##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2007

OR



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

For the transition period from              to

No. 000-50926

(Commission File Number)



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FREMONT MICHIGAN INSURACORP, INC.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Michigan                                                       |  | 42-1609947                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|933 E. Main St., Fremont, Michigan                             |  | 49412                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(231) 924-0300

(Registrants telephone number, including area code)



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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 ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes ̈No  x

Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date.





|                            |  |                                                   
|--------------------------- |  | --------------------------------------------------
|                            |  | Number of Shares Outstanding as of August 31, 2007
|COMMON STOCK (No Par Value) |  | 1,727,456                                         
|(Title of Class)            |  | (Outstanding Shares)                              



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  | 3 
|                              |  | Consolidated Balance Sheets                                                           |  | 3 
|                              |  | Consolidated Statements of Operations                                                 |  | 4 
|                              |  | Consolidated Statement of Stockholders Equity                                        |  | 5 
|                              |  | Consolidated Statements of Cash Flows                                                 |  | 6 
|                              |  | Notes to Consolidated Financial Statements                                            |  | 7 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 29
|Item 4.                       |  | Controls and Procedures                                                               |  | 29
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 30
|Item 1A.                      |  | Risk Factors                                                                          |  | 30
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 30
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 30
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 30
|Item 5.                       |  | Other Information                                                                     |  | 30
|Item 6.                       |  | Exhibits                                                                              |  | 30
|                              | 
|SIGNATURES                    |  | 32                                                                                   



2



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##### Table of Contents

PART IFINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS.
|------- | ---------------------

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                                 |  |                   |            |                  |   |           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ----------
|                                                                                                                                                                                 |  | September 30,2007 |            | December 31,2006
|Assets                                                                                                                                                                           |  |                   |            |                  |   |           
|                                                                                                                                                                                 |  |                  
|Investments:                                                                                                                                                                     |  |                   |            |                  |   |           
|Fixed maturities available for sale, at fair value                                                                                                                               |  | $                 | 46,602,694 |                  | $ | 44,959,266
|Equity securities available for sale, at fair value                                                                                                                              |  |                   | 8,346,773  |                  |   | 11,689,756
|Mortgage loans on real estate from related parties                                                                                                                               |  |                   | 255,490    |                  |   | 260,808   
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|Total investments                                                                                                                                                                |  |                   | 55,204,957 |                  |   | 56,909,830
|Cash and cash equivalents                                                                                                                                                        |  |                   | 6,852,937  |                  |   | 4,598,843 
|Premiums due from policyholders, net                                                                                                                                             |  |                   | 8,186,900  |                  |   | 7,528,683 
|Amounts due from reinsurers                                                                                                                                                      |  |                   | 8,164,790  |                  |   | 7,883,153 
|Prepaid reinsurance premiums                                                                                                                                                     |  |                   | 1,619,975  |                  |   | 404,016   
|Accrued investment income                                                                                                                                                        |  |                   | 518,490    |                  |   | 447,411   
|Deferred policy acquisition costs                                                                                                                                                |  |                   | 3,356,690  |                  |   | 3,235,383 
|Deferred federal income taxes                                                                                                                                                    |  |                   | 3,097,493  |                  |   | 3,070,713 
|Property and equipment, net of accumulated depreciation                                                                                                                          |  |                   | 1,993,249  |                  |   | 1,771,323 
|Other assets                                                                                                                                                                     |  |                   | 5,525      |                  |   | 28,078    
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|                                                                                                                                                                                 |  | $                 | 89,001,006 |                  | $ | 85,877,433
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|Liabilities and Stockholders Equity                                                                                                                                             |  |                   |            |                  |   |           
|                                                                                                                                                                                 |  |                  
|Liabilities:                                                                                                                                                                     |  |                   |            |                  |   |           
|Losses and loss adjustment expenses                                                                                                                                              |  | $                 | 22,015,170 |                  | $ | 20,176,555
|Unearned premiums                                                                                                                                                                |  |                   | 22,794,870 |                  |   | 21,463,019
|Reinsurance balances payable                                                                                                                                                     |  |                   | 48,060     |                  |   | 50,313    
|Accrued expenses and other liabilities                                                                                                                                           |  |                   | 7,144,756  |                  |   | 6,867,081 
|Surplus notes                                                                                                                                                                    |  |                   |           |                  |   | 2,890,288 
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|Total liabilities                                                                                                                                                                |  |                   | 52,002,856 |                  |   | 51,447,256
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|Commitments and contingencies                                                                                                                                                    |  |                   |            |                  |   |           
|                                                                                                                                                                                 |  |                  
|Stockholders Equity                                                                                                                                                             |  |                   |            |                  |   |           
|Preferred stock, no par value, authorized 4,500,000 shares, no shares issued and outstanding                                                                                     |  |                   |           |                  |   |          
|Class A common stock, no par value, authorized 5,000,000 shares, 1,727,456 and 1,725,456 shares issued and outstanding at
September 30, 2007 and December 31, 2006, respectively |  |                   |           |                  |   |          
|Class B common stock, no par value, authorized 500,000 shares, no shares issued and outstanding                                                                                  |  |                   |           |                  |   |          
|Additional paid-in capital                                                                                                                                                       |  |                   | 7,700,209  |                  |   | 7,605,096 
|Retained earnings                                                                                                                                                                |  |                   | 27,995,958 |                  |   | 25,511,413
|Accumulated other comprehensive income                                                                                                                                           |  |                   | 1,301,983  |                  |   | 1,313,668 
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|Total stockholders equity                                                                                                                                                       |  |                   | 36,998,150 |                  |   | 34,430,177
|                                                                                                                                                                                 |  |                   |            |                  |   |           
|Total liabilities and stockholders equity                                                                                                                                       |  | $                 | 89,001,006 |                  | $ | 85,877,433
|                                                                                                                                                                                 |  |                   |            |                  |   |           

The accompanying notes are an integral part of the consolidated financial statements.



3



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##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Operations (Unaudited)



|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|-------------------------------------------------- |  | -------------------------------- | ---------- | ---- | ------------------------------- | ---------- | ---- |  | ---- | ---------- |  | - | ----------
|                                                   |  | Three Months Ended September 30, |            |      | Nine Months Ended September 30,
|                                                   |  | 2007                             |            | 2006 |                                 |            | 2007 |  | 2006
|Revenues:                                          |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Net premiums earned                                |  | $                                | 10,874,446 |      | $                               | 9,908,832  |      |  | $    | 31,739,937 |  | $ | 29,140,172
|Net investment income                              |  |                                  | 527,002    |      |                                 | 459,670    |      |  |      | 1,536,762  |  |   | 1,305,136 
|Net realized gains (losses) on investments         |  |                                  | 1,124,059  |      |                                 | (217       | )    |  |      | 1,446,031  |  |   | 295,494   
|Other income, net                                  |  |                                  | 122,449    |      |                                 | 107,201    |      |  |      | 338,153    |  |   | 305,452   
|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Total revenues                                     |  |                                  | 12,647,956 |      |                                 | 10,475,486 |      |  |      | 35,060,883 |  |   | 31,046,254
|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Expenses:                                          |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Losses and loss adjustment expenses, net           |  |                                  | 7,768,458  |      |                                 | 5,804,215  |      |  |      | 19,685,075 |  |   | 14,983,839
|Policy acquisition and other underwriting expenses |  |                                  | 4,058,431  |      |                                 | 3,463,918  |      |  |      | 11,661,017 |  |   | 10,132,178
|Interest expense                                   |  |                                  | 45,010     |      |                                 | 50,580     |      |  |      | 146,170    |  |   | 177,823   
|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Total expenses                                     |  |                                  | 11,871,899 |      |                                 | 9,318,713  |      |  |      | 31,492,262 |  |   | 25,293,840
|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Income before federal income tax expense           |  |                                  | 776,057    |      |                                 | 1,156,773  |      |  |      | 3,568,621  |  |   | 5,752,414 
|Federal income tax expense                         |  |                                  | 206,567    |      |                                 | 375,589    |      |  |      | 1,084,076  |  |   | 1,889,560 
|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Net income                                         |  | $                                | 569,490    |      | $                               | 781,184    |      |  | $    | 2,484,545  |  | $ | 3,862,854 
|                                                   |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Earnings per share                                 |  |                                  |            |      |                                 |            |      |  |      |            |  |   |           
|Basic                                              |  | $                                | .33        |      | $                               | 0.45       |      |  | $    | 1.44       |  | $ | 2.24      
|Diluted                                            |  | $                                | .32        |      | $                               | 0.44       |      |  | $    | 1.41       |  | $ | 2.20      

The accompanying notes are an integral part of the consolidated financial statements.



4



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##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statement of Stockholders Equity
(Unaudited)



|                                                 |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   |           |   |  |   |            |  
|------------------------------------------------ |  | --------------- | ------- | ------------ | ------- | -------------------------- |  | ----------------- | - | --------------------------------------------- | - | --------- | ----- | - | ---------- |  | - | --------- | - |  | - | ---------- | -
|                                                 |  | Preferred Stock |         | Common Stock |         | Additional Paid-in Capital |  | Retained Earnings |   | Accumulated Other Comprehensive Income (Loss) |   |           | Total |  
|                                                 |  |                 | Class A |              | Class B |                            |  |                   |  
|Balance, December 31, 2006                       |  | $               |        |              | $       |                           |  | $                 |  |                                               | $ | 7,605,096 |       | $ | 25,511,413 |  | $ | 1,313,668 |   |  | $ | 34,430,177 |  
|Comprehensive income:                            |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   |           |   |  |   |            |  
|Net income                                       |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   | 2,484,545  |  |   |           |   |  |   | 2,484,545  |  
|Net unrealized gains on investments, net of tax  |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   | 20,683    |   |  |   | 20,683     |  
|Amortization of prior service credit, net of tax |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   | (42,413   | ) |  |   | (42,413    | )
|Amortization of net actuarial loss, net of tax   |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   | 10,045    |   |  |   | 10,045     |  
|                                                 |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   |           |   |  |   |            |  
|Total comprehensive income                       |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   |           |   |  |   | 2,472,860  |  
|Stock-based compensation                         |  |                 |         |              |         |                            |  |                   |   |                                               |   | 73,557    |       |   |            |  |   |           |   |  |   | 73,557     |  
|Stock options exercised                          |  |                 |         |              |         |                            |  |                   |   |                                               |   | 10,000    |       |   |            |  |   |           |   |  |   | 10,000     |  
|Tax benefit from stock options exercised         |  |                 |         |              |         |                            |  |                   |   |                                               |   | 11,556    |       |   |            |  |   |           |   |  |   | 11,556     |  
|                                                 |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   |           |   |  |   |            |  
|Balance, September 30, 2007                      |  | $               |        |              | $       |                           |  | $                 |  |                                               | $ | 7,700,209 |       | $ | 27,995,958 |  | $ | 1,301,983 |   |  | $ | 36,998,150 |  
|                                                 |  |                 |         |              |         |                            |  |                   |   |                                               |   |           |       |   |            |  |   |           |   |  |   |            |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)



|                                                                           |  |                                 |             |   |      |   |            |  
|-------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                           |  | Nine Months Ended September 30, |            
|                                                                           |  | 2007                            |             |   | 2006 |  
|Cash flows from operating activities:                                      |  |                                 |             |   |      |   |            |  
|Net income                                                                 |  | $                               | 2,484,545   |   |      | $ | 3,862,854  |  
|Adjustments to reconcile net income to net cash from operating activities: |  |                                 |             |   |      |   |            |  
|Depreciation                                                               |  |                                 | 756,748     |   |      |   | 273,750    |  
|Deferred federal income taxes                                              |  |                                 | (20,761     | ) |      |   | 87,175     |  
|Stock based compensation expense                                           |  |                                 | 73,557      |   |      |   | 35,290     |  
|Net realized gains on investments                                          |  |                                 | (1,443,197  | ) |      |   | (295,494   | )
|Gain on sale of property and equipment                                     |  |                                 | (2,834      | ) |      |   | (145       | )
|Net amortization of premiums on investments                                |  |                                 | 146,090     |   |      |   | 157,319    |  
|Excess tax benefit from stock options exercised                            |  |                                 | (11,556     | ) |      |   |           |  
|Changes in assets and liabilities:                                         |  |                                 |             |   |      |   |            |  
|Premiums due from policyholders                                            |  |                                 | (658,217    | ) |      |   | (476,214   | )
|Amounts due from reinsurers                                                |  |                                 | (281,637    | ) |      |   | 1,230,687  |  
|Prepaid reinsurance premiums                                               |  |                                 | (1,215,959  | ) |      |   | 10,667     |  
|Accrued investment income                                                  |  |                                 | (71,079     | ) |      |   | (50,678    | )
|Deferred policy acquisition costs                                          |  |                                 | (121,307    | ) |      |   | (150,657   | )
|Other assets                                                               |  |                                 | 22,553      |   |      |   | (143,288   | )
|Losses and loss adjustment expenses                                        |  |                                 | 1,838,615   |   |      |   | 2,383,873  |  
|Unearned premiums                                                          |  |                                 | 1,331,851   |   |      |   | 828,177    |  
|Reinsurance balances payable                                               |  |                                 | (2,253      | ) |      |   | (1,006,610 | )
|Accrued expenses and other liabilities                                     |  |                                 | 240,189     |   |      |   | 441,218    |  
|                                                                           |  |                                 |             |   |      |   |            |  
|Net cash provided by operating activities                                  |  |                                 | 3,065,348   |   |      |   | 7,187,924  |  
|                                                                           |  |                                 |             |   |      |   |            |  
|Cash flows from investing activities:                                      |  |                                 |             |   |      |   |            |  
|Proceeds from sales and maturities of fixed maturity investments           |  |                                 | 14,305,490  |   |      |   | 6,424,750  |  
|Proceeds from sales of equity investments                                  |  |                                 | 6,459,229   |   |      |   | 2,779,562  |  
|Purchases of fixed maturity investments                                    |  |                                 | (16,034,218 | ) |      |   | (8,312,859 | )
|Purchases of equity investments                                            |  |                                 | (1,702,501  | ) |      |   | (3,259,482 | )
|Increase in receivable from investments                                    |  |                                 |            |   |      |   | (997,249   | )
|Repayment of mortgage loan on real estate from related party               |  |                                 | 5,318       |   |      |   | 4,763      |  
|Issuance of mortgage loan on real estate from related party                |  |                                 |            |   |      |   | (5,200     | )
|Proceeds from sale of property and equipment                               |  |                                 | 3,601       |   |      |   | 3,400      |  
|Purchase of property and equipment, net                                    |  |                                 | (979,441    | ) |      |   | (903,705   | )
|                                                                           |  |                                 |             |   |      |   |            |  
|Net cash provided by (used in) investing activities                        |  |                                 | 2,057,478   |   |      |   | (4,266,020 | )
|                                                                           |  |                                 |             |   |      |   |            |  
|Cash flows from financing activities:                                      |  |                                 |             |   |      |   |            |  
|Proceeds from exercised stock options                                      |  |                                 | 10,000      |   |      |   | 6,000      |  
|Tax benefit from exercised stock options                                   |  |                                 | 11,556      |   |      |   | 4,925      |  
|Repayment of surplus notes                                                 |  |                                 | (2,890,288  | ) |      |   |           |  
|                                                                           |  |                                 |             |   |      |   |            |  
|Net cash (used in) provided by financing activities                        |  |                                 | (2,868,732  | ) |      |   | 10,925     |  
|                                                                           |  |                                 |             |   |      |   |            |  
|Net increase in cash and cash equivalents                                  |  |                                 | 2,254,094   |   |      |   | 2,932,829  |  
|Cash and cash equivalents, beginning of period                             |  |                                 | 4,598,843   |   |      |   | 1,542,581  |  
|                                                                           |  |                                 |             |   |      |   |            |  
|Cash and cash equivalents, end of period                                   |  | $                               | 6,852,937   |   |      | $ | 4,475,410  |  
|                                                                           |  |                                 |             |   |      |   |            |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|1. | Basis of Presentation
|-- | ---------------------

Fremont Michigan InsuraCorp,
Inc. and subsidiary (collectively, the Company) includes Fremont Michigan InsuraCorp, Inc. (FMIC) and its wholly owned subsidiary Fremont Insurance Company (FIC). FIC is a Michigan licensed property and casualty
insurance carrier operating exclusively in the State of Michigan and writing principally personal lines, commercial lines, farm and marine insurance policies through independent agents.

