' equity was due to net income of $5.8 million and accumulated other
comprehensive income, consisting of unrealized holding gains on the investment
portfolio of $0.8 million during the six month period ended June 30, 1998. The
Company expects to use retained earnings to increase its capital base and
finance future growth and, therefore, there can be no assurance as to any future
cash dividends by the Company.


Results of Operations -- Three Months Ended June 30, 1998 Compared to Three
Months Ended June 30, 1997:


         Total net premiums written were $22.8 million for the three months
ended June 30, 1998, an increase of 115.6%, as compared to net premiums written
of $10.6 million for the three months ended June 30, 1997. The reinsurance
premiums assumed from MEEMIC increased net premiums written by $10.4 million for
the three months ended June 30, 1998 (the MEEMIC reinsurance agreement was not
in force during the three months ended June 30, 1997). Professional liability
related net premiums written were $12.4 million for the three months ended

                                      -10-

<PAGE>   11
June 30, 1998, an increase of 16.9%, as compared to net premiums written of
$10.6 million for the three months ended June 30, 1997. The increase    in
professional liability net premiums written was primarily due to $830,000 of
additional net written premiums from the Company's Illinois book of business as
all Illinois policies were converted to annual policies with a predominant
common renewal date of January 1. Previously, Illinois policies were six-month
policies with common renewal dates of January 1 and July 1. Additional
increases were caused by increased business in Ohio ($250,000), expansion of
business into Pennsylvania ($130,000) and an increase in the Company's net
retention from $250,000 to $500,000, effective January 1, 1998 ($1.2 million).
The increase in professional liability net premiums written was offset somewhat
by lower premiums written in Michigan and price-based competition ($600,000). 
For financial reporting purposes, the previously described $30.6 million
reinsurance transaction with PPTF was recorded net of the $30.6 million in
assumed loss and loss adjustment expense reserves and, therefore, written and
earned premiums and incurred losses and loss adjustment expenses were
unaffected.

         During the three months ended June 30, 1998 and 1997, the Company
continued to balance its need for rate adjustments with a goal of maintaining
market share in very competitive environments in Michigan, Illinois, Indiana,
Ohio and Pennsylvania. Although the Company has maintained profitability and is
endeavoring to offset lower premiums charged through more selective underwriting
practices, there can be no assurance that these practices will be successful in
the long run.

         Net investment income, excluding realized capital gains and losses, was
$5.3 million for the three months ended June 30, 1998, an increase of 11.7% over
net investment income of $4.7 million for the three months ended June 30, 1997.
The increase in net investment income mainly resulted from an increase in
average invested assets associated with the $30.6 million in reinsurance
premiums received from PPTF, as well as positive cash flows from operations. The
weighted average tax equivalent book yield of the fixed maturity portfolio was
7.0% and 6.8% as of June 30, 1998 and 1997, respectively. Net realized
investment gains/losses were negligible during the three month periods ended
June 30, 1998 and 1997.

         Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $12.2 million for the three months ended June 30, 1998, an
increase of 7.4%, as compared to $11.3 million for the three months ended June
30, 1997. As a percentage of premiums earned, the professional liability
insurance incurred loss and loss adjustment expense ratio (including the
increase in reserve for extended reporting period claims) increased to 88.3% for
the three months ended June 30, 1998, as compared to 86.7% for the same period
of 1997. The professional liability insurance incurred loss and loss adjustment
expense ratio has increased due to an increase in outstanding professional
liability claims at June 30, 1998 as compared to June 30, 1997 and a modest
increase in severity caused by increases to case reserves.


         Incurred losses and loss adjustment expenses related to the personal
automobile and homeowners insurance assumed from MEEMIC (the "personal liability
insurance") totaled $7.2 million for the three months ended June 30, 1998. As a
percentage of premiums earned, such personal liability insurance generated an 
incurred loss and loss adjustment expense ratio of 69.3% for the three months 
ended June 30, 1998. The Company believes that the personal

                                      -11-

<PAGE>   12

liability insurance produced a low loss ratio primarily due to lower  than
expected storm related losses in Michigan during the second quarter of  1998.
        
