<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 March 31, 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 INSURANCE COMPANY MANAGEMENT GROUP
             (Exact name of registrant as specified in its charter)

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

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

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


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 May 12, 1998 was 3,505,750.


<PAGE>   2



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>


                                                                                       PAGE NO.
<S>                                                                                     <C>
PART I.  FINANCIAL INFORMATION

         Item 1.    Financial Statements
                     
                    Condensed Consolidated Balance Sheets at March 31, 1998
                    (Unaudited) and December 31, 1997                                     3
                                                                                          
                    Condensed Consolidated Statements of Income for the Three             
                    Months Ended March 31, 1998 and 1997 (Unaudited)                      4
                                                                                          
                    Condensed Consolidated Statements of Cash Flows for the               
                    Three Months Ended March 31, 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                                  9-14
                                                                                         
PART II. OTHER INFORMATION                                                               
                                                                                         
         Item 6.    Exhibits and Reports on Form 8-K                                        14

                    Signatures                                                              15
</TABLE>

                                      -2-
<PAGE>   3
<PAGE 3>

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

               PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
                               AND SUBSIDIARIES
                    Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                            March 31,                December 31,
                                Assets                                        1998                      1997
                                                                       -------------------       -------------------
Investments:                                                              (Unaudited)
<S>                                                                        <C>                       <C>
   Fixed maturities available for sale, at fair value
      (amortized cost:  $344,551,000 and $308,941,000)                       $349,286,000              $313,633,000
   Equity securities available for sale, at fair value
      (cost:  $2,723,000 and $2,704,000)                                        2,871,000                 2,831,000
   Short-term investments, at cost                                             30,399,000                25,655,000
   Real estate, at cost, net of accumulated depreciation                          436,000                   442,000
                                                                       -------------------       -------------------
               Total investments                                              382,992,000               342,561,000
Cash                                                                            1,232,000                 2,176,000
Premiums due from policyholders                                                18,847,000                 7,051,000
Reinsurance balances                                                           23,617,000                24,257,000
Accrued investment income                                                       6,276,000                 4,785,000
Deferred federal income taxes                                                  14,565,000                15,003,000
Property and equipment, at cost, net of
  accumulated depreciation                                                      8,281,000                 9,060,000
Deferred policy acquisition costs                                               1,259,000                 1,376,000
Other assets                                                                   10,306,000                 6,926,000
                                                                       -------------------       -------------------
               Total assets                                                  $467,375,000              $413,195,000
                                                                       ===================       ===================

                 Liabilities and Shareholders' Equity
Liabilities:
   Loss and loss adjustment expense reserves                                 $277,721,000              $239,151,000
   Reserve for extended reporting period claims                                15,400,000                15,300,000
   Unearned premiums                                                           33,350,000                21,665,000
   Long-term debt                                                              22,500,000                22,500,000
   Accrued expenses and other liabilities                                      13,627,000                12,653,000
                                                                       -------------------       -------------------
               Total liabilities                                              362,598,000               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                                                           83,480,000                80,671,000
   Accumulated other comprehensive income,
      net of deferred federal income taxes                                      3,222,000                 3,180,000
                                                                       -------------------       -------------------
               Total shareholders' equity                                     104,777,000               101,926,000
                                                                       -------------------       -------------------
               Total liabilities and shareholders' equity                    $467,375,000              $413,195,000
                                                                       ===================       ===================

</TABLE>

See accompanying notes to the unaudited condensed consolidated financial
statements.
        
                                      -3-

<PAGE>   4
               PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
                               AND SUBSIDIARIES
                 Condensed Consolidated Statements of Income
                                 (Unaudited)


<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                                March 31,
                                                                   ------------------------------------
                                                                        1998                 1997
                                                                   ----------------     ---------------
<S>                                                                <C>                   <C>
Revenues and other income:
   Net premiums written                                                $32,444,000         $14,376,000
   Increase in unearned premiums, net of
      prepaid reinsurance premiums                                      (8,368,000)         (1,985,000)
                                                                   ----------------     ---------------
   Premiums earned, net                                                 24,076,000          12,391,000
   Net investment income                                                 5,171,000           4,172,000
   Net realized investment gains (losses)                                    2,000             (36,000)
   Other                                                                   518,000              54,000
                                                                   ----------------     ---------------
      Total revenues and other income                                   29,767,000          16,581,000
                                                                   ----------------     ---------------

Expenses:
   Losses and loss adjustment expenses, net                             19,293,000          10,384,000
   Increase in reserve for extended reporting
      period claims                                                        100,000             100,000
   Policy acquisition and other underwriting expenses                    6,501,000           2,635,000
   Interest expense                                                        360,000            -
                                                                   ----------------     ---------------
      Total expenses                                                    26,254,000          13,119,000
                                                                   ----------------     ---------------

      Income from operations before federal income taxes                 3,513,000           3,462,000

Federal income taxes                                                       704,000             841,000
                                                                   ----------------     ---------------

      Net income                                                        $2,809,000          $2,621,000
                                                                   ================     ===============


Net income per common share                                                  $0.80               $0.75
                                                                   ================     ===============

Net income per common share - assuming dilution                              $0.80               $0.75
                                                                    ================     ===============

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

Weighted average shares outstanding - assuming dilution                  3,511,837           3,506,380
                                                                   ================     ===============

</TABLE>


See accompanying notes to the unaudited condensed consolidated financial
statements.
        

