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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, 2005



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.                                                |  | 49412                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(231) 924-0300

(Registrants telephone number, including area code)



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Check whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  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



State 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 November 8, 2005
|COMMON STOCK (No Par Value) |  | 862,128                                            
|(Title of Class)            |  | (Outstanding Shares)                               



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FORWARD-LOOKING STATEMENTS



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 Holding Company, which are made in good faith by the Holding 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 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;
| | - |  | ------------------------------------------



| |  |  | 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.



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PART IFINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS.



Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Balance Sheets (Unaudited)

September 30, 2005 and December 31, 2004



|                                                                                                       |  |                   |            |                  |   |           
|------------------------------------------------------------------------------------------------------ |  | ----------------- | ---------- | ---------------- | - | ----------
|                                                                                                       |  | September 30,2005 |            | December 31,2004
|Assets                                                                                                 |  |                   |            |                  |   |           
|                                                                                                       |  |                  
|Investments:                                                                                           |  |                   |            |                  |   |           
|Fixed maturities available for sale, at fair value                                                     |  | $                 | 40,441,994 |                  | $ | 37,205,694
|Equity securities available for sale, at fair value                                                    |  |                   | 8,267,663  |                  |   | 5,071,758 
|Mortgage loans on real estate from related parties                                                     |  |                   | 263,308    |                  |   | 136,262   
|                                                                                                       |  |                   |            |                  |   |           
|Total investments                                                                                      |  |                   | 48,972,965 |                  |   | 42,413,714
|Cash and cash equivalents                                                                              |  |                   | 2,527,543  |                  |   | 3,672,254 
|Receivable from sale of investments                                                                    |  |                   |           |                  |   | 739,150   
|Premiums due from policyholders, net                                                                   |  |                   | 7,226,066  |                  |   | 6,846,286 
|Amounts due from reinsurers                                                                            |  |                   | 8,282,791  |                  |   | 10,879,642
|Accrued investment income                                                                              |  |                   | 377,351    |                  |   | 398,208   
|Deferred policy acquisition costs                                                                      |  |                   | 2,893,667  |                  |   | 2,860,621 
|Deferred federal income taxes                                                                          |  |                   | 3,765,025  |                  |   |          
|Property and equipment, net of accumulated depreciation                                                |  |                   | 841,349    |                  |   | 848,103   
|Other assets                                                                                           |  |                   | 3,350      |                  |   | 3,136     
|                                                                                                       |  |                   |            |                  |   |           
|                                                                                                       |  | $                 | 74,890,107 |                  | $ | 68,661,114
|                                                                                                       |  |                   |            |                  |   |           
|Liabilities and Stockholders Equity                                                                   |  |                   |            |                  |   |           
|                                                                                                       |  |                  
|Liabilities:                                                                                           |  |                   |            |                  |   |           
|Losses and loss adjustment expenses                                                                    |  | $                 | 19,091,495 |                  | $ | 18,972,587
|Unearned premiums                                                                                      |  |                   | 20,403,740 |                  |   | 19,675,548
|Reinsurance funds withheld and premiums ceded payable                                                  |  |                   | 1,361,968  |                  |   | 3,018,710 
|Accrued expenses and other liabilities                                                                 |  |                   | 7,463,480  |                  |   | 6,798,772 
|Surplus notes                                                                                          |  |                   | 2,890,288  |                  |   | 2,890,288 
|                                                                                                       |  |                   |            |                  |   |           
|Total liabilities                                                                                      |  |                   | 51,210,971 |                  |   | 51,355,905
|                                                                                                       |  |                   |            |                  |   |           
|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, 862,128 shares issued and outstanding |  |                   |           |                  |   |          
|Class B common stock, no par value, authorized 500,000 shares, no shares issued and outstanding        |  |                   |           |                  |   |          
|Additional paid-in capital                                                                             |  |                   | 7,540,767  |                  |   | 7,512,913 
|Retained earnings                                                                                      |  |                   | 16,009,795 |                  |   | 9,213,811 
|Accumulated other comprehensive income:                                                                |  |                   |            |                  |   |           
|Net unrealized gains on investments, net of deferred federal income taxes                              |  |                   | 128,574    |                  |   | 578,485   
|                                                                                                       |  |                   |            |                  |   |           
|Total stockholders equity                                                                             |  |                   | 23,679,136 |                  |   | 17,305,209
|                                                                                                       |  |                   |            |                  |   |           
|Total liabilities and stockholders equity                                                             |  | $                 | 74,890,107 |                  | $ | 68,661,114
|                                                                                                       |  |                   |            |                  |   |           