The accompanying unaudited consolidated financial statements which include the accounts of FMIC and its wholly-owned subsidiary, FIC, have been prepared
in accordance with accounting principles generally accepted in the United States of America (GAAP). All significant intercompany transactions have been eliminated.

The accompanying unaudited consolidated financial statements for the interim periods included herein are unaudited; however, such information reflects all
adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations, and cash flows for the interim periods. The results of operations
for interim periods are not necessarily indicative of results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read with the annual consolidated financial statements and notes contained in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006.

The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain reclassifications have been
made to the prior year balances to conform to the current year presentation.



|2. | Recently Issued Accounting Pronouncements
|-- | -----------------------------------------

The
Company adopted the Financial Accounting Standards Boards (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), effective
January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not
of being sustained by the taxing authority. The adoption of FIN 48 did not have a material effect on our consolidated financial position or results of operations. See Note 8 for further discussion of the Companys adoption of FIN 48.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (Statement 157). Statement 157
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Statement 157 applies under other accounting pronouncements that require fair
value measurement in which the FASB concluded that fair value was the relevant measurement, but does not require any new fair value measurements. Statement 157 will be effective for the quarter ended March 31, 2008. The Company is currently
evaluating the impact Statement 157 will have on the consolidated financial statements.

In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (Statement 159). This statement, which is expected to expand fair value measurement, permits entities to choose to measure many financial
instruments and certain other items at fair value. Statement 159 will be effective for the quarter ended March 31, 2008. The Company is currently assessing the impact Statement 159 may have on the consolidated financial statements.



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##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|3. | Comprehensive Income
|-- | --------------------

The Companys
comprehensive income for the three and nine months ended September 30 is as follows:



|                                                                                           |  |                                  |          |                                 |      |   |           |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------------------------ |  | -------------------------------- | -------- | ------------------------------- | ---- | - | --------- |  | - | --------- | - |  | - | --------- | -
|                                                                                           |  | Three Months Ended September 30, |          | Nine Months Ended September 30, |     
|                                                                                           |  | 2007                             |          |                                 | 2006 |   | 2007      |  |   | 2006      |  
|Net income                                                                                 |  | $                                | 569,490  |                                 |      | $ | 781,184   |  | $ | 2,484,545 |   |  | $ | 3,862,854 |  
|Other comprehensive income, net of tax:                                                    |  |                                  |          |                                 |      |   |           |  |   |           |   |  |   |           |  
|Unrealized gain on investments                                                             |  |                                  | 501,685  |                                 |      |   | 786,010   |  |   | 975,063   |   |  |   | 607,980   |  
|Reclassification adjustment for realized (gain) loss on investments included in net income |  |                                  | (741,878 | )                               |      |   | 143       |  |   | (954,380  | ) |  |   | (195,026  | )
|Amortization of prior service credit                                                       |  |                                  | (14,138  | )                               |      |   |          |  |   | (42,413   | ) |  |   |          |  
|Amortization of net actuarial loss                                                         |  |                                  | 3,348    |                                 |      |   |          |  |   | 10,045    |   |  |   |          |  
|                                                                                           |  |                                  |          |                                 |      |   |           |  |   |           |   |  |   |           |  
|Other comprehensive income (loss), net of tax                                              |  |                                  | (250,983 | )                               |      |   | 786,153   |  |   | (11,685   | ) |  |   | 412,954   |  
|                                                                                           |  |                                  |          |                                 |      |   |           |  |   |           |   |  |   |           |  
|Comprehensive income                                                                       |  | $                                | 318,507  |                                 |      | $ | 1,567,337 |  | $ | 2,472,860 |   |  | $ | 4,275,808 |  
|                                                                                           |  |                                  |          |                                 |      |   |           |  |   |           |   |  |   |           |  



|4. | Earnings per Share
|-- | ------------------

Basic earnings per share has
been calculated by dividing net income by the weighted-average common shares outstanding. Diluted earnings per share has been calculated by dividing net income by the weighted-average common shares outstanding and the weighted-average share
equivalents outstanding. The computation of basic and diluted earnings per share for the three and nine months ended September 30 is as follows:



|                                                                                          |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|----------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | ------------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                                                          |  | Three Months Ended September 30, |           | Nine Months Ended September 30,
|                                                                                          |  | 2007                             |           | 2006                            |   | 2007      |  | 2006
|Numerator for basic and diluted earnings per share:                                       |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Net income                                                                                |  | $                                | 569,490   |                                 | $ | 781,184   |  | $    | 2,484,545 |  | $ | 3,862,854
|                                                                                          |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Denominator:                                                                              |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Denominator for basic earnings per share  weighted average shares outstanding            |  |                                  | 1,727,456 |                                 |   | 1,724,556 |  |      | 1,727,177 |  |   | 1,724,358
|Effect of dilutive stock options                                                          |  |                                  | 38,895    |                                 |   | 36,086    |  |      | 40,601    |  |   | 31,764   
|                                                                                          |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Denominator for diluted earnings per share  adjusted weighted average shares outstanding |  |                                  | 1,766,351 |                                 |   | 1,760,642 |  |      | 1,767,778 |  |   | 1,756,122
|                                                                                          |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Basic earnings per share                                                                  |  | $                                | 0.33      |                                 | $ | 0.45      |  | $    | 1.44      |  | $ | 2.24     
|Diluted earnings per share                                                                |  | $                                | 0.32      |                                 | $ | 0.44      |  | $    | 1.41      |  | $ | 2.20     



|5. | Segment Information
|-- | -------------------

The Company defines its
operations as property and casualty insurance operations. The Company writes four major insurance lines exclusively in the State of Michigan: Personal Lines, Commercial Lines, Farm and Marine. The separate financial information of these four major
insurance lines is consistent with the way results are regularly evaluated by management in deciding how to allocate resources and in assessing performance. All revenues are generated from external customers and the Company does not have a
significant reliance on any single major customer.

The Company evaluates product line profitability based on underwriting gain (loss).
Certain expenses are allocated based on net premiums earned and net losses incurred. Underwriting gain (loss) by product line would change if different methods were applied.



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



The Company does not allocate assets, net investment income, net realized gains on investments, other
income (expense) or interest expense to its product lines. In addition, the Company does not separately identify depreciation expense related to the building by product line as such disclosure would be impracticable.

Segment data for the three and nine months ended September 30 are as follows:



|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|-------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                         |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                                                         |  | 2007                             |            |   | 2006                            |   |           | 2007 |  |   | 2006       |  
|Revenues:                                                |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Net premiums earned:                                     |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Personal lines                                           |  | $                                | 7,417,850  |   |                                 | $ | 6,474,806 |      |  | $ | 21,642,198 |   |  | $ | 19,021,941 |  
|Commercial lines                                         |  |                                  | 1,936,517  |   |                                 |   | 1,953,861 |      |  |   | 5,596,570  |   |  |   | 5,804,093  |  
|Farm                                                     |  |                                  | 1,081,548  |   |                                 |   | 1,063,356 |      |  |   | 3,257,431  |   |  |   | 3,152,749  |  
|Marine                                                   |  |                                  | 438,531    |   |                                 |   | 416,809   |      |  |   | 1,243,738  |   |  |   | 1,161,389  |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Total net premiums earned                                |  |                                  | 10,874,446 |   |                                 |   | 9,908,832 |      |  |   | 31,739,937 |   |  |   | 29,140,172 |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Expenses:                                                |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Loss and loss adjustment expenses:                       |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Personal lines                                           |  |                                  | 6,315,228  |   |                                 |   | 4,102,573 |      |  |   | 14,758,573 |   |  |   | 10,331,810 |  
|Commercial lines                                         |  |                                  | 712,555    |   |                                 |   | 561,754   |      |  |   | 2,731,477  |   |  |   | 2,691,188  |  
|Farm                                                     |  |                                  | 460,589    |   |                                 |   | 841,854   |      |  |   | 1,674,146  |   |  |   | 1,385,140  |  
|Marine                                                   |  |                                  | 280,086    |   |                                 |   | 298,034   |      |  |   | 520,879    |   |  |   | 575,701    |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Total loss and loss adjustment expenses                  |  |                                  | 7,768,458  |   |                                 |   | 5,804,215 |      |  |   | 19,685,075 |   |  |   | 14,983,839 |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Policy acquisition and other underwriting expenses:      |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Personal lines                                           |  |                                  | 2,768,375  |   |                                 |   | 2,263,437 |      |  |   | 7,951,183  |   |  |   | 6,614,021  |  
|Commercial lines                                         |  |                                  | 722,555    |   |                                 |   | 683,084   |      |  |   | 2,056,138  |   |  |   | 2,018,111  |  
|Farm                                                     |  |                                  | 403,948    |   |                                 |   | 371,752   |      |  |   | 1,196,756  |   |  |   | 1,096,226  |  
|Marine                                                   |  |                                  | 163,553    |   |                                 |   | 145,645   |      |  |   | 456,940    |   |  |   | 403,820    |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Total policy acquisition and other underwriting expenses |  |                                  | 4,058,431  |   |                                 |   | 3,463,918 |      |  |   | 11,661,017 |   |  |   | 10,132,178 |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Underwriting gain (loss):                                |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Personal lines                                           |  |                                  | (1,665,753 | ) |                                 |   | 108,796   |      |  |   | (1,067,558 | ) |  |   | 2,076,110  |  
|Commercial lines                                         |  |                                  | 501,407    |   |                                 |   | 709,023   |      |  |   | 808,955    |   |  |   | 1,094,794  |  
|Farm                                                     |  |                                  | 217,011    |   |                                 |   | (150,250  | )    |  |   | 386,529    |   |  |   | 671,383    |  
|Marine                                                   |  |                                  | (5,108     | ) |                                 |   | (26,870   | )    |  |   | 265,919    |   |  |   | 181,868    |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Total underwriting gain                                  |  |                                  | (952,443   | ) |                                 |   | 640,699   |      |  |   | 393,845    |   |  |   | 4,024,155  |  
|                                                         |  |                                  |            |  
|Net investment income                                    |  |                                  | 527,002    |   |                                 |   | 459,670   |      |  |   | 1,536,762  |   |  |   | 1,305,136  |  
|Net realized gains (losses) on investments               |  |                                  | 1,124,059  |   |                                 |   | (217      | )    |  |   | 1,446,031  |   |  |   | 295,494    |  
|Other income, net                                        |  |                                  | 122,449    |   |                                 |   | 107,201   |      |  |   | 338,153    |   |  |   | 305,452    |  
|Interest expense                                         |  |                                  | (45,010    | ) |                                 |   | (50,580   | )    |  |   | (146,170   | ) |  |   | (177,823   | )
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Income before federal income taxes                       |  | $                                | 776,057    |   |                                 | $ | 1,156,773 |      |  | $ | 3,568,621  |   |  | $ | 5,752,414  |  
|                                                         |  |                                  |            |   |                                 |   |           |      |  |   |            |   |  |   |            |  



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##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|6. | Other Postretirement Plan
|-- | -------------------------

The Company provides
certain postretirement health care benefits for retired employees. The components of the net periodic benefit cost for the three and nine months ended September 30 are as follows:



|                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30, |  
|                                                |  | 2007                             |         |   | 2006                            |   |         | 2007 |  |   | 2006    |  
|Components of net periodic benefit cost:        |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Service cost                                    |  | $                                | 2,895   |   |                                 | $ | 2,540   |      |  | $ | 8,684   |   |  | $ | 7,619   |  
|Interest cost                                   |  |                                  | 26,230  |   |                                 |   | 25,096  |      |  |   | 78,692  |   |  |   | 75,289  |  
|Amortization of unrecognized prior service cost |  |                                  | (21,421 | ) |                                 |   | (21,421 | )    |  |   | (64,262 | ) |  |   | (64,262 | )
|Amortization of unrecognized net actuarial loss |  |                                  | 5,073   |   |                                 |   | 5,291   |      |  |   | 15,220  |   |  |   | 15,872  |  
|                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Net periodic benefit cost                       |  | $                                | 12,777  |   |                                 | $ | 11,506  |      |  | $ | 38,334  |   |  | $ | 34,518  |  
|                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  

As this plan is not pre-funded, no contributions other than those necessary to cover benefit
payments are anticipated. For the nine months ended September 30, 2007 the Company has made contributions to the plan of approximately $57,000. During 2007, the Company expects to contribute approximately $60,000 to the plan to cover
anticipated benefit payments.