                                      -4-

<PAGE>   5
               PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
                               AND SUBSIDIARIES
               Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)



<TABLE>
<CAPTION>
                                                                   Three Months Ended March 31,
                                                            -------------------------------------------
                                                                   1998                     1997
                                                            --------------------       ---------------
<S>                                                         <C>                        <C>
Net cash provided by (used in) operating activities                 $39,576,000              ($987,000)
                                                            -------------------         --------------

Cash flows from investing activities:
   Proceeds from sale or maturity of short-term investments         168,188,000             81,775,000
   Purchases of short-term investments                             (172,686,000)           (84,490,000)
   Proceeds from maturity of securities available for sale            -                        370,000
   Proceeds from sale of securities available for sale               12,487,000             19,385,000
   Purchases of securities available for sale                       (48,433,000)           (15,927,000)
   Purchases of property and equipment                                  (76,000)               (90,000)
                                                            --------------------        ---------------
      Net cash provided by (used in) investing activities           (40,520,000)             1,023,000
                                                            --------------------        ---------------

Net increase (decrease) in cash                                        (944,000)                36,000

Cash, beginning of period                                             2,176,000              2,023,000
                                                            --------------------        ---------------

Cash, end of period                                                  $1,232,000             $2,059,000
                                                            ====================        ===============
</TABLE>

See accompanying notes to the unaudited condensed consolidated financial
statements.
        
                                     -5-
<PAGE>   6
                PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
                                AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)


(1)      Basis of Presentation

         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 PICOM Insurance Company ("PICOM"), 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 PICOM, are
         PICOM Claims Services Corporation ("PCSC") and ProNational Casualty
         Company ("ProNational Casualty").

         PICOM 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 PICOM. 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 period ended March 31, 1998 are
         not necessarily indicative of the results to be expected for the year
         ending December 31, 1998.


                                      -6-
<PAGE>   7



                PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
                                AND SUBSIDIARIES
   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 related tax, for the
         three-month periods ended March 31, 1998 and 1997 are as follows:


<TABLE>
<CAPTION>
                                                                         1998             1997
                                                                         ----           ------
                                                                             (In thousands)

                  <S>                                                  <C>               <C>
                  Net income                                           $2,809             2,621
                  Unrealized holding gains, net of tax                     42            (2,526)
                                                                      -------            ------

                     Comprehensive income                              $2,851                95
                                                                       ======            ======
</TABLE>

         The components of accumulated other comprehensive income, net of
         related tax, included in shareholders' equity at March 31, 1998 and
         December 31, 1997 include only unrealized holding gains, net of tax.


                                      -7-
<PAGE>   8



                PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
                                AND SUBSIDIARIES
   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
         results of operations or financial condition.



                                      -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 -- March 31, 1998 Compared to December 31, 1997:

     Total assets increased to $467.4 million at March 31, 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 11.8% to $383.0 million, or approximately 82%
of the Company's total assets at March 31, 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 have a common renewal date of
January 1.

     The Company's investment portfolio continues to be dominated by fixed
maturity securities at March 31, 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 March 31, 1998,
the fixed maturity portfolio had a fair value that was $4.7 million more than
the $344.6 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 77%
of the Company's consolidated liabilities at both March 31, 1998 and December
31, 1997. These 


                                      -9-

<PAGE>   10
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 16.1% to $277.7
million at March 31, 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 $2.7 million increase in the reserves assumed from Michigan
Educational Employees Mutual Insurance Company ("MEEMIC"). The remainder of the
increase was due to an increase in outstanding professional liability claims at
March 31, 1998 as compared to December 31, 1997.

         The unearned premium reserve increased to $33.4 million at March 31,
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 have a common renewal date of January 1, and an increase in the
Company's net retention to $500,000, effective January 1, 1998.

         Shareholders' equity increased 2.8% to $104.8 million at March 31,
1998, as compared to $101.9 million at December 31, 1997. The increase in
shareholders' equity was due to net income of $2.8 million during the three
month period ended March 31, 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 March 31, 1998 Compared to Three
Months Ended March 31, 1997:

         Total net premiums written were $32.4 million for the three months
ended March 31, 1998, an increase of 125.7%, as compared to net premiums written
of $14.4 million for the three months ended March 31, 1997. The reinsurance
premiums assumed from MEEMIC increased net premiums written by $10.4 million for
the three months ended March 31, 1998 (the MEEMIC reinsurance agreement was not
in force during the three months ended March 31, 1997). Professional liability
related net premiums written were $22.0 million for the three months ended March
31, 1998, an increase of 53.0%, as compared to net premiums written of $14.4
million for the three months ended March 31, 1997. The increase in professional
liability net premiums written was primarily due to $5.2 million of additional
net written premiums from 