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



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Operations (Unaudited)

For the Nine Months Ended September 30, 2005 and 2004



|                                                   |  |      |            |      |   |            |  
|-------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                   |  | 2005 |            | 2004 |  
|Revenues:                                          |  |      |            |      |   |            |  
|Net premiums earned                                |  | $    | 28,935,596 |      | $ | 18,575,987 |  
|Net investment income                              |  |      | 1,013,263  |      |   | 666,483    |  
|Net realized gains (losses) on investments         |  |      | 388,006    |      |   | (104,978   | )
|Other income, net                                  |  |      | 296,944    |      |   | 285,315    |  
|                                                   |  |      |            |      |   |            |  
|Total revenues                                     |  |      | 30,633,809 |      |   | 19,422,807 |  
|                                                   |  |      |            |      |   |            |  
|Expenses:                                          |  |      |            |      |   |            |  
|Losses and loss adjustment expenses, net           |  |      | 16,268,879 |      |   | 11,947,954 |  
|Policy acquisition and other underwriting expenses |  |      | 9,651,317  |      |   | 6,428,602  |  
|Interest expense                                   |  |      | 232,152    |      |   | 398,631    |  
|Demutualization expenses                           |  |      |           |      |   | 143,189    |  
|                                                   |  |      |            |      |   |            |  
|Total expenses                                     |  |      | 26,152,348 |      |   | 18,918,376 |  
|                                                   |  |      |            |      |   |            |  
|Income before federal income tax expense           |  |      | 4,481,461  |      |   | 504,431    |  
|                                                   |  |     
|Federal income tax benefit (expense)               |  |      | 2,314,523  |      |   | (75,000    | )
|                                                   |  |      |            |      |   |            |  
|Net income                                         |  | $    | 6,795,984  |      | $ | 429,431    |  
|                                                   |  |      |            |      |   |            |  
|Net income per common share                        |  |      |            |      |   |            |  
|Basic                                              |  | $    | 7.88       |      |   |            |  
|Diluted                                            |  | $    | 7.86       |      |   |            |  



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



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Operations (Unaudited)

For the Three Months Ended September 30, 2005 and 2004



|                                                   |  |      |            |      |   |           |  
|-------------------------------------------------- |  | ---- | ---------- | ---- | - | --------- | -
|                                                   |  | 2005 |            | 2004 |  
|Revenues:                                          |  |      |            |      |   |           |  
|Net premiums earned                                |  | $    | 10,513,429 |      | $ | 7,294,306 |  
|Net investment income                              |  |      | 271,672    |      |   | 256,292   |  
|Net realized gains (losses) on investments         |  |      | 5,586      |      |   | (96,606   | )
|Other income, net                                  |  |      | 103,033    |      |   | 98,889    |  
|                                                   |  |      |            |      |   |           |  
|Total revenues                                     |  |      | 10,893,720 |      |   | 7,552,881 |  
|                                                   |  |      |            |      |   |           |  
|Expenses:                                          |  |      |            |      |   |           |  
|Losses and loss adjustment expenses, net           |  |      | 5,288,043  |      |   | 4,770,904 |  
|Policy acquisition and other underwriting expenses |  |      | 3,166,629  |      |   | 2,699,607 |  
|Interest expense                                   |  |      | 77,111     |      |   | 125,419   |  
|Demutualization expenses                           |  |      |           |      |   | 101,962   |  
|                                                   |  |      |            |      |   |           |  
|Total expenses                                     |  |      | 8,531,783  |      |   | 7,697,892 |  
|                                                   |  |      |            |      |   |           |  
|Income (loss) before federal income tax expense    |  |      | 2,361,937  |      |   | (145,011  | )
|                                                   |  |     
|Federal income tax benefit                         |  |      | 3,022,245  |      |   | 15,000    |  
|                                                   |  |      |            |      |   |           |  
|Net income (loss)                                  |  | $    | 5,384,182  |      | $ | (130,011  | )
|                                                   |  |      |            |      |   |           |  
|Net income per common share                        |  |      |            |      |   |           |  
|Basic                                              |  | $    | 6.25       |      |   |           |  
|Diluted                                            |  | $    | 6.20       |      |   |           |  



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



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statement of Stockholders Equity (Unaudited)