|7. | Reinsurance
|-- | -----------

The effect of reinsurance on premiums
written and earned was as follows:



|             |  |                    |            |   |                    |   |            |         |  |   |            |   |  |   |            |  
|------------ |  | ------------------ | ---------- | - | ------------------ | - | ---------- | ------- |  | - | ---------- | - |  | - | ---------- | -
|             |  | Three Months Ended |           
|             |  | September 30, 2007 |            |   | September 30, 2006 |  
|             |  | Written            |            |   | Earned             |   |            | Written |  |   | Earned     |  
|Direct       |  | $                  | 14,892,593 |   |                    | $ | 13,374,527 |         |  | $ | 13,539,226 |   |  | $ | 12,074,769 |  
|Assumed      |  |                    | 16,001     |   |                    |   | 16,782     |         |  |   | 18,140     |   |  |   | 19,065     |  
|Ceded        |  |                    | (2,509,107 | ) |                    |   | (2,516,863 | )       |  |   | (2,167,676 | ) |  |   | (2,185,002 | )
|             |  |                    |            |   |                    |   |            |         |  |   |            |   |  |   |            |  
|Net premiums |  | $                  | 12,399,487 |   |                    | $ | 10,874,446 |         |  | $ | 11,389,690 |   |  | $ | 9,908,832  |  
|             |  |                    |            |   |                    |   |            |         |  |   |            |   |  |   |            |  
|             | 
|             |  | Nine Months Ended  |           
|             |  | September 30, 2007 |            |   | September 30, 2006 |  
|             |  | Written            |            |   | Earned             |   |            | Written |  |   | Earned     |  
|Direct       |  | $                  | 40,391,546 |   |                    | $ | 39,061,376 |         |  | $ | 36,313,997 |   |  | $ | 35,476,064 |  
|Assumed      |  |                    | 58,156     |   |                    |   | 56,475     |         |  |   | 44,235     |   |  |   | 53,991     |  
|Ceded        |  |                    | (7,398,674 | ) |                    |   | (7,377,914 | )       |  |   | (6,379,216 | ) |  |   | (6,389,883 | )
|             |  |                    |            |   |                    |   |            |         |  |   |            |   |  |   |            |  
|Net premiums |  | $                  | 33,051,028 |   |                    | $ | 31,739,937 |         |  | $ | 29,979,016 |   |  | $ | 29,140,172 |  
|             |  |                    |            |   |                    |   |            |         |  |   |            |   |  |   |            |  

The effect of reinsurance on incurred losses was as follows:



|                          |  |                                  |           |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|------------------------- |  | -------------------------------- | --------- | - | ------------------------------- | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                          |  | Three Months Ended September 30, |           |   | Nine Months Ended September 30, |  
|                          |  | 2007                             |           |   | 2006                            |   |           | 2007 |  |   | 2006       |  
|Loss and LAE incurred     |  | $                                | 8,638,736 |   |                                 | $ | 6,706,167 |      |  | $ | 21,926,907 |   |  | $ | 17,185,246 |  
|Reinsurance recoveries    |  |                                  | (870,278  | ) |                                 |   | (901,952  | )    |  |   | (2,241,832 | ) |  |   | (2,201,407 | )
|                          |  |                                  |           |   |                                 |   |           |      |  |   |            |   |  |   |            |  
|Net loss and LAE incurred |  | $                                | 7,768,458 |   |                                 | $ | 5,804,215 |      |  | $ | 19,685,075 |   |  | $ | 14,983,839 |  
|                          |  |                                  |           |   |                                 |   |           |      |  |   |            |   |  |   |            |  

Effective March 31, 2006, the Company entered into a commutation agreement with respect to
the 2003 multi-line net account quota share reinsurance agreement. As a result of this commutation, the funds withheld account liability was reduced by approximately $1,053,000 offset by an increase to the loss and loss adjustment expense liability
of the same amount. No gain or loss was realized as a result of this commutation.



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|8. | Federal Income Taxes
|-- | --------------------

The Company adopted the
provisions of FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a material effect on our consolidated financial position or results of operations. The Company evaluated all tax positions taken on its U.S. federal income tax return.
No material uncertainties exist for any tax positions taken by the Company.

The Company files income tax returns in the U.S. federal
jurisdiction. The Company is subject to U.S federal income tax examinations for all tax years from 1994 to the current year (with the exception of the 2002 tax year) due to the utilization of its net operating losses in current open tax years. The
Company has not recently been examined by the Internal Revenue Service for any open tax year.

It is the Companys policy to recognize
interest and penalties related to uncertain tax positions in income tax expense.

The provision for income taxes for the three and nine
months ended September 30 consists of the following:



|                           |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |          
|-------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | ---------
|                           |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30,
|                           |  | 2007                             |         |   | 2006                            |   |         | 2007 |  |   | 2006     
|Current expense (benefit)  |  | $                                | 235,760 |   |                                 | $ | 406,883 |      |  | $ | 1,104,836 |   |  | $ | 1,802,385
|Deferred expense (benefit) |  |                                  | (29,193 | ) |                                 |   | (31,294 | )    |  |   | (20,760   | ) |  |   | 87,175   
|                           |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |          
|Total                      |  | $                                | 206,567 |   |                                 | $ | 375,589 |      |  | $ | 1,084,076 |   |  | $ | 1,889,560
|                           |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |          

Actual federal income taxes vary from amounts computed by applying the current federal income tax
rate of 34 percent to income before federal income taxes due to the following:



|                                   |  |                                  |         |   |                                 |      |    |      |   |           |      |  |      |    |  |   |           |   |  |      |    |  |   |           |   |  |      |   
|---------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | ---- | -- | ---- | - | --------- | ---- |  | ---- | -- |  | - | --------- | - |  | ---- | -- |  | - | --------- | - |  | ---- | --
|                                   |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30, |     
|                                   |  | 2007                             |         |   | 2006                            |      |    | 2007 |   |           | 2006 | 
|Income before federal income taxes |  | $                                | 776,057 |   |                                 |      |    |      | $ | 1,156,773 |      |  |      |    |  | $ | 3,568,621 |   |  |      |    |  | $ | 5,752,414 |   |  |      |   
|                                   |  |                                  |         |   |                                 |      |    |      |   |           |      |  |      |    |  |   |           |   |  |      |    |  |   |           |   |  |      |   
|Tax at statutory rate              |  |                                  | 263,859 |   |                                 | 34.0 | %  |      |   | 393,303   |      |  | 34.0 | %  |  |   | 1,213,331 |   |  | 34.0 | %  |  |   | 1,955,821 |   |  | 34.0 | % 
|Tax effect of :                    |  |                                  |         |   |                                 |      |    |      |   |           |      |  |      |    |  |   |           |   |  |      |    |  |   |           |   |  |      |   
|Nontaxable investment income       |  |                                  | (58,485 | ) |                                 | (7.5 | )% |      |   | (21,538   | )    |  | (1.9 | )% |  |   | (136,996  | ) |  | (3.8 | )% |  |   | (68,662   | ) |  | (1.2 | )%
|Nondeductible expenses, net        |  |                                  | 1,453   |   |                                 | 0.2  | %  |      |   | (2,501    | )    |  | (0.2 | )% |  |   | 4,727     |   |  | 0.1  | %  |  |   | 2,939     |   |  | 0.1  | % 
|Provision to return variance       |  |                                  | 3,275   |   |                                 | 0.4  | %  |      |   | (969      | )    |  | 0.0  | %  |  |   | 3,275     |   |  | 0.1  | %  |  |   | (969      | ) |  | (0.0 | )%
|Other, net                         |  |                                  | (3,535  | ) |                                 | (0.5 | )% |      |   | 7,294     |      |  | 0.6  | %  |  |   | (261      | ) |  | (0.0 | )% |  |   | 431       |   |  | 0.0  | % 
|                                   |  |                                  |         |   |                                 |      |    |      |   |           |      |  |      |    |  |   |           |   |  |      |    |  |   |           |   |  |      |   
|Federal income tax expense         |  | $                                | 206,567 |   |                                 | 26.6 | %  |      | $ | 375,589   |      |  | 32.5 | %  |  | $ | 1,084,076 |   |  | 30.4 | %  |  | $ | 1,889,560 |   |  | 32.8 | % 
|                                   |  |                                  |         |   |                                 |      |    |      |   |           |      |  |      |    |  |   |           |   |  |      |    |  |   |           |   |  |      |   

Deferred federal income tax assets and liabilities are recognized for the estimated future tax
consequences attributable to the difference between financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. A valuation allowance is established when necessary to reduce deferred tax assets to the
amount expected to be realized. In determining the need for a valuation allowance, the Companys management reviews both positive and negative evidence, including current and historical results of operations, the annual limitation on
utilization of net operating loss carryforwards pursuant to Internal Revenue Code Section 382 (Section 382), future income projections and the overall prospects of our business. Based on the annual Section 382 limitation of the
utilization of net operating loss carryforwards management has determined that approximately $2,971,000 of net operating loss carryforwards will not be realized and therefore a full valuation allowance will be maintained for the deferred tax asset
associated with these amounts. Based upon managements assessment of all available evidence, including the Companys cumulative net income for recent fiscal years, estimates of current and future profitability and the overall prospects of
our business, it has been determined that as of September 30, 2007 it is more likely than not that sufficient taxable income will exist in the periods of reversal in order to realize the remaining net deferred tax asset.



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



At September 30, 2007 and December 31, 2006 the tax effects of temporary differences that
give rise to deferred federal income tax assets and liabilities are as follows:



|                                                      |  |                    |            |   |                   |   |            |  
|----------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | -
|                                                      |  | September 30, 2007 |            |   | December 31, 2006 |  
|Deferred federal income tax assets arising from:      |  |                    |            |   |                   |   |            |  
|Loss and loss adjustment expense reserves             |  | $                  | 440,503    |   |                   | $ | 421,360    |  
|Unearned premium reserves                             |  |                    | 1,584,834  |   |                   |   | 1,470,987  |  
|Postretirement benefits accrued                       |  |                    | 682,026    |   |                   |   | 667,021    |  
|Net operating loss carryforward                       |  |                    | 2,498,439  |   |                   |   | 2,634,446  |  
|Alternative minimum tax credit carryforward           |  |                    | 357,697    |   |                   |   | 357,697    |  
|Other deferred tax assets                             |  |                    | 166,074    |   |                   |   | 186,814    |  
|                                                      |  |                    |            |   |                   |   |            |  
|Total deferred federal income tax assets              |  |                    | 5,729,573  |   |                   |   | 5,738,325  |  
|                                                      |  |                    |            |   |                   |   |            |  
|Deferred federal income tax liabilities arising from: |  |                    |            |   |                   |   |            |  
|Deferred policy acquisition costs                     |  |                    | (1,177,774 | ) |                   |   | (1,120,000 | )
|Unrealized gains on investments                       |  |                    | (416,950   | ) |                   |   | (406,295   | )
|Property and equipment                                |  |                    |           |   |                   |   | (107,254   | )
|Other deferred tax liabilities                        |  |                    | (27,319    | ) |                   |   | (24,026    | )
|                                                      |  |                    |            |   |                   |   |            |  
|Total deferred federal income tax liabilities         |  |                    | (1,622,043 | ) |                   |   | (1,657,575 | )
|                                                      |  |                    |            |   |                   |   |            |  
|Net deferred federal income tax asset                 |  |                    | 4,107,530  |   |                   |   | 4,080,750  |  
|Valuation allowance                                   |  |                    | (1,010,037 | ) |                   |   | (1,010,037 | )
|                                                      |  |                    |            |   |                   |   |            |  
|Net deferred tax asset                                |  | $                  | 3,097,493  |   |                   | $ | 3,070,713  |  
|                                                      |  |                    |            |   |                   |   |            |  



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##### Table of Contents

|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 unaudited Consolidated Financial Statements and the Notes thereto included
elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2006, particularly Item 7  Managements Discussion and Analysis of Financial Condition and Results of Operations
in the Annual Report.

Fremont Michigan InsuraCorp, Inc. (the Company or the Holding Company) and Fremont Insurance
Company (the Insurance Company) may from time to time make written or oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission (including this Quarterly Report
on Form 10-Q and the exhibits hereto and thereto), in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. You can find many of these statements by looking for words such as believes, intends, expects, plans, anticipates, seeks, estimates,
projects, or similar expressions in this report. Determination of loss and loss adjustment expense reserves and amounts due from reinsurers are based substantially on estimates and the amounts so determined are inherently
forward-looking.

The forward-looking statements are subject to numerous assumptions, risks and uncertainties. We have identified several
important factors that could cause actual results to differ materially from any results discussed, contemplated, projected, forecast, estimated or budgeted in the forward-looking information. These factors, which are listed below, are difficult to
predict and many are beyond our control:



| |  |  | future economic conditions and the legal and regulatory environment in Michigan;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the effects of weather-related and other catastrophic events;
| | - |  | -------------------------------------------------------------



| |  |  | financial market conditions, including, but not limited to, changes in fiscal, monetary and tax policies, interest rates and values of investments;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact of acts of terrorism and acts of war on investment and reinsurance markets;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | inflation;
| | - |  | ----------



| |  |  | the cost, availability and collectibility of reinsurance;
| | - |  | ---------------------------------------------------------



| |  |  | estimates and adequacy of loss reserves and trends in losses and loss adjustment expenses;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | heightened competition, including specifically the intensification of price competition, the entry of new competitors and the development of new products by new and
existing competitors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our inability to obtain regulatory approval of, or to implement, premium rate increases;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | inability to carry out marketing and sales plans, including, among others, development of new products or changes to existing products and acceptance of the new or
revised products in the market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | adverse litigation or arbitration results;
| | - |  | ------------------------------------------



| |  |  | technological change;
| | - |  | ---------------------



| |  |  | the ability to carry out our business plans; and
| | - |  | ------------------------------------------------



| |  |  | adverse changes in applicable laws, regulations or rules governing insurance holding companies and insurance companies, and changes that affect the cost of, or
demand for, our products.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because forward-looking information is subject to various risks and uncertainties, actual
results may differ materially from those expressed or implied by the forward-looking information. Therefore, we caution you not to place undue reliance on this forward-looking information, which speaks only as of the date of this filing. All
subsequent written and oral forward-looking information attributable to the Holding Company or the Insurance Company or any person acting on our behalf is expressly qualified in its entirety by the cautionary statements contained or referred to in
this section. We do not undertake any obligation to publicly release any revisions that may be made to any forward-looking statements to reflect events or circumstances occurring after the date of this filing.

Overview of Fremont Michigan InsuraCorp

Fremont
Michigan InsuraCorp, Inc. is a holding company owning all of the outstanding shares of Fremont Insurance Company. Fremont Insurance Company is a Michigan licensed property and casualty insurer operating exclusively in the State of Michigan and
writing principally personal lines, commercial lines, farm and marine insurance policies through independent agents. We were founded in 1876 and have served Michigan policyholders for over 131 years. We market policies through approximately 170
independent insurance agencies. Fremont Insurance Company has a financial strength rating of B++ (Good) by A.M. Best. The Holding Company is subject to regulation by the Michigan Office of Financial and Insurance Services
(OFIS) as its primary regulator because it is the holding company for Fremont Insurance Company. As of September 30, 2007, we had approximately 59,300 policies in force and assets of $89.0 million.