                                      -10-
<PAGE>   11

the Company's Illinois book of business as all Illinois policies were converted
to annual policies with a 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 ($3.4
million), expansion of business into Pennsylvania ($370,000) and an increase in
the Company's net retention to $500,000, effective January 1, 1998 ($1.2
million). The increase in professional liability net premiums written was offset
somewhat by continued price-based competition, particularly in the Michigan and
Illinois insurance markets. 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 March 31, 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
$5.2 million for the three months ended March 31, 1998, an increase of 24.0%
over net investment income of $4.2 million for the three months ended March 31,
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
6.9% and 6.8% as of March 31, 1998 and 1997, respectively. Net realized
investment gains/losses were negligible during the three month periods ended
March 31, 1998 and 1997.

         Professional liability insurance incurred losses and loss adjustment
expenses (including the increase in reserve for extended reporting period
claims) totaled $12.1 million for the three months ended March 31, 1998, an
increase of 15.1%, as compared to $10.5 million for the three months ended
March 31, 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 88.5%
for the three months ended March 31, 1998, as compared to 84.6% 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 March 31, 1998 as compared to March 31, 1997.

         Incurred losses and loss adjustment expenses related to the personal
automobile and homeowners insurance assumed from MEEMIC (the "personal liability
insurance") totaled $7.3 million for the three months ended March 31, 1998. As a
percentage of premiums earned, such personal liability insurance generated an
incurred loss and loss adjustment expense ratio of 70.2% for the three months
ended March 31, 1998. The Company believes that the personal liability insurance
produced a low loss ratio primarily due to mild weather-related conditions in
Michigan during the first quarter of 1998.



                                      -11-
<PAGE>   12


         Policy acquisition and underwriting expenses were $6.5 million for the
three months ended March 31, 1998, an increase of 146.7% over policy acquisition
and underwriting expenses of $2.6 million for the same period of 1997. As a
percentage of premiums earned, the underwriting expense ratio increased to 27.0%
for the three months ended March 31, 1998, from 21.3% 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 March 31, 1997, and approximately $100,000
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 March 31, 1998 included start-up expenses
associated with the Company's planned expansion into Florida and Pennsylvania
during 1998. Interest expense of $360,000 during the three months ended March
31, 1998 resulted from the Company's bank borrowings of $22.5 million obtained
in April 1997. See "Liquidity and Capital Resources."

         The Company recorded $704,000 in federal income tax expense for the
three months ended March 31, 1998, compared to $841,000 during the same period
in 1997. The effective tax rate was 20.0% for the three months ended March 31,
1998 compared to 24.3% for the three months ended March 31, 1997. The Company's
lower effective tax rate for the three months ended March 31, 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 March 31, 1998 was $2.8 million,
or $0.80 per share (assuming dilution) on revenues of $29.8 million. This
compares to net income of $2.6 million, or $0.75 per share (assuming dilution)
on revenues of $16.6 million, for the three months ended March 31, 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 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
three 

                                      -12-

<PAGE>   13

month periods ended March 31, 1998 or 1997. As of March 31, 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 (6.40% at March 31, 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 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 March 31, 1998.

         On August 15, 1997, Professionals Group announced a definitive
agreement to merge PICOM with Physicians Protective Trust Fund, a medical
malpractice self-insurance trust fund located in Coral Gables, Florida ("PPTF").
PPTF is a provider of medical malpractice insurance for physicians and physician
corporations in the State of Florida. This agreement was amended and restated on
October 3, 1997, and pursuant to the amended and restated agreement,
Professionals Group will issue 4,089,160 shares of Professionals Group common
stock to the eligible members of PPTF and 153,000 shares to directors and
management of PPTF upon consummation of the merger. The transaction is expected
to be accounted for as a pooling of interests, whereby Professionals Group will
carry forward to its accounts the assets and liabilities of PPTF at their
respective amounts as reported by PPTF. The proposed merger has been submitted
to the shareholders of Professionals Group and the policyholders of PPTF for
their review and approval at meetings to be held June 3, 1998 and June 5, 1998,
respectively. Assuming favorable shareholder/policyholder votes and final
regulatory approval, the merger is expected to close on or before July 1, 1998.


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, 


                                       13
<PAGE>   14

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 results of operations or financial
condition.


PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits.

             Item 601
          Regulation S-K
         Exhibit Reference
             Number                 Exhibit Description
         -----------------          -------------------

               (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.*

---------------

*        Filed herewith.

         (b)      Reports on Form 8-K.

                  None.


                                      -14-
<PAGE>   15


 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 INSURANCE COMPANY
                                      MANAGEMENT GROUP


DATE:  May 12, 1998                   /s/ R. Kevin Clinton
                                      ---------------------------------
                                      R. Kevin Clinton
                                      Vice President, Treasurer and
                                      Chief Financial Officer (Principal
                                      Financial Officer and Accounting Officer)









                                      -15-

<PAGE>   16
                                Exhibit Index


Exhibit Number                          Description
--------------                          -----------

      27                        Financial Data Schedule