For the Nine Months Ended September 30, 2005



|                                                                           |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   |          |   |  |   |            |  
|-------------------------------------------------------------------------- |  | -------------- | - | ------------ | - | ------------------------ |  | ---------------- | - | ------------------------------------------ | - | --------- | ----- | - | ---------- |  | - | -------- | - |  | - | ---------- | -
|                                                                           |  | PreferredStock |   | Common Stock |   | AdditionalPaid-inCapital |  | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome (Loss) |   |           | Total |  
|                                                                           |  | Class A        |   | Class B      |   |                          |  |                 
|Balance, December 31, 2004                                                 |  | $              |  |              | $ |                         |  | $                |  |                                            | $ | 7,512,913 |       | $ | 9,213,811  |  | $ | 578,485  |   |  | $ | 17,305,209 |  
|                                                                           |  |                |   |              |   |                          | 
|Comprehensive income:                                                      |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   |          |   |  |   |            |  
|Net income                                                                 |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   | 6,795,984  |  |   |          |   |  |   | 6,795,984  |  
|Net unrealized losses on investments, net of deferred federal income taxes |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   | (449,911 | ) |  |   | (449,911   | )
|                                                                           |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   |          |   |  |   |            |  
|Total comprehensive income                                                 |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   |          |   |  |   | 6,346,073  |  
|Issuance of stock options                                                  |  |                |   |              |   |                          |  |                  |   |                                            |   | 27,854    |       |   |            |  |   |          |   |  |   | 27,854     |  
|                                                                           |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   |          |   |  |   |            |  
|Balance, September 30, 2005                                                |  | $              |  |              | $ |                         |  | $                |  |                                            | $ | 7,540,767 |       | $ | 16,009,795 |  | $ | 128,574  |   |  | $ | 23,679,136 |  
|                                                                           |  |                |   |              |   |                          |  |                  |   |                                            |   |           |       |   |            |  |   |          |   |  |   |            |  



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



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2005 and 2004



|                                                                              |  |      |             |   |      |   |             |  
|----------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                              |  | 2005 |             |   | 2004 |  
|Cash flows from operating activities:                                         |  |      |             |   |      |   |             |  
|Net income                                                                    |  | $    | 6,795,984   |   |      | $ | 429,431     |  
|Adjustments to reconcile net income to net cash used in operating activities: |  |      |             |   |      |   |             |  
|Depreciation                                                                  |  |      | 117,915     |   |      |   | 117,915     |  
|Deferred federal income taxes                                                 |  |      | (3,831,260  | ) |      |   |            |  
|Stock based compensation expense                                              |  |      | 27,854      |   |      |   |            |  
|Net realized (gains) losses on investments                                    |  |      | (388,006    | ) |      |   | 104,978     |  
|Net amortization of premiums on investments                                   |  |      | 188,237     |   |      |   | 147,493     |  
|Changes in assets and liabilities:                                            |  |      |             |   |      |   |             |  
|Premiums due from policyholders                                               |  |      | (379,780    | ) |      |   | (311,427    | )
|Amounts due from reinsurers                                                   |  |      | 2,596,851   |   |      |   | 5,443,123   |  
|Accrued investment income                                                     |  |      | 20,857      |   |      |   | (8,897      | )
|Deferred policy acquisition costs                                             |  |      | (33,046     | ) |      |   | (2,417,842  | )
|Deferred equity offering expenses                                             |  |      |            |   |      |   | (337,017    | )
|Other assets                                                                  |  |      | (214        | ) |      |   | 853         |  
|Losses and loss adjustment expenses                                           |  |      | 118,908     |   |      |   | 3,544,122   |  
|Unearned premiums                                                             |  |      | 728,192     |   |      |   | 938,031     |  
|Reinsurance funds withheld and premiums ceded payable                         |  |      | (1,656,742  | ) |      |   | (4,432,581  | )
|Accrued expenses and other liabilities                                        |  |      | 664,708     |   |      |   | 708,691     |  
|                                                                              |  |      |             |   |      |   |             |  
|Net cash provided by operating activities                                     |  |      | 4,970,458   |   |      |   | 3,926,873   |  
|                                                                              |  |      |             |   |      |   |             |  
|Cash flows from investing activities:                                         |  |      |             |   |      |   |             |  
|Proceeds from sales and maturities of fixed maturity investments              |  |      | 19,105,699  |   |      |   | 7,346,108   |  
|Proceeds from sales of equity investments                                     |  |      | 1,702,942   |   |      |   | 735,868     |  
|Purchases of fixed maturity investments                                       |  |      | (22,892,855 | ) |      |   | (12,578,621 | )
|Purchases of equity investments                                               |  |      | (4,531,898  | ) |      |   | (2,990,148  | )
|Decrease in receivable from investments                                       |  |      | 739,150     |   |      |   |            |  
|Repayment of mortgage loan on real estate from related party                  |  |      | 2,954       |   |      |   | 2,782       |  
|Issuance of mortgage loan on real estate from related party                   |  |      | (130,000    | ) |      |   |            |  
|Purchase of equipment, net                                                    |  |      | (111,161    | ) |      |   | (139,315    | )
|                                                                              |  |      |             |   |      |   |             |  
|Net cash used in investing activities                                         |  |      | (6,115,169  | ) |      |   | (7,623,326  | )
|                                                                              |  |      |             |   |      |   |             |  
|Cash flows from financing activities:                                         |  |      |            |   |      |   |            |  
|                                                                              |  |      |             |   |      |   |             |  
|Net decrease in cash and cash equivalents                                     |  |      | (1,144,711  | ) |      |   | (3,696,453  | )
|                                                                              |  |     
|Cash and cash equivalents, beginning of period                                |  |      | 3,672,254   |   |      |   | 6,977,804   |  
|                                                                              |  |      |             |   |      |   |             |  
|Cash and cash equivalents, end of period                                      |  | $    | 2,527,543   |   |      | $ | 3,281,351   |  
|                                                                              |  |      |             |   |      |   |             |  