13



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##### Table of Contents

General

We use accounting principles that are in compliance with those generally accepted in the United States of America (GAAP). Managements discussion and analysis covers the Companys financial condition and results of operations for
the three and nine months ended September 30, 2007 and 2006. The Companys fiscal year ends on December 31.

Critical Accounting Policies
and Estimates

General. Our discussion and analysis of financial condition, results of operations and liquidity and
capital resources is based upon the consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, expenses and related disclosures. We generally base our estimates on historical experience or other appropriate assumptions that we believe are reasonable and relevant under the circumstances and evaluate them on an
ongoing basis. The results of these estimation processes form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.

We believe the critical accounting policies and estimates discussed below reflect our more
significant judgments and estimates used in the preparation of the consolidated financial statements. These may be further commented upon in applicable sections on Results of Operations and Liquidity and Capital Resources that follow. These policies
are more fully described below as well as in our 2006 Annual Report on Form 10-K. There have been no material changes to these policies during the most recent quarter.

Liabilities for Loss and Loss Adjustment Expenses. The liability for losses and loss adjustment expenses represents estimates of the ultimate unpaid cost of all losses incurred,
including losses for claims that have not yet been reported. The amount of loss reserves for reported claims is based primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and
the insurance policy provisions relating to the type of loss. The amounts of loss reserves for unreported claims and loss adjustment expenses are determined using historical information by line of insurance as adjusted to current conditions.
Inflation is ordinarily implicitly provided for in the reserving function through analysis of costs, trends and reviews of historical reserving results over multiple years.

When a claim is reported to us, our claims representatives establish a case reserve for the estimated amount of the ultimate payment. This
estimate reflects an informed judgment based upon general insurance reserving practices and on the experience and knowledge of the estimator. The individual estimating the reserve considers the nature and value of the specific claim, the severity of
injury or damage, and the policy provisions relating to the type of loss. Case reserves are adjusted by our claims staff as more information becomes available. It is our policy to settle each claim as expeditiously as possible.

We maintain incurred but not reported (IBNR) reserves to provide for already incurred claims that have not yet been reported and developments
on reported claims. The IBNR reserve is determined by estimating our ultimate net liability for both reported and unreported claims and then subtracting the case reserves and payments made to date for reported claims.

Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical
techniques. Each quarter we review existing reserves, new claims, changes to existing case reserves and paid losses with respect to the current and prior accident years. In connection with the determination of the reserves we also consider other
specific factors such as recent weather-related losses, trends in historical paid losses, and legal and judicial trends with respect to theories of liability. We review our loss reserves to ascertain whether new developments have occurred which
would require adjustment to our ultimate loss estimates. The quarterly review also involves roundtable discussion involving the claims, underwriting and accounting departments. Discussion is generally focused on claims involving liability and those
claims that involve significant judgment. Because the establishment of loss reserves is an inherently uncertain process, we cannot be certain that ultimate losses will not exceed the established loss reserves and have a material adverse effect on
the Companys results of operations and financial condition. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.

Reserves are estimates because there are uncertainties inherent in the determination of ultimate losses. Court decisions, regulatory
changes and economic conditions can affect the ultimate cost of claims that occurred in the past as well as create uncertainties regarding future loss cost trends. Accordingly, the ultimate liability for unpaid losses and loss adjustment expenses
will likely differ from the amount recorded at September 30, 2007.



14



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##### Table of Contents

We have four business segments: personal, commercial, farm and marine. The following table shows the
breakdown of our loss and LAE reserves between reported losses and IBNR losses by segment as of September 30, 2007 and December 31, 2006 (in thousands):



|                |  |                    |        |                   |   |       
|--------------- |  | ------------------ | ------ | ----------------- | - | ------
|                |  | September 30, 2007 |        | December 31, 2006
|Reported losses |  |                    |        |                   |   |       
|Personal        |  | $                  | 7,680  |                   | $ | 6,094 
|Commercial      |  |                    | 3,179  |                   |   | 3,525 
|Farm            |  |                    | 1,107  |                   |   | 1,123 
|Marine          |  |                    | 845    |                   |   | 837   
|                |  |                    |        |                   |   |       
|                |  |                    | 12,811 |                   |   | 11,579
|                |  |                    |        |                   |   |       
|IBNR losses     |  |                    |        |                   |   |       
|Personal        |  |                    | 4,926  |                   |   | 4,338 
|Commercial      |  |                    | 3,520  |                   |   | 3,520 
|Farm            |  |                    | 486    |                   |   | 486   
|Marine          |  |                    | 272    |                   |   | 254   
|                |  |                    |        |                   |   |       
|                |  |                    | 9,204  |                   |   | 8,598 
|                |  |                    |        |                   |   |       
|Total           |  |                    |        |                   |   |       
|Personal        |  |                    | 12,606 |                   |   | 10,432
|Commercial      |  |                    | 6,699  |                   |   | 7,045 
|Farm            |  |                    | 1,593  |                   |   | 1,609 
|Marine          |  |                    | 1,117  |                   |   | 1,091 
|                |  |                    |        |                   |   |       
|                |  | $                  | 22,015 |                   | $ | 20,177
|                |  |                    |        |                   |   |       

The reserves are reported gross of any amounts recoverable from reinsurers and are reduced for
anticipated salvage and subrogation. Anticipated salvage and subrogation as of September 30, 2007 and December 31, 2006, was approximately $167,000 and $208,000, respectively.

Investments.All of the Companys investments are classified as available-for-sale and are those
investments that would be available to be sold in response to the Companys liquidity needs, changes in market interest rates and asset-liability management strategies, among others. Available-for-sale investments are recorded at fair value,
with the corresponding unrealized appreciation or depreciation, net of deferred income taxes, reported as a component of accumulated other comprehensive income or loss until realized.

The Company reviews the status and market value changes of its investment portfolio each month, and any provisions for other-than-temporary impairments
in the portfolios value are evaluated and established at each quarterly balance sheet date. In reviewing investments for other than temporary impairment, the Company, in addition to an investments market price history and its intent and
ability to hold fixed maturity investments until maturity, considers the issuers operating results, financial condition and liquidity, its ability to access capital markets, credit rating trends, most current audit opinion, industry and
securities market conditions, and analyst expectations, in their totality to reach its conclusions. When a security in the Companys investment portfolio has an unrealized loss in value that is deemed to be other than temporary, the Company
reduces the book value of such security to its current market value, recognizing the decline as a realized loss in the statement of operations. Any future increases in the market value of investments previously written down are reflected as changes
in unrealized gains as part of accumulated other comprehensive income within stockholders equity.

Reinsurance.The Company accounts for reinsurance contracts under the provisions of Statement of Financial Accounting Standards (SFAS), No. 113, Accounting and
Reporting for Reinsurance on Short-Duration and Long-Duration Contracts. Net premiums earned, losses and LAE and policy acquisition and other underwriting expenses are reported net of the amounts related to reinsurance ceded to other
companies. Amounts recoverable from reinsurers related to the portions of the liability for losses and LAE and unearned premiums ceded to them are reported as assets. Reinsurance assumed from other companies, including assumed premiums written and
earned and losses and LAE, is accounted for in the same manner as direct insurance written.

Reinsurance recoverables include
balances due from reinsurance companies for paid and unpaid losses and LAE that will be recovered from reinsurers, based on contracts in force. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability
associated with the reinsured policy. Reinsurance contracts do not relieve the Company from its primary obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk with respect to the individual reinsurer that participates



15



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##### Table of Contents

in its ceded programs to minimize its exposure to significant losses from reinsurer insolvencies. When necessary the Company holds collateral in the form of
letters of credit or trust accounts for amounts recoverable from reinsurers that are not considered authorized insurers by the State of Michigan Office of Financial and Insurance Services.

At September 30, 2007 and December 31, 2006, the Companys recoverable from reinsurers was comprised of the following:



|                            |  |                    |           |                   |   |          
|--------------------------- |  | ------------------ | --------- | ----------------- | - | ---------
|                            |  | September 30, 2007 |           | December 31, 2006
|Paid losses and LAE         |  | $                  | 867,615   |                   | $ | 853,132  
|Unpaid losses and LAE       |  |                    | 7,297,175 |                   |   | 7,030,021
|                            |  |                    |           |                   |   |          
|Amounts due from reinsurers |  | $                  | 8,164,790 |                   | $ | 7,883,153
|                            |  |                    |           |                   |   |          

Federal Income Taxes.Deferred federal income tax
assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amount of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.

Description of Ratios Analyzed.In the analysis of our operating results that follows, we refer to
various financial ratios and other measures that management uses to analyze and compare the underwriting results of our insurance operations. We calculate the loss and LAE ratio, policy acquisition and other underwriting expense ratio and combined
ratio on a GAAP basis. As such, we calculate these ratios by using net premiums earned as the denominator. There have been no material changes to the calculation and use of these ratios during the most recent quarter. The Company also calculates
underwriting gain (loss) on a GAAP basis. This measure equals the net premiums earned less loss and loss adjustment expenses as well as policy acquisition and other underwriting expenses. It is another measure used by management and insurance
regulators to evaluate the underwriting performance of our insurance operations.

Results of Operations  Three Months Ended
September 30, 2007 and 2006

Consolidated Results of Operations. The following table shows the
underwriting gain or loss as well as other revenue and expense items included in our unaudited consolidated statements of income for the three months ended September 30, 2007 and 2006. The Companys underwriting gain or loss consists of
net premiums earned less loss and LAE and policy acquisition and other underwriting expenses. The Companys underwriting performance is the most important factor in evaluating the overall results of operations given the fluctuations which can
occur in loss and LAE due to weather related events as well as the uncertainties involved in the process of estimating reserves for losses and LAE. The underwriting results and the fluctuations in other revenue and expense items are discussed in
greater detail below.



|                                    |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|----------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | ------ |  | - | ---------- | - |  | ------- | --
|                                    |  |      |            |   |      |   |           | Change | 
|                                    |  | 2007 |            |   | 2006 |   |           | Dollar |  |   | Percentage |  
|Underwriting gain (loss)            |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|Personal                            |  | $    | (1,665,753 | ) |      | $ | 108,796   |        |  | $ | (1,774,549 | ) |  | (1631.1 | )%
|Commercial                          |  |      | 501,407    |   |      |   | 709,023   |        |  |   | (207,616   | ) |  | (29.3   | )%
|Farm                                |  |      | 217,011    |   |      |   | (150,250  | )      |  |   | 367,261    |   |  | 244.4   | % 
|Marine                              |  |      | (5,108     | ) |      |   | (26,870   | )      |  |   | 21,762     |   |  | 81.0    | % 
|                                    |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|Total underwriting gain             |  |      | (952,443   | ) |      |   | 640,699   |        |  |   | (1,593,142 | ) |  | (248.7  | )%
|Other revenue (expense) items       |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|Net investment income               |  |      | 527,002    |   |      |   | 459,670   |        |  |   | 67,332     |   |  | 14.6    | % 
|Net realized gains on investments   |  |      | 1,124,059  |   |      |   | (217      | )      |  |   | 1,124,276  |   |  | NM      |   
|Other income                        |  |      | 122,449    |   |      |   | 107,201   |        |  |   | 15,248     |   |  | 14.2    | % 
|Interest expense                    |  |      | (45,010    | ) |      |   | (50,580   | )      |  |   | 5,570      |   |  | (11.0   | )%
|                                    |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|Total other revenue (expense) items |  |      | 1,728,500  |   |      |   | 516,074   |        |  |   | 1,212,426  |   |  | 234.9   | % 
|                                    |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|Income before federal income taxes  |  |      | 776,057    |   |      |   | 1,156,773 |        |  |   | (380,716   | ) |  | (32.9   | )%
|Federal income tax expense          |  |      | 206,567    |   |      |   | 375,589   |        |  |   | (169,022   | ) |  | (45.0   | )%
|                                    |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   
|Net income                          |  | $    | 569,490    |   |      | $ | 781,184   |        |  | $ | (211,694   | ) |  | (27.1   | )%
|                                    |  |      |            |   |      |   |           |        |  |   |            |   |  |         |   



16



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##### Table of Contents

Underwriting Results. The following table shows the components of the
Companys underwriting gain or loss for the three months ended September 30, 2007 and 2006.



|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |        |   
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | ---------- | - |  | ------ | --
|                                                        |  | 2007 |            |   | 2006 |   |            | Change |  |   | % Change   |  
|Direct premiums written                                 |  | $    | 14,892,593 |   |      | $ | 13,539,226 |        |  | $ | 1,353,367  |   |  | 10.0   | % 
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |        |   
|Net premiums written                                    |  | $    | 12,399,487 |   |      | $ | 11,389,690 |        |  | $ | 1,009,797  |   |  | 8.9    | % 
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |        |   
|Net premiums earned                                     |  | $    | 10,874,446 |   |      | $ | 9,908,832  |        |  | $ | 965,614    |   |  | 9.7    | % 
|Loss and LAE                                            |  |      | 7,768,458  |   |      |   | 5,804,215  |        |  |   | 1,964,243  |   |  | 33.8   | % 
|Policy acquisition and other underwriting expenses      |  |      | 4,058,431  |   |      |   | 3,463,918  |        |  |   | 594,513    |   |  | 17.2   | % 
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |        |   
|Underwriting gain (loss)                                |  | $    | (952,443   | ) |      | $ | 640,699    |        |  | $ | (1,593,142 | ) |  | (248.7 | )%
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |        |   
|Loss and LAE ratio                                      |  |      | 71.4       | % |      |   | 58.5       | %      |  |   | 12.9       | % |  |        |   
|Policy acquisition and other underwriting expense ratio |  |      | 37.3       | % |      |   | 35.0       | %      |  |   | 2.3        | % |  |        |   
|Combined ratio                                          |  |      | 108.7      | % |      |   | 93.5       | %      |  |   | 15.2       | % |  |        |   

Premiums. The property and casualty industry is affected by
soft and hard market business cycles no different than most other industries. During a soft market price competition tends to increase as insurers are willing to reduce premium rates in order to maintain growth in premium volume. The soft market
makes it more difficult to attract new business as well as retain exposures which are adequately priced. Although we recognize the need to remain competitive in the Michigan market during the current soft market the Company remains committed to its
disciplined underwriting philosophy of only accepting risks which we feel are appropriately priced while declining risks which are under priced for the level of coverage provided.