         Policy acquisition and underwriting expenses were $6.6 million for the
three months ended June 30, 1998, an increase of 148.0% over policy acquisition
and underwriting expenses of $2.7 million for the same period of 1997. As a
percentage of premiums earned, the underwriting expense ratio increased to 27.1%
for the three months ended June 30, 1998, from 20.3% for the same period of
1997. The increase in such expenses was mainly due to $3.2 million of ceding
commission attributable to the MEEMIC reinsurance agreement, which was not in
force during the three months ended June 30, 1997, and approximately $200,000 of
non-recurring legal, accounting, investment banker and related expenses
associated with the Company's merger and acquisition activities. Additional
expenses during the three months ended June 30, 1998 included start-up expenses
associated with the Company's planned expansion into Florida and Pennsylvania
during 1998. Interest expense was $334,000 for the three months ended June 30,
1998 compared to $370,000 during the same period in 1997 (See "Liquidity and
Capital Resources").

         The Company recorded $748,000 in federal income tax expense for the
three months ended June 30, 1998, compared to $1.0 million during the same
period in 1997. The effective tax rate was 20.2% for the three months ended June
30, 1998 compared to 27.3% for the three months ended June 30, 1997. The
Company's lower effective tax rate for the three months ended June 30, 1998 was
due primarily to increased holdings in tax-exempt municipal bonds as compared to
the same period in 1997.

         Net income for the three months ended June 30, 1998 was $2.9 million,
or $0.84 per share (assuming dilution) on revenues of $30.0 million. This
compares to net income of $2.7 million, or $0.76 per share (assuming dilution)
on revenues of $18.1 million, for the three months ended June 30, 1997. The
improvement in earnings is primarily attributable to increased net investment
income, as described previously.


Results of Operations -- Six Months Ended June 30, 1998 Compared to Six Months
Ended June 30, 1997:

         Total net premiums written were $55.3 million for the six months ended
June 30, 1998, an increase of 121.4%, as compared to net premiums written of
$25.0 million for the six months ended June 30, 1997. The reinsurance premiums
assumed from MEEMIC increased net premiums written by $20.9 million for the six
months ended June 30, 1998 (the MEEMIC reinsurance agreement was not in force
during the six months ended June 30, 1997). Professional liability related net
premiums written were $34.4 million for the six months ended June 30, 1998, an
increase of 37.7%, as compared to net premiums written of $25.0 million for the
six months ended June 30, 1997. The increase in professional liability net
premiums written was primarily due to $5.7 million of additional net written
premiums from the Company's Illinois book of business as all Illinois policies
were converted to annual policies with a 

                                      -12-

<PAGE>   13

predominant common renewal date of January 1. Previously, Illinois policies were
six-month policies with common renewal dates of January 1 and July 1. Additional
increases were caused by increased business in Ohio ($2.9 million), expansion of
business into Pennsylvania ($500,000) and an increase in the Company's net
retention from $250,000 to $500,000, effective January 1, 1998 ($2.4 million).
The increase in professional liability net premiums written was offset somewhat
by lower premiums written in Michigan and price-based competition ($2.1
million). For financial reporting purposes, the previously described $30.6
million reinsurance transaction with PPTF was recorded net of the $30.6 million
in assumed loss and loss adjustment expense reserves and, therefore, written and
earned premiums and incurred losses and loss adjustment expenses were
unaffected.

         During the six months ended June 30, 1998 and 1997, the Company
continued to balance its need for rate adjustments with a goal of maintaining
market share in very competitive environments in Michigan, Illinois, Indiana,
Ohio and Pennsylvania. Although the Company has maintained profitability and is
endeavoring to offset lower premiums charged through more selective underwriting
practices, there can be no assurance that these practices will be successful in
the long run.