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



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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, 2004.



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.



Conversion and Demutualization



On October 12, 2004, FIC, formerly Fremont Mutual Insurance Company,
converted from a mutual to a stock form of insurance company and subsequently on October 15, 2004, all of its outstanding capital stock was transferred to FMIC thereby becoming a wholly owned subsidiary of FMIC. Prior to the conversion and
since 1876, Fremont Mutual Insurance Company conducted business as a Michigan domiciled mutual property and casualty insurer. FMIC was formed on November 18, 2003 for the purpose of acquiring all of the stock of FIC. On October 15, 2004
FMIC issued and sold 862,118 shares of its Common Stock at $10 per share (the Conversion). As part of the Conversion, surplus note holders converted approximately $2,498,000 of principal and accrued interest on surplus notes into common
stock of FMIC.



|2. | New Accounting Pronouncement
|-- | ----------------------------



In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS
123R). This standard requires expensing of stock options and other share-based payments and supersedes SFAS No. 123. This standard is effective for the Company as of January 1, 2006 and will apply to all awards granted, modified,
cancelled or repurchased after that date as well as the unvested portion of prior awards. The Company will adopt the standard as of the effective date and believes it will not have a material effect on the consolidated financial statements as the
Company already values stock options issued based upon a fair value method and recognizes the fair value as an expense over the period in which the options vest.



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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|3. | Comprehensive Income or Loss
|-- | ----------------------------



The Companys comprehensive income for the nine months ended September 30, 2005 and 2004 is as follows:



|                                                                                                                      |  |      |           |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ------- | -
|                                                                                                                      |  | 2005 |           |   | 2004 |  
|Net income                                                                                                            |  | $    | 6,795,984 |   |      | $ | 429,431 |  
|Other comprehensive income:                                                                                           |  |      |           |   |      |   |         |  
|Unrealized (loss) gain on investments arising during the period                                                       |  |      | 4,330     |   |      |   | 22,203  |  
|Deferred income tax benefit (expense) of unrealized (loss) gain on investments arising during the period              |  |      | (1,472    | ) |      |   | (7,549  | )
|Change in deferred tax valuation allowance                                                                            |  |      | (196,685  | ) |      |   | 7,549   |  
|                                                                                                                      |  |      |           |   |      |   |         |  
|Unrealized (loss) gain on investments arising during the period, net of deferred income taxes and valuation allowance |  |      | (193,827  | ) |      |   | 22,203  |  
|Adjustment for pretax realized (gains) losses on investments included in net income (loss)                            |  |      | (388,006  | ) |      |   | 104,978 |  
|Deferred income tax expense (benefit) of realized gains included in net income (loss)                                 |  |      | 131,922   |   |      |   | (35,692 | )
|Change in deferred tax valuation allowance                                                                            |  |      |          |   |      |   | 35,692  |  
|                                                                                                                      |  |      |           |   |      |   |         |  
|                                                                                                                      |  |      | (449,911  | ) |      |   | 127,181 |  
|                                                                                                                      |  |      |           |   |      |   |         |  
|Comprehensive income                                                                                                  |  | $    | 6,346,073 |   |      | $ | 556,612 |  
|                                                                                                                      |  |      |           |   |      |   |         |  