Direct premiums written by major business segment for the three months ended September 30 are presented in the table below:



|                         |  |      |            |      |   |            |  |   |           |   |  |      |   
|------------------------ |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | - |  | ---- | --
|                         |  | 2007 |            | 2006 |   | $ Change   |  |   | % Change  |  
|Direct Premiums Written: |  |      |            |      |   |            |  |   |           |   |  |      |   
|Personal                 |  | $    | 10,739,136 |      | $ | 9,561,859  |  | $ | 1,177,277 |   |  | 12.3 | % 
|Commercial               |  |      | 2,256,858  |      |   | 2,083,655  |  |   | 173,203   |   |  | 8.3  | % 
|Farm                     |  |      | 1,343,949  |      |   | 1,367,364  |  |   | (23,415   | ) |  | (1.7 | )%
|Marine                   |  |      | 552,650    |      |   | 526,348    |  |   | 26,302    |   |  | 5.0  | % 
|                         |  |      |            |      |   |            |  |   |           |   |  |      |   
|                         |  | $    | 14,892,593 |      | $ | 13,539,226 |  | $ | 1,353,367 |   |  | 10.0 | % 
|                         |  |      |            |      |   |            |  |   |           |   |  |      |   

Although the industry continues to experience soft market conditions we continue to generate solid
top line growth in direct premiums written. During the three months ended September 30, 2007, we increased direct premiums written 10% with new business volume increasing 11.3% and renewal premium volume increasing 8.9%. Since June 30,
2007 our in-force policy count has increased 2.5%. Direct premiums written for the personal segment increased 12.3%, driven by personal auto which was up 29% coupled with a 2.7% increase in the homeowners line. New business growth for personal
auto and home were up 3.8% and 14% respectively. Renewal premium growth for personal auto remained strong at 35.3% while home renewal premiums were flat for the quarter. Policy count continues to grow in both personal auto and home. During the three
months ended September 30, 2007, the in-force policy count for personal auto increased 6.8% while homeowners increased 1.5%. The growth in personal auto is driven by increased utilization of the Companys web-based rating
platformFremont Complete, focus on our multi-policy strategy of identifying for our agents current target market homes to solicit the companion personal auto policy, agent incentive programs for new target market personal auto production as
well as rate stability within the personal auto product line. Growth in the homeowners line was positively impacted by the ease of doing business within Fremont Complete.

The commercial segment was up 8.3% for the quarter driven by new business production which was up 15.4%. New commercial business growth is up primarily
in the Company complementary products including commercial auto and workers compensation. Growth in these lines is driven by increased marketing efforts in soliciting low hazard monoline policies as well as offering multi policy discounts. Renewal
premium was down 1.7%, however this was a dramatic improvement over the 8.2% decrease experienced during the previous quarter ended June 30, 2007. Much of the improvement in renewal premiums can be attributed to various underwriting initiatives
focusing on reviewing the renewal with the agent and making any adjustments prior to issuing the renewal. Farm direct premiums written were down 1.7%, with new business up 9.6% and renewal premiums down 0.3%. Marine saw premiums increase 5%, driven
by new business up 5.2% and renewal premiums up 3.7%. The marine product line was rolled out in Fremont Complete during the second quarter and as agents have become more familiar with the automation they are looking more to Fremont to place their
marine business.



17



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##### Table of Contents

Net premiums written by major business segment for the three months ended September 30 are presented
in the table below:



|                      |  |      |            |      |   |            |  |   |           |   |  |      |   
|--------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | - |  | ---- | --
|                      |  | 2007 |            | 2006 |   | $ Change   |  |   | % Change  |  
|Net Premiums Written: |  |      |            |      |   |            |  |   |           |   |  |      |   
|Personal              |  | $    | 8,840,604  |      | $ | 7,911,482  |  | $ | 929,122   |   |  | 11.7 | % 
|Commercial            |  |      | 1,882,879  |      |   | 1,802,478  |  |   | 80,401    |   |  | 4.5  | % 
|Farm                  |  |      | 1,182,472  |      |   | 1,204,251  |  |   | (21,779   | ) |  | (1.8 | )%
|Marine                |  |      | 493,532    |      |   | 471,479    |  |   | 22,053    |   |  | 4.7  | % 
|                      |  |      |            |      |   |            |  |   |           |   |  |      |   
|                      |  | $    | 12,399,487 |      | $ | 11,389,690 |  | $ | 1,009,797 |   |  | 8.9  | % 
|                      |  |      |            |      |   |            |  |   |           |   |  |      |   

The increase in net premiums written is due to the overall increase in direct premiums written of
$1,353,000 offset by a net increase of $344,000 in ceded and assumed premiums written under the Companys reinsurance agreements.

Net
premiums earned by major business segment for the three months ended September 30 are presented in the table below:



|                     |  |      |            |      |   |           |  |   |          |   |  |      |   
|-------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | -------- | - |  | ---- | --
|                     |  | 2007 |            | 2006 |   | $ Change  |  |   | % Change |  
|Net Premiums Earned: |  |      |            |      |   |           |  |   |          |   |  |      |   
|Personal             |  | $    | 7,417,850  |      | $ | 6,474,806 |  | $ | 943,044  |   |  | 14.6 | % 
|Commercial           |  |      | 1,936,517  |      |   | 1,953,861 |  |   | (17,344  | ) |  | (0.9 | )%
|Farm                 |  |      | 1,081,548  |      |   | 1,063,356 |  |   | 18,192   |   |  | 1.7  | % 
|                     |  |      |            |      |   |           |  |   |          |   |  |      |   
|Marine               |  |      | 438,531    |      |   | 416,809   |  |   | 21,722   |   |  | 5.2  | % 
|                     |  |      |            |      |   |           |  |   |          |   |  |      |   
|                     |  | $    | 10,874,446 |      | $ | 9,908,832 |  | $ | 965,614  |   |  | 9.7  | % 

The increase in net premiums earned is due to the overall increase in direct premiums earned of
$1,300,000 offset by a net increase of $334,000 in ceded and assumed premiums earned under the Companys reinsurance agreements.



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##### Table of Contents

Loss and Loss Adjustment Expenses (LAE). The Companys net loss and LAE, incurred
claim count, average loss and LAE per claim and the loss and LAE ratios for the three months ended September 30 are shown in the tables below:



|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -------- |  | - | --------- | - |  | ----- | --
|                                |  | 2007 |           |   | 2006 |   |           | $ Change |  |   | % Change  |  
|Loss and LAE:                   |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Personal                        |  | $    | 6,315,228 |   |      | $ | 4,102,573 |          |  | $ | 2,212,655 |   |  | 53.9  | % 
|Commercial                      |  |      | 712,555   |   |      |   | 561,754   |          |  |   | 150,801   |   |  | 26.8  | % 
|Farm                            |  |      | 460,589   |   |      |   | 841,854   |          |  |   | (381,265  | ) |  | (45.3 | )%
|Marine                          |  |      | 280,086   |   |      |   | 298,034   |          |  |   | (17,948   | ) |  | (6.0  | )%
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|                                |  | $    | 7,768,458 |   |      | $ | 5,804,215 |          |  | $ | 1,964,243 |   |  | 33.8  | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Incurred Claim Count:           |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Personal                        |  |      | 2,084     |   |      |   | 1,635     |          |  |   | 449       |   |  | 27.5  | % 
|Commercial                      |  |      | 207       |   |      |   | 158       |          |  |   | 49        |   |  | 31.0  | % 
|Farm                            |  |      | 149       |   |      |   | 173       |          |  |   | (24       | ) |  | (13.9 | )%
|Marine                          |  |      | 103       |   |      |   | 96        |          |  |   | 7         |   |  | 7.3   | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|                                |  |      | 2,543     |   |      |   | 2,062     |          |  |   | 481       |   |  | 23.3  | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Average Loss and LAE per Claim: |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Personal                        |  | $    | 3,030     |   |      | $ | 2,509     |          |  | $ | 521       |   |  | 20.8  | % 
|Commercial                      |  |      | 3,442     |   |      |   | 3,555     |          |  |   | (113      | ) |  | (3.2  | )%
|Farm                            |  |      | 3,091     |   |      |   | 4,866     |          |  |   | (1,775    | ) |  | (36.5 | )%
|Marine                          |  |      | 2,719     |   |      |   | 3,105     |          |  |   | (386      | ) |  | (12.4 | )%
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|                                |  | $    | 3,055     |   |      | $ | 2,815     |          |  | $ | 240       |   |  | 8.5   | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Loss and LAE Ratio:             |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|Personal                        |  |      | 85.1      | % |      |   | 63.4      | %        |  |   |           |   |  |       |   
|Commercial                      |  |      | 36.8      | % |      |   | 28.8      | %        |  |   |           |   |  |       |   
|Farm                            |  |      | 42.6      | % |      |   | 79.2      | %        |  |   |           |   |  |       |   
|Marine                          |  |      | 63.9      | % |      |   | 71.5      | %        |  |   |           |   |  |       |   
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   
|                                |  |      | 71.4      | % |      |   | 58.5      | %        |  |   |           |   |  |       |   
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |   

The increase in the personal segments loss and LAE was driven by higher losses in the homeowners
and personal auto product lines. During the 2007 quarter, the Company experienced volatile weather activity in Michigan which included strong thunderstorms resulting in increased losses from wind, hail and lightening damage. Weather related losses
increased approximately $803,000 during the three months ended September 30, 2007 as compared to the same period in 2006. The losses were concentrated in the personal segment product lines of homeowners and mobilowners. The Company also
experienced increased losses in the personal auto line from both liability and personal injury protection claims as well as auto physical damage claims. The number of claims in the personal auto line is up 44%. The majority of the increase in
personal auto claims is in auto physical damage which is typically a higher frequency but lower severity type of loss. The increase in the commercial segments incurred loss and LAE and the loss ratio was driven by higher claim severity primarily
from fire related losses experienced during the quarter. The decline in losses and LAE in the farm segment is due to drop in both severity and frequency during the 2007 period as compared to 2006. The marine segments loss and LAE remained
relatively constant as compared to the 2006 quarter. Typically, marine losses are at their highest levels during the quarter ended September 30 due to the increased boating activity during the summer months in Michigan.



19



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##### Table of Contents

Policy Acquisition and Other Underwriting Expenses.Policy acquisition and other
underwriting expenses for the three months ended September 30 were as follows:



|                                                         |  |      |            |   |      |   |           |        |  |   |          |   |  |      |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | ------ |  | - | -------- | - |  | ---- | -
|                                                         |  | 2007 |            |   | 2006 |   |           | Change |  |   | % Change |  
|Amortization of deferred policy acquisition costs        |  | $    | 1,830,693  |   |      | $ | 1,704,538 |        |  | $ | 126,155  |   |  | 7.4  | %
|Other underwriting expenses                              |  |      | 2,227,738  |   |      |   | 1,759,380 |        |  |   | 468,358  |   |  | 26.6 | %
|                                                         |  |      |            |   |      |   |           |        |  |   |          |   |  |      |  
|Total policy acquisition and other underwriting expenses |  | $    | 4,058,431  |   |      | $ | 3,463,918 |        |  | $ | 594,513  |   |  | 17.2 | %
|                                                         |  |      |            |   |      |   |           |        |  |   |          |   |  |      |  
|Net premiums earned                                      |  | $    | 10,874,446 |   |      | $ | 9,908,832 |        |  | $ | 965,614  |   |  | 9.7  | %
|                                                         |  |      |            |   |      |   |           |        |  |   |          |   |  |      |  
|Expense ratio                                            |  |      | 37.3       | % |      |   | 35.0      | %      |  |   | 2.3      | % |  |      |  
|                                                         |  |      |            |   |      |   |           |        |  |   |          |   |  |      |  

Amortization of deferred policy acquisition costs increased during the third quarter of 2007 as
compared to the same period in 2006 as a result of increased earned premium. The increase in other underwriting expenses was caused by increased compensation expense as a result of increased headcount ($73,000), higher depreciation associated with
the Companys web-based rating platform ($108,000), increased assessments from state mandated pools and associations ($173,000), increased survey and inspection fees driven by the growth in the personal auto line ($81,000) and higher marketing
and advertising costs ($26,000).

The increase in depreciation is driven by the Companys continued investment in its web-based rating
platform  Fremont Complete. Fremont Complete is a significant technological step forward for the Company and provides a strong foundation for future growth. Not only does the rating platform enhance the ease of doing business with
our agency force it also provides a direct inter-phase between our independent agents management systems and the Companys policy processing system.

At September 30, 2007, the following product lines were available through Fremont Complete: personal auto, businessowners, homeowners, mobilowners and marine. The Company has invested over $1,850,000 in Fremont
Complete since development began in late 2005. We continue to receive positive feedback from our agency force. More importantly, we continue to experience growth in the product lines which are available through Fremont Complete. Moving forward we
continue to evaluate adding additional product lines to the web-based platform. The Company anticipates adding commercial auto and workers compensation to Fremont Complete in early 2008. The Company recognizes the fact that the additional
depreciation of the development costs puts pressure on our expense ratio over the short term particularly during the current soft market. However, from a longer term perspective Fremont Complete provides a robust processing infrastructure which is
necessary for the Company to achieve its long-term growth goals.

Investment Income.The Companys net investment income
excluding realized gains, average invested assets including cash and cash equivalents and the rate of return for the three months ended September 30 are as follows:



|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |        |   
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | - |  | ------ | --
|                                               |  | 2007 |            |   | 2006 |   |            | Change |  |   | % Change  |  
|Fixed maturities                               |  | $    | 477,490    |   |      | $ | 485,931    |        |  | $ | (8,441    | ) |  | (1.7   | )%
|Equity securities                              |  |      |           |   |      |   | 870        |        |  |   | (870      | ) |  | (100.0 | )%
|Cash and cash equivalents                      |  |      | 131,181    |   |      |   | 48,567     |        |  |   | 82,614    |   |  | 170.1  | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |        |   
|Gross investment income                        |  |      | 608,671    |   |      |   | 535,368    |        |  |   | 73,303    |   |  | 13.7   | % 
|Less: Investment expenses                      |  |      | (81,669    | ) |      |   | (75,698    | )      |  |   | 5,971     |   |  | 7.9    | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |        |   
|Net investment income                          |  | $    | 527,002    |   |      | $ | 459,670    |        |  | $ | 67,332    |   |  | 14.6   | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |        |   
|Average invested assets (amortized cost basis) |  | $    | 61,027,187 |   |      | $ | 57,868,158 |        |  | $ | 3,159,029 |   |  | 5.5    | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |        |   
|Rate of return on average invested assets      |  |      | 3.5        | % |      |   | 3.2        | %      |  |   | 0.3       | % |  |        |   
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |        |   

In the third quarter of 2007, gross investment income from fixed maturities was approximately
$8,000 lower than in the same period in 2006. However, income from cash and cash equivalents was approximately $83,000 higher in 2007. The increase in income from cash and cash equivalents was due to the fact that the Company had a larger
portion of its invested assets placed in short-term securities over this time period. When income from cash and cash equivalents and fixed maturities are combined, gross investment income was 13.9% higher in the third quarter of 2007 as
compared to the third quarter of 2006. The growth in invested assets, along with higher investment yields, has been responsible for the increase in gross investment income. At September 30, 2007 the fixed maturity portfolio had an effective
duration of 4.86 years and a tax equivalent book yield of 5.31% compared to an effective duration of 4.34 years and a tax equivalent book yield of 5.12% at June 30, 2007.