         Net investment income, excluding realized capital gains and losses, was
$10.4 million for the six months ended June 30, 1998, an increase of 17.4% over
net investment income of $8.9 million for the six months ended June 30, 1997.
The increase in net investment income mainly resulted from an increase in
average invested assets associated with the $30.6 million in reinsurance
premiums received from PPTF, as well as positive cash flows from operations. The
weighted average tax equivalent book yield of the fixed maturity portfolio was
7.0% and 6.8% as of June 30, 1998 and 1997, respectively. Net realized
investment gains/losses were negligible during the six month periods ended June
30, 1998 and 1997.

         Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $24.2 million for the six months ended June 30, 1998, an
increase of 11.1%, as compared to $21.8 million for the six months ended June
30, 1997. As a percentage of premiums earned, the professional liability
insurance incurred loss and loss adjustment expense ratio (including the
increase in reserve for extended reporting period claims) increased to 88.4% for
the six months ended June 30, 1998, as compared to 85.7% for the same period of
1997. The professional liability insurance incurred loss and loss adjustment
expense ratio has increased due to an increase in outstanding professional
liability claims at June 30, 1998 as compared to June 30, 1997 and a modest
increase in severity caused by increases to case reserves.

         Incurred losses and loss adjustment expenses related to the personal
automobile and homeowners insurance assumed from MEEMIC (the "personal liability
insurance") totaled $14.6 million for the six months ended June 30, 1998. As a
percentage of premiums earned, such personal liability insurance generated an
incurred loss and loss adjustment expense ratio of 69.8% for the six months
ended June 30, 1998. The Company believes that the personal liability 

                                      -13-

<PAGE>   14

insurance produced a low loss ratio primarily due to lower than expected storm
related losses in Michigan during the first six months of 1998.

         Policy acquisition and underwriting expenses were $13.1 million for the
six months ended June 30, 1998, an increase of 147.3% over policy acquisition
and underwriting expenses of $5.3 million for the same period of 1997. As a
percentage of premiums earned, the underwriting expense ratio increased to 27.1%
for the six months ended June 30, 1998, from 20.7% for the same period of 1997.
The increase in such expenses was mainly due to $6.5 million of ceding
commission attributable to the MEEMIC reinsurance agreement, which was not in
force during the six months ended June 30, 1997, and approximately $300,000 of
non-recurring legal, accounting, investment banker and related expenses
associated with the Company's merger and acquisition activities. Additional
expenses during the six months ended June 30, 1998 included start-up expenses
associated with the Company's planned expansion into Florida and Pennsylvania
during 1998. Interest expense related to the Company's bank borrowings of $22.5
million obtained in April 1997 was $694,000 for the six months ended June 30,
1998 compared to $370,000 during the same period in 1997 (See "Liquidity and
Capital Resources").

         The Company recorded $1.5 million in federal income tax expense for the
six months ended June 30, 1998, compared to $1.8 million during the same period
in 1997. The effective tax rate was 20.1% for the six months ended June 30, 1998
compared to 25.8% for the six months ended June 30, 1997. The Company's lower
effective tax rate for the six months ended June 30, 1998 was due primarily to
increased holdings in tax-exempt municipal bonds as compared to the same period
in 1997.

         Net income for the six months ended June 30, 1998 was $5.8 million, or
$1.64 per share (assuming dilution) on revenues of $59.8 million. This compares
to net income of $5.3 million, or $1.51 per share (assuming dilution) on
revenues of $34.6 million, for the six months ended June 30, 1997. The
improvement in earnings is primarily attributable to increased net investment
income, as described previously.


Liquidity and Capital Resources:

         Liquidity describes the ability to generate sufficient cash flows to
meet the cash requirements of continuing operations. Liquidity, in the context
of insurance operations, is typically determined by two distinct operations:
underwriting and investing. Net cash flows from underwriting operations are used
to build an investment portfolio, which in turn produces future cash from
investment income. The Company continuously monitors available cash and
short-term investment balances in relation to projected cash needs to maintain
adequate balances for current payments while maximizing cash available for
longer term investment opportunities.