20



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##### Table of Contents

Investment expenses increased 7.9% driven by increased advisory fees which are based on assets under
management by the Companys investment advisors. As a result of the items above, the annualized rate of return on average invested assets increased to 3.5% during the third quarter of 2007 from 3.2% during the same period in 2006.

The Companys net realized gains (losses) for the three months ended September 30, 2007 and 2006 are as follows:



|                         |  |      |           |   |      |   |      |        |  |   |           |   |  |   
|------------------------ |  | ---- | --------- | - | ---- | - | ---- | ------ |  | - | --------- | - |  | --
|                         |  | 2007 |           |   | 2006 |   |      | Change |  |   | % Change 
|Fixed maturities         |  | $    | (22,284   | ) |      | $ | (217 | )      |  | $ | (22,067   | ) |  | NM
|Equity securities        |  |      | 1,146,343 |   |      |   |     |        |  |   | 1,146,343 |   |  | NM
|                         |  |      |           |   |      |   |      |        |  |   |           |   |  |   
|Total net realized gains |  | $    | 1,124,059 |   |      | $ | (217 | )      |  | $ | 1,124,276 |   |  | NM
|                         |  |      |           |   |      |   |      |        |  |   |           |   |  |   

During the three months ended September 30, 2007 the Company generated net realized gains
from the equity portfolio of approximately $1,146,000 offset by realized losses of $22,000 from the fixed maturity portfolio for a combined net realized gain of $1,124,000. During the three months ended September 30, 2007, the Company sold
approximately $4.6 million in equity securities which generated approximately $1.1 million in realized gains as noted in the table above. The sales were generated in order to reduce the level of equity risk in the portfolio, rebalance the equity
portfolio and take advantage of the unrealized market value appreciation in the equity portfolio. The majority of the cash generated from the equity sales will be placed into the fixed portfolio.

Interest Expense. Interest expense decreased approximately $5,600 during the three months ended September 30, 2007 as compared to the
same period in 2006. The decrease is due to the repayment of the surplus notes during September 2007.

Income Tax Expense.
During the three months ended September 30, 2007 and 2006 the Company recorded income tax expense of approximately $207,000 and $376,000, respectively. The decrease is due to a decline in pre-tax income in the 2007 period compared to the prior
year period. The effective tax rate for the three months ended September 30, 2007 was 26.6% compared to 32.5% in the prior year period. The decrease in the effective tax rate is due to increased tax-exempt interest income received during the
third quarter of 2007 compared to 2006.



21



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##### Table of Contents

Results of Operations  Nine Months Ended September 30, 2007 and 2006

Consolidated Results of Operations. The following table shows the underwriting gain or loss as well as other revenue and expense items
included in our unaudited consolidated statements of income for the nine months ended September 30, 2007 and 2006. The Companys underwriting gain or loss consists of net premiums earned less loss and LAE and policy acquisition and other
underwriting expenses. The Companys underwriting performance is the most important factor in evaluating the overall results of operations given the fluctuations which can occur in loss and LAE due to weather related events as well as the
uncertainties involved in the process of estimating reserves for losses and LAE. The underwriting results and the fluctuations in other revenue and expense items are discussed in greater detail below.



|                                           |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|------------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- | ------ |  | - | ---------- | - |  | ------ | --
|                                           |  |      |            |   |      |   |           | Change | 
|                                           |  | 2007 |            |   | 2006 |   |           | Dollar |  |   | Percentage |  
|Underwriting gain (loss)                   |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|Personal                                   |  | $    | (1,067,558 | ) |      | $ | 2,076,110 |        |  | $ | (3,143,668 | ) |  | (151.4 | )%
|Commercial                                 |  |      | 808,955    |   |      |   | 1,094,794 |        |  |   | (285,839   | ) |  | (26.1  | )%
|Farm                                       |  |      | 386,529    |   |      |   | 671,383   |        |  |   | (284,854   | ) |  | (42.4  | )%
|Marine                                     |  |      | 265,919    |   |      |   | 181,868   |        |  |   | 84,051     |   |  | 46.2   | % 
|                                           |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|Total underwriting gain                    |  |      | 393,845    |   |      |   | 4,024,155 |        |  |   | (3,630,310 | ) |  | (90.2  | )%
|Other revenue (expense) items              |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|Net investment income                      |  |      | 1,536,762  |   |      |   | 1,305,136 |        |  |   | 231,626    |   |  | 17.7   | % 
|Net realized gains (losses) on investments |  |      | 1,446,031  |   |      |   | 295,494   |        |  |   | 1,150,537  |   |  | 389.4  | % 
|Other income                               |  |      | 338,153    |   |      |   | 305,452   |        |  |   | 32,701     |   |  | 10.7   | % 
|Interest expense                           |  |      | (146,170   | ) |      |   | (177,823  | )      |  |   | 31,653     |   |  | (17.8  | )%
|                                           |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|Total other revenue (expense) items        |  |      | 3,174,776  |   |      |   | 1,728,259 |        |  |   | 1,446,517  |   |  | 83.7   | % 
|                                           |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|Income before federal income taxes         |  |      | 3,568,621  |   |      |   | 5,752,414 |        |  |   | (2,183,793 | ) |  | (38.0  | )%
|Federal income tax expense                 |  |      | 1,084,076  |   |      |   | 1,889,560 |        |  |   | (805,484   | ) |  | (42.6  | )%
|                                           |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   
|Net income                                 |  | $    | 2,484,545  |   |      | $ | 3,862,854 |        |  | $ | (1,378,309 | ) |  | (35.7  | )%
|                                           |  |      |            |   |      |   |           |        |  |   |            |   |  |        |   

Underwriting Results. The following table shows the components of the Companys
underwriting gain or loss for the nine months ended September 30, 2007 and 2006.



|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | ---------- | - |  | ----- | --
|                                                        |  | 2007 |            |   | 2006 |   |            | Change |  |   | % Change   |  
|Direct premiums written                                 |  | $    | 40,391,546 |   |      | $ | 36,313,997 |        |  | $ | 4,077,549  |   |  | 11.2  | % 
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Net premiums written                                    |  | $    | 33,051,028 |   |      | $ | 29,979,016 |        |  | $ | 3,072,012  |   |  | 10.2  | % 
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Net premiums earned                                     |  | $    | 31,739,937 |   |      | $ | 29,140,172 |        |  | $ | 2,599,765  |   |  | 8.9   | % 
|Loss and LAE                                            |  |      | 19,685,075 |   |      |   | 14,983,839 |        |  |   | 4,701,236  |   |  | 31.4  | % 
|Policy acquisition and other underwriting expenses      |  |      | 11,661,017 |   |      |   | 10,132,178 |        |  |   | 1,528,839  |   |  | 15.1  | % 
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Underwriting gain (loss)                                |  | $    | 393,845    |   |      | $ | 4,024,155  |        |  | $ | (3,630,310 | ) |  | (90.2 | )%
|                                                        |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Loss and LAE ratio                                      |  |      | 62.0       | % |      |   | 51.4       | %      |  |   | 10.6       | % |  |       |   
|Policy acquisition and other underwriting expense ratio |  |      | 36.7       | % |      |   | 34.8       | %      |  |   | 1.9        | % |  |       |   
|Combined ratio                                          |  |      | 98.7       | % |      |   | 86.2       | %      |  |   | 12.5       | % |  |       |   

Premiums. The property and casualty industry is affected by soft and hard market
business cycles no different than most other industries. During a soft market price competition tends to increase as insurers are willing to reduce premium rates in order to maintain growth in premium volume. The soft market makes it more difficult
to attract new business as well as retain exposures which are adequately priced. Although we recognize the need to remain competitive in the Michigan market during the current soft market the Company remains committed to its disciplined underwriting
philosophy of only accepting risks which we feel are appropriately priced while declining risks which are under priced for the level of coverage provided.



22



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##### Table of Contents

Direct premiums written by major business segment for the nine months ended September 30 are
presented in the table below:



|                         |  |      |            |      |   |            |  |          |           |  |      |  
|------------------------ |  | ---- | ---------- | ---- | - | ---------- |  | -------- | --------- |  | ---- | -
|                         |  | 2007 |            | 2006 |   | Change     |  | % Change |          
|Direct Premiums Written: |  |      |            |      |   |            |  |          |           |  |      |  
|Personal                 |  | $    | 28,067,317 |      | $ | 24,241,453 |  | $        | 3,825,864 |  | 15.8 | %
|Commercial               |  |      | 6,782,433  |      |   | 6,688,664  |  |          | 93,769    |  | 1.4  | %
|Farm                     |  |      | 3,773,372  |      |   | 3,708,335  |  |          | 65,037    |  | 1.8  | %
|Marine                   |  |      | 1,768,424  |      |   | 1,675,545  |  |          | 92,879    |  | 5.5  | %
|                         |  |      |            |      |   |            |  |          |           |  |      |  
|                         |  | $    | 40,391,546 |      | $ | 36,313,997 |  | $        | 4,077,549 |  | 11.2 | %
|                         |  |      |            |      |   |            |  |          |           |  |      |  

Despite the soft market, we continue to generate solid growth in direct premiums written evidenced
by an 11.2% increase in premium volume for the first nine months of 2007. New business volume is up 27.7% while renewal volume grew 8.2%. All segments are showing positive growth year to date. The growth is driven by the relationships we have
cultivated with our agency force and our ability to provide them with a consistent and stable market for their preferred business. Total in-force policy count continues to grow and is up 8.2% over the in-force policy count as of December 31,
2006.

Within the personal segment, personal auto continues to lead the way in terms of growth and is up 30.7% through September 30,
2007. Personal auto new premium volume is up 30.1% while renewal volume is up 30.8%. Homeowner new and renewal business are up 33.9% and 1.9%, respectively. One of the main contributing factors to the strong growth in new business for both personal
auto and homeowners is the Companys web-based rating platform  Fremont Complete. From a personal lines standpoint, the Companys independent agents are now able to quote and issue personal auto and homeowner policies through Fremont
Complete which is a significant driver behind the premium growth in the personal segment.

The commercial segment, which is most affected
by soft market conditions, experienced growth of 1.4%. New business increased 27.5%; however, renewal business was down 5.9% which is a reflection of the competitiveness of the soft market, especially on property driven accounts which is the
majority of the Companys commercial business. In addition, as noted in the first quarter, there was a $60,000 audit premium reduction on one of our larger accounts due to decreased payroll which negatively impacted our commercial renewal
premiums during the nine month period ended September 30, 2007.

Farm direct premiums are up 1.8%, driven by an increase of 14.3% in
new business premiums and a 1.7% increase in renewal premiums. Direct premiums written for marine business are up 5.5%, driven by renewal premiums which are up 5.7%, with new business down 0.8%. New business growth in the marine segment remains a
challenge given the lagging Michigan economy and the impact that has on individuals discretionary spending on larger ticket items such as boats.

Net premiums written by major business segment for the nine months ended September 30 are presented in the table below:



|                      |  |      |            |      |   |            |  |          |           |  |      |  
|--------------------- |  | ---- | ---------- | ---- | - | ---------- |  | -------- | --------- |  | ---- | -
|                      |  | 2007 |            | 2006 |   | Change     |  | % Change |          
|Net Premiums Written: |  |      |            |      |   |            |  |          |           |  |      |  
|Personal              |  | $    | 22,603,195 |      | $ | 19,674,166 |  | $        | 2,929,029 |  | 14.9 | %
|Commercial            |  |      | 5,624,319  |      |   | 5,623,571  |  |          | 748       |  | 0.0  | %
|Farm                  |  |      | 3,269,361  |      |   | 3,209,394  |  |          | 59,967    |  | 1.9  | %
|Marine                |  |      | 1,554,153  |      |   | 1,471,885  |  |          | 82,268    |  | 5.6  | %
|                      |  |      |            |      |   |            |  |          |           |  |      |  
|                      |  | $    | 33,051,028 |      | $ | 29,979,016 |  | $        | 3,072,012 |  | 10.2 | %
|                      |  |      |            |      |   |            |  |          |           |  |      |  

The increase in net premiums written is due to the overall increase in direct premiums written of
4,078,000 offset by an increase of $1,006,000 in ceded and assumed premiums written under the Companys reinsurance agreements.



23



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##### Table of Contents

Net premiums earned by major business segment for the nine months ended September 30 are presented
in the table below:



|                     |  |      |            |      |   |            |  |   |           |   |  |      |   
|-------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | - |  | ---- | --
|                     |  | 2007 |            | 2006 |   | Change     |  |   | % Change  |  
|Net Premiums Earned: |  |      |            |      |   |            |  |   |           |   |  |      |   
|Personal             |  | $    | 21,642,198 |      | $ | 19,021,941 |  | $ | 2,620,257 |   |  | 13.8 | % 
|Commercial           |  |      | 5,596,570  |      |   | 5,804,093  |  |   | (207,523  | ) |  | (3.6 | )%
|Farm                 |  |      | 3,257,431  |      |   | 3,152,749  |  |   | 104,682   |   |  | 3.3  | % 
|Marine               |  |      | 1,243,738  |      |   | 1,161,389  |  |   | 82,349    |   |  | 7.1  | % 
|                     |  |      |            |      |   |            |  |   |           |   |  |      |   
|                     |  | $    | 31,739,937 |      | $ | 29,140,172 |  | $ | 2,599,765 |   |  | 8.9  | % 
|                     |  |      |            |      |   |            |  |   |           |   |  |      |   

The increase in net premiums earned is due to the overall increase in direct premiums earned of
$3,585,000 offset by an increase of $986,000 in ceded and assumed premiums earned under the Companys reinsurance agreements.