         The payment of losses, loss adjustment expenses and operating expenses
in the ordinary course of business represents the Company's principal need for
liquid funds. Payments for 

                                      -14-

<PAGE>   15

losses and loss adjustment expenses are distributed fairly evenly throughout the
year. Payments for reinsurance are made within thirty days subsequent to the end
of each quarter, with adjustments made after each reinsurance year.
Historically, cash used to pay for these items has been provided by operations.
The Company did not borrow any additional funds in the six month periods ended
June 30, 1998 or 1997. As of June 30, 1998, no material commitments for capital
expenditures existed, and management believes the Company's present liquidity,
together with its expected cash flow from operations, will be sufficient to fund
any future potential commitments for capital expenditures.

         On April 4, 1997, Professionals Group borrowed $22.5 million under a
seven-year unsecured bank term loan, bearing interest at an adjustable rate of
LIBOR plus 62.5 basis points (6.375% at June 30, 1998), and payable quarterly
(the "Credit Agreement"). Principal payments are due on April 30, as follows:
1998 - $2,500,000; 1999 - $2,500,000; 2000 - $3,000,000; 2001 - $3,000,000; 2002
- $3,500,000; 2003 - $3,500,000; and 2004 - $4,500,000. The principal payment
due on April 30, 1998 was timely paid.

         The Credit Agreement contains a covenant which prohibits the payment of
cash dividends on Professionals Group's common stock (except for cash paid in
lieu of fractional shares related to stock dividends declared). Additional
covenants also require the Company to, among other things, maintain total
consolidated shareholders' equity of at least $80.0 million plus 50% of the
preceding fiscal year's consolidated net income, maintain a ratio of debt to
equity of not more than 0.5:1 and maintain a fixed charges coverage ratio and an
interest coverage ratio (as defined by the Credit Agreement) of not less than
1.5:1 and 2.5:1, respectively. The Company was in compliance with, or had
received waivers of, all required covenants at June 30, 1998.

         On July 1, 1998, Professionals Group consummated its merger with
Physicians Protective Trust Fund, a medical malpractice self-insurance trust
fund located in Coral Gables, Florida ("PPTF"). Pursuant to the merger
agreement, Professionals Group issued 4,087,525 shares of Professionals Group
common stock to the eligible members of PPTF and paid cash of approximately
$66,000 in lieu of fractional shares. Additionally, 30,594 shares (representing
20% of the 153,000 total shares to be issued over a period of five years) of
Professionals Group common stock were issued to directors and management of
PPTF, as contemplated by the merger agreement. The transaction will be accounted
for as a "pooling of interests" business combination under generally accepted
accounting principles, whereby Professionals Group will carry forward to its
accounts the assets and liabilities of PPTF at their respective amounts as
reported by PPTF. As a result of such business combination, Professionals
Group's consolidated assets and shareholders equity increased to approximately
$873.7 million and $223.1 million, respectively on a proforma basis as of March
31, 1998.

         The third quarter results for Professionals Group will include the
pooled results for the merged operations. For the third quarter, Professionals
Group expects to take a one-time after-tax charge for merger related expenses of
up to approximately $3.0 million.  June 30, 1998 financial results for PPTF are
not currently available because Professionals Group has not yet completed a
reserve analysis of the carried reserves of PPTF at June 30, 1998, and may
increase reserves in order to better reflect the application of ProNational's
reserving practices. 

                                      -15-

<PAGE>   16


The amount of such a charge has not been determined and, if taken, will relate
to the June 30, 1998 pre-merger financial statements of PPTF and will not effect
third quarter income of Professionals Group. Such a charge would be reflected in
Professionals Group's pooled results for 1998. Pooling accounting will also
require a restatement of 1996 and 1997 financial statements to reflect the
proforma combined operations of Professionals Group and PPTF.


Effects of New Accounting Pronouncements:

         The FASB has issued SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. This standard requires that an enterprise
report financial and descriptive information about its reportable operating
segments. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. Generally, financial information is required to be
reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. The Company is
not required to report pursuant to SFAS No. 131 until December 31, 1998 and has
not determined what effects the adoption of SFAS No. 131 will have on its
consolidated footnote disclosures.