Loss and Loss Adjustment Expenses (LAE). The Companys net loss and LAE, incurred claim count, average loss and LAE per claim and the loss and LAE ratios for the nine months ended September 30 are shown in the tables
below:



|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | - |  | ----- | --
|                                |  | 2007 |            |   | 2006 |   |            | Change |  |   | % Change  |  
|Loss and LAE:                   |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  | $    | 14,758,573 |   |      | $ | 10,331,810 |        |  | $ | 4,426,763 |   |  | 42.8  | % 
|Commercial                      |  |      | 2,731,477  |   |      |   | 2,691,188  |        |  |   | 40,289    |   |  | 1.5   | % 
|Farm                            |  |      | 1,674,146  |   |      |   | 1,385,140  |        |  |   | 289,006   |   |  | 20.9  | % 
|Marine                          |  |      | 520,879    |   |      |   | 575,701    |        |  |   | (54,822   | ) |  | (9.5  | )%
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  | $    | 19,685,075 |   |      | $ | 14,983,839 |        |  | $ | 4,701,236 |   |  | 31.4  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Incurred Claim Count:           |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  |      | 4,752      |   |      |   | 3,752      |        |  |   | 1,000     |   |  | 26.7  | % 
|Commercial                      |  |      | 420        |   |      |   | 351        |        |  |   | 69        |   |  | 19.7  | % 
|Farm                            |  |      | 262        |   |      |   | 302        |        |  |   | (40       | ) |  | (13.2 | )%
|Marine                          |  |      | 165        |   |      |   | 142        |        |  |   | 23        |   |  | 16.2  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  |      | 5,599      |   |      |   | 4,547      |        |  |   | 1,052     |   |  | 23.1  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Average Loss and LAE per Claim: |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  | $    | 3,106      |   |      | $ | 2,754      |        |  | $ | 352       |   |  | 12.8  | % 
|Commercial                      |  |      | 6,504      |   |      |   | 7,667      |        |  |   | (1,163    | ) |  | (15.2 | )%
|Farm                            |  |      | 6,390      |   |      |   | 4,587      |        |  |   | 1,803     |   |  | 39.3  | % 
|Marine                          |  |      | 3,157      |   |      |   | 4,054      |        |  |   | (897      | ) |  | (22.1 | )%
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  | $    | 3,516      |   |      | $ | 3,295      |        |  | $ | 221       |   |  | 6.7   | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Loss and LAE Ratio:             |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  |      | 68.2       | % |      |   | 54.3       | %      |  |   |           |   |  |       |   
|Commercial                      |  |      | 48.8       | % |      |   | 46.4       | %      |  |   |           |   |  |       |   
|Farm                            |  |      | 51.4       | % |      |   | 43.9       | %      |  |   |           |   |  |       |   
|Marine                          |  |      | 41.9       | % |      |   | 49.6       | %      |  |   |           |   |  |       |   
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  |      | 62.0       | % |      |   | 51.4       | %      |  |   |           |   |  |       |   
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   

The personal segment experienced an increase in incurred loss and loss adjusting expense as well
as the loss and LAE ratio driven by increased severity in the homeowner product line coupled with increased claim frequency in the personal auto line. Incurred losses for homeowners and personal auto increased $2,601,000 and $1,344,000,
respectively, during the nine months ended September 30, 2007 compared to 2006. The homeowner line experienced increased loss severity as a result of weather related losses including wind, hail and lightening damages sustained during the second
and third quarters as well as snow, ice and water damage losses as a result of the colder winter weather experienced during the first quarter 2007. Weather related losses increased approximately $1,794,000 during the nine months ended
September 30, 2007 as compared to the same period in 2006. In addition, the Company experienced an increase in fire related losses during the nine month period in 2007 as compared to 2006. Weather patterns experienced during the first nine
months of 2007 reflected more traditional weather activity typically experienced in Michigan. Although the Company did experience summer storm activity in 2006 it was not near the extent of storm activity experienced in 2007. Furthermore, during the
first quarter of 2007 Michigan experienced a more normalized winter weather pattern evidenced by consistent below-freezing



24



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##### Table of Contents

temperatures and significant snow accumulation. During the first quarter of 2006 Michigan did not experience the consistent below freezing temperatures as
those experienced in 2007 which resulted in lower claim severity in 2006. Loss and LAE from personal auto increased due to increased frequency driven by volume growth in this line. The personal auto lines direct premiums written increased
30.7% during the first nine months of 2007 as compared to 2006. Furthermore, the majority of the increase in the incurred claim count for the personal segment was from increased personal auto claims particularly auto physical damage.

The commercial segment experienced a small increase in incurred loss and LAE as well as the loss and LAE ratio. Despite experiencing an increase in the
number of claims as well as fire related losses during the nine months ended September 30, 2007 claim severity actually declined. Contributing to the drop in claim severity was a decrease in incurred loss and LAE in the workers compensation
line of approximately $254,000 during the 2007 period compared to 2006. The farm segment experienced higher loss and LAE during the nine month period due to an increase in losses attributable to the previously mentioned weather conditions and fire
losses experienced in the 2007 period. The marine segment experienced a slight drop in loss and LAE as well as the loss and LAE ratio. Despite an increase in the number of marine claims incurred during the nine months ended September 30, 2007
the severity of the claims reported actually declined in 2007.

Policy Acquisition and Other Underwriting Expenses.Policy
acquisition and other underwriting expenses for the nine months ended September 30 were as follows:



|                                                         |  |      |            |   |      |   |            |        |  |   |           |   |  |      |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | - |  | ---- | -
|                                                         |  | 2007 |            |   | 2006 |   |            | Change |  |   | % Change  |  
|Amortization of deferred policy acquisition costs        |  | $    | 5,463,897  |   |      | $ | 5,095,639  |        |  | $ | 368,258   |   |  | 7.2  | %
|Other underwriting expenses                              |  |      | 6,197,120  |   |      |   | 5,036,539  |        |  |   | 1,160,581 |   |  | 23.0 | %
|                                                         |  |      |            |   |      |   |            |        |  |   |           |   |  |      |  
|Total policy acquisition and other underwriting expenses |  | $    | 11,661,017 |   |      | $ | 10,132,178 |        |  | $ | 1,528,839 |   |  | 15.1 | %
|                                                         |  |      |            |   |      |   |            |        |  |   |           |   |  |      |  
|Net premiums earned                                      |  | $    | 31,739,937 |   |      | $ | 29,140,172 |        |  | $ | 2,599,765 |   |  | 8.9  | %
|                                                         |  |      |            |   |      |   |            |        |  |   |           |   |  |      |  
|Expense ratio                                            |  |      | 36.7       | % |      |   | 34.8       | %      |  |   | 1.9       | % |  |      |  
|                                                         |  |      |            |   |      |   |            |        |  |   |           |   |  |      |  

Amortization of deferred policy acquisition costs increased during the nine months ended
September 30, 2007 as compared to the same period in 2006 as a result of increased net earned premium volume. The increase in other underwriting expenses was caused by increased compensation expense ($225,000), higher depreciation associated
with the Companys web-based rating platform ($337,000), increased assessments from state mandated pools and associations ($195,000), increased survey and inspection fees driven by the growth in the personal auto line ($123,000). Furthermore,
in 2006 other underwriting expenses were lower by approximately $272,000 due to premium tax refunds received on prior year amended returns.

Compensation expense increased due to an increase in headcount, annual merit increases, an increase in compensation allocated to other underwriting expenses and increased expense associated with the vesting of stock options. The increase in
depreciation is due to the Companys continued investment in its web-based rating platform  Fremont Complete. Fremont Complete is a significant technological step forward for the Company and provides a strong foundation for future growth.
Not only does the rating platform enhance the ease of doing business with our agency force it also provides a direct interface between our independent agents management systems and the Companys policy processing system.
Expenses associated with surveys and inspections, which are up 29%, are increasing due to the growth in the personal auto line which is up 30.7% through September 30, 2007. The increase in the overall expense ratio from 34.8% to 36.7% is driven
primarily by increased depreciation which added 1.0 percentage point and increase in assessments from state mandated pools and associations which added 0.6 percentage points to the 2007 expense ratio.



25



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##### Table of Contents

Investment Income.The Companys net investment income excluding realized gains,
average invested assets including cash and cash equivalents and the rate of return for the nine months ended September 30 are as follows:



|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | - |  | ----- | --
|                                               |  | 2007 |            |   | 2006 |   |            | Change |  |   | % Change  |  
|Fixed maturities                               |  | $    | 1,518,076  |   |      | $ | 1,388,199  |        |  | $ | 129,877   |   |  | 9.4   | % 
|Equity securities                              |  |      | 20,089     |   |      |   | 29,973     |        |  |   | (9,884    | ) |  | (33.0 | )%
|Cash and cash equivalents                      |  |      | 234,819    |   |      |   | 116,818    |        |  |   | 118,001   |   |  | 101.0 | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Gross investment income                        |  |      | 1,772,984  |   |      |   | 1,534,990  |        |  |   | 237,994   |   |  | 15.5  | % 
|Less: Investment expenses                      |  |      | (236,222   | ) |      |   | (229,854   | )      |  |   | 6,368     |   |  | 2.8   | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Net investment income                          |  | $    | 1,536,762  |   |      | $ | 1,305,136  |        |  | $ | 231,626   |   |  | 17.7  | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Average invested assets (amortized cost basis) |  | $    | 60,572,630 |   |      | $ | 55,692,367 |        |  | $ | 4,880,263 |   |  | 8.8   | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Rate of return on average invested assets      |  |      | 3.4        | % |      |   | 3.1        | %      |  |   | 0.3       | % |  |       |   
|                                               |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   

For the nine months ended September 30, 2007, gross investment income from fixed maturities
increased 9.4% over 2006, while income from cash and cash equivalents increased 101%. The increase in income from cash and cash equivalents was due to the fact that the Company had a larger portion of its invested assets placed in short-term
securities over this time period. When income from cash and cash equivalents are combined with fixed maturities, gross investment income was 16.5% higher in the 2007 period as compared to 2006. Growth in invested assets, along with higher
investment yields, has been responsible for the increase in gross investment income. At September 30, 2007 the fixed maturity portfolio had an effective duration of 4.86 years and a tax equivalent book yield of 5.31% compared to an effective
duration of 3.96 years and a tax equivalent book yield of 4.87% at December 31, 2006.

Investment income from equity securities
decreased approximately $9,800. The decrease in investment income from the equity portfolio is largely driven by the shift within the portfolio from holding common and preferred stocks to holding mutual funds. During the nine months ended
September 30, 2006 the Company received dividends from common and preferred stocks it held during this time. During the nine months ended September 30, 2007 the Company only held mutual funds which typically do not pay dividends in the
same manner as common and preferred stock. As a result of the items above, the annualized rate of return on average invested assets increased to 3.4% during 2007 from 3.1% during the same period in 2006.

The Companys net realized gains (losses) for the nine months ended September 30, 2007 and 2006 are as follows:



|                         |  |      |           |   |      |   |         |  |   |           |   |  |         |   
|------------------------ |  | ---- | --------- | - | ---- | - | ------- |  | - | --------- | - |  | ------- | --
|                         |  | 2007 |           |   | 2006 |   | Change  |  |   | % Change  |  
|Fixed maturities         |  | $    | (234,988  | ) |      | $ | 12,749  |  | $ | (247,737  | ) |  | (1943.2 | )%
|Equity securities        |  |      | 1,681,019 |   |      |   | 282,745 |  |   | 1,398,274 |   |  | 494.5   | % 
|                         |  |      |           |   |      |   |         |  |   |           |   |  |         |   
|Total net realized gains |  | $    | 1,446,031 |   |      | $ | 295,494 |  | $ | 1,150,537 |   |  | 389.4   | % 
|                         |  |      |           |   |      |   |         |  |   |           |   |  |         |   

During the nine months ended September 30, 2007 the Company generated net realized gains from
the equity portfolio of approximately $1,681,000 offset by realized losses of $235,000 from the fixed maturity portfolio for a combined net realized gain of $1,446,000. During the nine months ended September 30, 2007, the Company sold
approximately $6.4 million in equity securities which generated the $1,681,000 in realized gains. The sales were generated in order to reduce the level of equity risk in the portfolio, rebalance the equity portfolio and take advantage of the
unrealized market value appreciation in the equity portfolio. The majority of the cash generated from the equity sales will be placed into the fixed portfolio.

During 2007, the Company increased its holdings in tax exempt municipals in order to take advantage of the higher tax equivalent yields in that sector. This was accomplished by selling both corporate securities and
other tax exempt municipals which had lower yields. The shift resulted in net realized losses of $235,000. At September 30, 2007 the fixed maturity portfolio had an effective duration of 4.86 years and a tax equivalent book yield of 5.31%
compared to an effective duration of 4.34 years and a tax equivalent book yield of 5.12% at June 30, 2007.

Interest
Expense. Interest expense decreased $32,000 during the nine months ended September 30, 2007 as compared to the same period in 2006. Approximately $26,000 of the decrease is due to the fact that the Company is no longer incurring
interest expense related to the funds withheld account balance associated with the previously commuted quota share reinsurance agreement. The quota share reinsurance contract, which was commuted on March 31, 2006, was structured on a funds
withheld basis and required the Company to accrue interest at an annual rate of 2.5%. The remaining decline is due to the payoff of the surplus notes which occurred during September 2007.

Income Tax Expense. During the nine months ended September 30, 2007 and 2006 the Company recorded income tax expense of approximately
$1,084,000 and $1,890,000 respectively. The decrease is due to a decline in pre-tax income in the 2007 period compared to the prior year period. The effective tax rate for the nine months ended September 30, 2007 was 30.4% compared to 32.8% in
the prior year period. The decrease in the effective tax rate is due to increased tax-exempt interest income received during the second quarter of 2007 compared to 2006.



26



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##### Table of Contents

Liquidity and Capital Resources

The principal sources of funds for the Company are insurance premiums, investment income and proceeds from the maturity and sale of invested assets. Funds are primarily used for the payment of claims, commissions,
salaries and employee benefits, other operating expenses and surplus note service. Our short and long term liquidity requirements vary because of the uncertainties regarding the settlement dates for liabilities for unpaid claims and because of the
potential for large losses, either individually or in the aggregate.

We maintain an investment portfolio that is intended to provide
sufficient funds to meet our obligations without forced sales of investments. A portion of our investment portfolio is maintained in relatively short term and highly liquid assets, including mortgage-backed securities, which have shorter estimated
durations, to ensure the availability of funds.

Cash flow provided by operations was $3,065,000 and $7,188,000 for the nine months ended
September 30, 2007 and 2006, respectively, a decrease of $4,123,000. During the nine months ended September 30, 2007 as compared to the same period in 2006, net premiums collected increased $1,819,000, net loss and LAE payments increased
$5,639,000, policy acquisition and other underwriting expenses paid increased $965,000 and federal income taxes paid decreased $554,000. Other cash provided by operations increased $108,000 during the nine months ended September 30, 2007
compared to the same period in 2006.

During the nine months ended September 30, 2007 cash flow provided by investing activities was
$2,057,000 while during the same period in 2006 cash flow used in investing activities was $4,266,000. The shift in cash flow provided by investing activities is due to the increased selling activity within the investment portfolio in 2007 compared
to 2006 offset by increased expenditures for equipment and software.

Our debt structure consisted of approximately $2,890,000 of Series B
Surplus Notes which carried a 7 percent interest rate. The notes matured and were repaid in September 2007.

We believe that our existing
cash and funds generated from operations will be sufficient to satisfy our financial requirements during the foreseeable future.

The cost
or amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of investments at September 30, 2007 and December 31, 2006 are as follows:



|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | ---------------------- | - | ----------------------- |  | -------------------- | ------- |  | - | ----------
|                                                                                      |  | September 30, 2007    
|                                                                                      |  | Cost or Amortized Cost |            | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value
|Fixed maturities:                                                                     |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                      | 4,175,860  |                        | $ | 3,132                   |  | $                    | 35,765  |  | $ | 4,143,227 
|States and political subdivisions                                                     |  |                        | 22,552,763 |                        |   | 201,607                 |  |                      | 68,181  |  |   | 22,686,189
|Corporate securities                                                                  |  |                        | 7,944,186  |                        |   |                        |  |                      | 186,763 |  |   | 7,757,423 
|Mortgage-backed securities                                                            |  |                        | 12,188,271 |                        |   | 35,394                  |  |                      | 207,810 |  |   | 12,015,855
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|                                                                                      |  |                        | 46,861,080 |                        |   | 240,133                 |  |                      | 498,519 |  |   | 46,602,694
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|Equity securities  mutual funds                                                      |  |                        | 6,862,064  |                        |   | 1,484,709               |  |                      |        |  |   | 8,346,773 
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|Total                                                                                 |  | $                      | 53,723,144 |                        | $ | 1,724,842               |  | $                    | 498,519 |  | $ | 54,949,467
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           



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##### Table of Contents

|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | ---------------------- | - | ----------------------- |  | -------------------- | ------- |  | - | ----------
|                                                                                      |  | December 31, 2006     
|                                                                                      |  | Cost or Amortized Cost |            | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value
|Fixed maturities:                                                                     |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                      | 6,074,385  |                        | $ | 2,756                   |  | $                    | 87,898  |  | $ | 5,989,243 
|States and political subdivisions                                                     |  |                        | 13,414,841 |                        |   | 37,133                  |  |                      | 47,155  |  |   | 13,404,819
|Corporate securities                                                                  |  |                        | 11,058,724 |                        |   | 901                     |  |                      | 305,359 |  |   | 10,754,266
|Mortgage-backed securities                                                            |  |                        | 14,965,481 |                        |   | 69,226                  |  |                      | 223,769 |  |   | 14,810,938
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|                                                                                      |  |                        | 45,513,431 |                        |   | 110,016                 |  |                      | 664,181 |  |   | 44,959,266
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|Equity securities  common stocks and mutual funds                                    |  |                        | 9,940,606  |                        |   | 1,756,784               |  |                      | 7,634   |  |   | 11,689,756
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           
|Total                                                                                 |  | $                      | 55,454,037 |                        | $ | 1,866,800               |  | $                    | 671,815 |  | $ | 56,649,022
|                                                                                      |  |                        |            |                        |   |                         |  |                      |         |  |   |           

At September 30, 2007, corporate securities accounted for 17% of our fixed maturity
portfolio, mortgage backed securities were 26%, states and political subdivisions (tax-exempt municipals) were 49% and U. S. government and government agency bonds were 8%. At September 30, 2007, our equity portfolio, which consists entirely of
mutual funds, was spread among the following mutual fund types: large-cap  30%, mid-cap  28%, small-cap  18%, specialty  4% and international  20%.

All securities are listed as available for sale. We evaluate securities for impairment on a regular basis and specifically determine on an individual
security basis whether or not the decline in value is other than temporary. Equity securities with unrealized losses at September 30, 2007 were generally determined to have temporary declines in value due to geopolitical reasons or a reaction
to their particular industry rather than fundamental reasons. Fixed maturity securities with unrealized losses at September 30, 2007 were also determined to have temporary declines in value as opposed to fundamental changes in the credit
quality of the issuers of the securities. We believe it is more likely than not that those securities will appreciate in value. Furthermore, the Company has both the intent and ability to hold such securities until maturity.

The following table summarizes the length of time securities with unrealized losses at September 30, 2007 have been in an unrealized loss position:



|                                                                                      |  |                      |            |                         |   |                      |  |                         |            |                      |   |                         |  |   |            |  |   |        
|------------------------------------------------------------------------------------- |  | -------------------- | ---------- | ----------------------- | - | -------------------- |  | ----------------------- | ---------- | -------------------- | - | ----------------------- |  | - | ---------- |  | - | -------
|                                                                                      |  | Less than 12 Months  |            | 12 Months or More       |   | Total               
|                                                                                      |  | Estimated Fair Value |            | Gross Unrealized Losses |   | Estimated Fair Value |  | Gross Unrealized Losses |            | Estimated Fair Value |   | Gross Unrealized Losses
|Fixed maturities:                                                                     |  |                      |            |                         |   |                      |  |                         |            |                      |   |                         |  |   |            |  |   |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 1,360,564  |                         | $ | 765                  |  | $                       | 2,370,779  |                      | $ | 35,000                  |  | $ | 3,731,343  |  | $ | 35,765 
|States and political subdivisions                                                     |  |                      | 6,626,150  |                         |   | 43,803               |  |                         | 2,086,272  |                      |   | 24,378                  |  |   | 8,712,422  |  |   | 68,181 
|Corporate securities                                                                  |  |                      | 404,989    |                         |   | 1,371                |  |                         | 7,352,434  |                      |   | 185,392                 |  |   | 7,757,423  |  |   | 186,763
|Mortgage-backed securities                                                            |  |                      | 1,733,575  |                         |   | 12,750               |  |                         | 6,728,753  |                      |   | 195,060                 |  |   | 8,462,328  |  |   | 207,810
|                                                                                      |  |                      |            |                         |   |                      |  |                         |            |                      |   |                         |  |   |            |  |   |        
|                                                                                      |  |                      | 10,125,278 |                         |   | 58,689               |  |                         | 18,538,238 |                      |   | 439,830                 |  |   | 28,663,516 |  |   | 498,519
|                                                                                      |  |                      |            |                         |   |                      |  |                         |            |                      |   |                         |  |   |            |  |   |        
|Common stocks and mutual funds                                                        |  |                      |           |                         |   |                     |  |                         |           |                      |   |                        |  |   |           |  |   |       
|                                                                                      |  |                      |            |                         |   |                      |  |                         |            |                      |   |                         |  |   |            |  |   |        
|Total                                                                                 |  | $                    | 10,125,278 |                         | $ | 58,689               |  | $                       | 18,538,238 |                      | $ | 439,830                 |  | $ | 28,663,516 |  | $ | 498,519
|                                                                                      |  |                      |            |                         |   |                      |  |                         |            |                      |   |                         |  |   |            |  |   |        

Changes in Interest Rates

Fluctuations in near-term interest rates could have an impact on our results of operations and cash flows due to some rate sensitive investments we hold. Certain fixed maturity securities have call features that allow
the issuer to pre-pay the obligation. In a declining interest rate environment, these securities may be called by their issuer and can only be replaced with similar securities bearing lower interest rates. In a rising interest rate environment,
because of our strategy of holding these securities to maturity, our ability to invest in higher yielding securities would be limited.



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Effects of Inflation

The effects of inflation are implicitly considered in estimating our reserves for unpaid losses and loss adjustment expenses and in the premium rate-making process. The actual effects of inflation on our results of
operations cannot be accurately known until the ultimate settlement of claims. However, based upon the actual results reported to date, it is our opinion that our loss and LAE reserves, including reserves for losses that have been incurred but not
yet reported, make adequate provision for the effects of inflation.

Contractual Obligations and Commitments

There were no material changes outside the ordinary course of our business in our contractual obligations during the nine months ended September 30,
2007. In September 2007 the Companys surplus notes which totaled approximately $2,890,000 matured and were repaid.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------

General. Market risk is the risk that we will incur losses due to adverse changes in market rates and prices. We have exposure to three principal types of market risk through our investment activities:
interest rate risk, credit risk and equity risk. Our primary market risk exposure is to changes in interest rates. We have not entered, and do not plan to enter, into any derivative financial instruments for hedging, trading or speculative purposes.

Interest Rate Risk. Interest rate risk is the risk that we will incur economic losses due to adverse
changes in interest rates. Our exposure to interest rate changes primarily results from our significant holdings of fixed rate investments. Fluctuations in interest rates have a direct impact on the market valuation of these securities. Therefore,
an adverse change in market prices of these securities would result in unrealized losses reflected in the balance sheet.

The following
table shows the effects of a change in interest rate on the fair value of our fixed maturity investment portfolio. We have assumed an immediate increase or decrease of 1% or 2% in interest rates. You should not consider this assumption or the values
shown in the table to be a prediction of actual future results.



|               |  |                 |        |                 |   |        |  
|-------------- |  | --------------- | ------ | --------------- | - | ------ | -
|Change in Rate |  | Portfolio Value |        | Change in Value |  
|               |  | (In thousands)  |       
|2%             |  | $               | 41,686 |                 | $ | (4,917 | )
|1%             |  |                 | 44,162 |                 |   | (2,441 | )
|0              |  |                 | 46,603 |                 |   |       |  
|-1%            |  |                 | 49,008 |                 |   | 2,405  |  
|-2%            |  |                 | 51,378 |                 |   | 4,775  |  

Credit Risk. At September 30, 2007, all of our fixed maturity securities were
rated by Moodys as investment grade with an average credit quality rating of AA+ and an effective duration of 4.86 years.

While
sub-prime mortgage headlines continue to be a top story in the news, it is important to stress that these loans make up less than 15% of the mortgage-backed market. Sub-prime loans are made to borrowers with extremely low credit scores (FICO
<620) and high loan-to-value ratios. These loans typically have rates well above prime rates (+200-300 basis points over current conventional mortgage loans). Compounding the problem, many sub-prime loans originated off of floating
rate indices and are being reset at levels significantly higher than their original rates.

Given the Companys propensity for high
credit quality, our portfolio does not hold any investments in this lower-tier sub-set of the mortgage-backed market. Instead, we hold higher-quality pools that are well-diversified, avoiding any regional concentrations. As added protection, the
majority of the securities held within the portfolio are agency-backed issues.

Equity Risk. Equity
price risk is the risk that we will incur economic losses due to adverse changes in equity prices. The Company believes that by holding mutual funds as opposed to common or preferred stocks it has mitigated its equity risk exposure due to the
diversification of the mutual funds. Our portfolio of equity securities is carried on the balance sheet at fair value. Therefore, an adverse change in market prices of these securities would result in losses.



|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------

The Company maintains
disclosure controls and procedures designed to ensure that information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and forms, and that such information is



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accumulated and communicated to the Companys management, including its Chief Executive Officer and Vice President of Finance, as appropriate, to allow
for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.

As required by Securities and Exchange Commission Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation
of the Companys management, including the Companys Chief Executive Officer and the Companys Vice President of Finance, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of
the end of the quarter covered by this report. Based on the foregoing, the Companys Chief Executive Officer and Vice President of Finance concluded that the Companys disclosure controls and procedures were effective at the reasonable
assurance level.

PART IIOTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------

The Company is party to
litigation in the normal course of business. Based upon information presently available to us, we do not consider any litigation to be material. However, given the uncertainties attendant to litigation, we cannot be sure that our results of
operations and financial condition will not be materially adversely affected by any litigation.



|ITEM 1A. | RISK FACTORS.
|-------- | -------------

There have been no material changes
to the risk factors previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|------- | ------------------------------------------------------------

We do not intend to pay dividends in the foreseeable future and cannot assure our shareholders that dividends will be paid in the future. The Holding Companys principal source of cash available for payment of
dividends is dividends from the Insurance Company. The payment of dividends by the Insurance Company is subject to limitations imposed by the Michigan Insurance Code. The Insurance Company may not pay an extraordinary dividend unless it notifies the
Insurance Commissioner and she does not disapprove the payment. An extraordinary dividend includes any dividend which, when taken together with other dividends paid within the preceding 12 months, exceeds the greater of 10% of the Insurance
Companys statutory policyholders surplus as of December 31 of the immediately preceding year or its statutory net income, excluding realized capital gains, for the 12-month period ending December 31 of the immediately preceding
year. During the year ended December 31, 2007, the Insurance Company can pay a non-extraordinary dividend of up to $3,367,000 without prior approval from the Insurance Commissioner. In order to pay any dividends, the Insurance Company must be
in a position to satisfy the requirement that the Company continues to be safe, reliable and entitled to public confidence. Also, in the absence of approval of the Insurance Commissioner, dividends may only be paid from statutory earned surplus.
Also, dividends may not exceed the amount of the Insurance Companys statutory capital stock account in any one-year unless it meets certain other requirements.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------

None



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

None



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------

None



|ITEM 6. | EXHIBITS.
|------- | ---------



| | (a) | Exhibits. The following documents are included as exhibits to this report on Form 10-Q. Documents not accompanying this report are incorporated by reference as indicated.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|        |  |                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER  |  | TITLE                                                                                                                                                                                                       
|3.1 (a) |  | Articles of Incorporation of Fremont Michigan InsuraCorp, Inc. (Incorporated by reference to Exhibit 3.1 to Registration Statement No. 333-112414 on Form S-1).                                             
|        | 
|3.1 (b) |  | Certificate of Amendment to the Articles of Incorporation of Fremont Michigan InsuraCorp, Inc. (Incorporated by reference to Exhibit 3.1(b) to the Companys Form 10-Q for the period ending
June 20, 2007).



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|     |  |                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of President and Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|31.2 |  | Certification of Vice President of Finance under Section 302 of the Sarbanes-Oxley Act of 2002.            
|     | 
|32   |  | Certification pursuant to 18 U.S.C. Section 1350.                                                          



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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.



|                        |  |  |  |     |  |                                   |  |                                             
|----------------------- |  |  |  | --- |  | --------------------------------- |  | --------------------------------------------
|                        |  |  |  |     |  | FREMONT MICHIGAN INSURACORP, INC.
|                        |  |  | 
|Date: November 13, 2007 |  |  |  | By: |  | /s/ Richard E. Dunning           
|                        |  |  |  |     |  |                                   |  | Richard E. Dunning                          
|                        |  |  |  |     |  |                                   |  | President and Chief Executive Officer       
|                        |  |  | 
|Date: November 13, 2007 |  |  |  | By: |  | /s/ Kevin G. Kaastra             
|                        |  |  |  |     |  |                                   |  | Kevin G. Kaastra                            
|                        |  |  |  |     |  |                                   |  | Vice President of Finance                   
|                        |  |  |  |     |  |                                   |  | (principal financial and accounting officer)



32