Year 2000 Compliance:

         The Company has completed an assessment of its computer programs and
has determined that portions of its software will have to be modified or
replaced to facilitate the continued operation of its computers in the Year 2000
and thereafter. Such modifications and replacements, which are not expected to
exceed $500,000, will be expensed as incurred. To date, the Company has incurred
and expensed approximately $250,000 (primarily for such assessment, the
development of a modification plan and the development of modifications to
existing software).

         The Company expects to complete its contemplated modifications and
replacements not later than March 31, 1999, which is prior to any anticipated
impact on the Company's operating systems. The Company believes that with timely
modifications to existing software and conversions to new software, Year 2000
compliance will not pose significant operational problems or have a material
impact on the operations of the Company.

         The costs and timing of the modifications and replacements currently
contemplated by the Company are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained 

                                      -16-

<PAGE>   17


in this area and the ability to locate and correct all relevant computer codes.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         By virtue of General Instruction 1 to Item 305 of Regulation S-K, and
because it is neither a bank or thrift and its market capitalization on January
28, 1997 did not exceed $2.5 billion, the Company is not required at this time
to provide disclosures under this Item 3.


PART II.  OTHER INFORMATION

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

         The Company's Annual Meeting of Shareholders was held on June 3, 1998.
The Company filed a Current Report on Form 8-K dated July 1, 1998 disclosing
under Item 5 (Other Events) of Form 8-K the submission of various matters to
votes of the stockholders of the Company at such Annual Meeting and the results
of such votes. The disclosures contained under Item 5 of such Current Report on
Form 8-K is hereby incorporated herein by this reference.



                                      -17-

<PAGE>   18



Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits.
          
<TABLE>  
<CAPTION>

             Item 601
          Regulation S-K
        Exhibit Reference
             Number                 Exhibit Description
        -----------------           -------------------
              <S>                   <C>

              (3)(a)                Second Amended and Restated Articles of Incorporation of Professionals Group,
                                    Inc. (incorporated by reference to Exhibit 3.1 of the registrant's Current
                                    Report on Form 8-K dated July 1, 1998 (File No. 0-21223)).

              (3)(b)                By-laws of Professionals Group, Inc. (incorporated by reference to Exhibit
                                    (3)(b)/(4)(b) of the initial filing of the registrant's Registration Statement
                                    on Form S-4 as filed with the Securities and Exchange Commission on April 3,
                                    1996 (registration no. 333-3138)).

              (11)                  No statement re: computation of per share earnings is required to be filed
                                    because the computations can be clearly determined from the materials
                                    contained herein.

              (27)                  Financial Data Schedule of registrant.*

</TABLE>

--------------------------------
*        Filed herewith.

         (b)      Reports on Form 8-K.

                  The Company filed a Current Report on Form 8-K dated July 1,
                  1998 disclosing (i) under Item 2 (Acquisition or Disposition
                  of Assets) of Form 8-K the Company's merger with Physicians
                  Protective Trust Fund, a medical malpractice self-insurance
                  trust fund, located in Coral Gables, Florida, and (ii) under
                  Item 5 (Other Events) the submission of various matters to
                  votes of the stockholders of the Company at its 1998 Annual
                  Meeting of Stockholders and the results of such votes.

                  No other reports were filed during the three months ended 
                  June 30, 1998.



                                      -18-

<PAGE>   19


 SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                   PROFESSIONALS GROUP, INC.


DATE:  August 12, 1998             /s/ John F. Lang
                                   -----------------------------
                                   John F. Lang
                                   Vice President, Treasurer and
                                   Chief Accounting Officer (Principal Financial
                                   Officer and Principal Accounting Officer)




                                      -19-

<PAGE>   20
                                Exhibit Index
                                -------------

Exhibit No.                     Description
-----------                     -----------
    27                          Financial Data Schedule