The Companys
comprehensive income for the three months ended September 30, 2005 and 2004 is as follows:



|                                                                                                                      |  |      |           |   |      |   |          |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | -
|                                                                                                                      |  | 2005 |           |   | 2004 |  
|Net income (loss)                                                                                                     |  | $    | 5,384,182 |   |      | $ | (130,011 | )
|Other comprehensive income:                                                                                           |  |      |           |   |      |   |          |  
|Unrealized (loss) gain on investments arising during the period                                                       |  |      | (168,039  | ) |      |   | 648,480  |  
|Deferred income tax benefit (expense) of unrealized (loss) gain on investments arising during the period              |  |      | 57,133    |   |      |   | (220,483 | )
|Change in deferred tax valuation allowance                                                                            |  |      | (125,268  | ) |      |   | 220,483  |  
|                                                                                                                      |  |      |           |   |      |   |          |  
|Unrealized (loss) gain on investments arising during the period, net of deferred income taxes and valuation allowance |  |      | (236,174  | ) |      |   | 648,480  |  
|Adjustment for pretax realized (gains) losses on investments included in net income (loss)                            |  |      | (5,586    | ) |      |   | 96,606   |  
|Deferred income tax expense (benefit) of realized gains included in net income (loss)                                 |  |      | 1,899     |   |      |   | (32,846  | )
|Change in deferred tax valuation allowance                                                                            |  |      |          |   |      |   | 32,846   |  
|                                                                                                                      |  |      |           |   |      |   |          |  
|                                                                                                                      |  |      | (239,861  | ) |      |   | 745,086  |  
|                                                                                                                      |  |      |           |   |      |   |          |  
|Comprehensive income                                                                                                  |  | $    | 5,144,322 |   |      | $ | 615,075  |  
|                                                                                                                      |  |      |           |   |      |   |          |  



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|4. | Income Per Share
|-- | ----------------



Basic net income per share has been calculated by dividing net income by the weighted-average common shares outstanding. Diluted net income 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 net income per share for the nine months ended September 30 is
as follows:



|                                                                                            |  |      |           |      |  
|------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | -
|                                                                                            |  | 2005 |           | 2004
|Numerator for basic and diluted net income per share:                                       |  |      |           |      |  
|Net income                                                                                  |  | $    | 6,795,984 |      | 
|                                                                                            |  |      |           |      |  
|Denominator:                                                                                |  |      |           |      |  
|Denominator for basic net income per share  weighted average shares outstanding            |  |      | 862,128   |      | 
|Effect of dilutive stock options                                                            |  |      | 2,770     |      | 
|                                                                                            |  |      |           |      |  
|Denominator for diluted net income per share  adjusted weighted average shares outstanding |  |      | 864,898   |      | 
|                                                                                            |  |      |           |      |  
|Basic net income per share                                                                  |  | $    | 7.88      |      | 
|Diluted net income per share                                                                |  | $    | 7.86      |      | 



The computation of
basic and diluted net income per share for the three months ended September 30 is as follows:



|                                                                                            |  |      |           |      |  
|------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | -
|                                                                                            |  | 2005 |           | 2004
|Numerator for basic and diluted net income per share:                                       |  |      |           |      |  
|Net income                                                                                  |  | $    | 5,384,182 |      | 
|                                                                                            |  |      |           |      |  
|Denominator:                                                                                |  |      |           |      |  
|Denominator for basic net income per share  weighted average shares outstanding            |  |      | 862,128   |      | 
|Effect of dilutive stock options                                                            |  |      | 5,746     |      | 
|                                                                                            |  |      |           |      |  
|Denominator for diluted net income per share  adjusted weighted average shares outstanding |  |      | 867,874   |      | 
|                                                                                            |  |      |           |      |  
|Basic net income per share                                                                  |  | $    | 6.25      |      | 
|Diluted net income per share                                                                |  | $    | 6.20      |      | 



|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. 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 assumptions and estimates made by management. Underwriting gain (loss) by product line would change if different methods were applied.



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



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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



|                                                         |  |      |            |   |      |   |            |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                         |  | 2005 |            |   | 2004 |  
|Revenues:                                                |  |      |            |   |      |   |            |  
|Net premiums earned:                                     |  |      |            |   |      |   |            |  
|Personal lines                                           |  | $    | 18,427,209 |   |      | $ | 11,392,617 |  
|Commercial lines                                         |  |      | 6,192,810  |   |      |   | 4,584,097  |  
|Farm                                                     |  |      | 3,213,086  |   |      |   | 1,961,732  |  
|Marine                                                   |  |      | 1,102,491  |   |      |   | 637,541    |  
|                                                         |  |      |            |   |      |   |            |  
|Total net premiums earned                                |  |      | 28,935,596 |   |      |   | 18,575,987 |  
|                                                         |  |      |            |   |      |   |            |  
|Expenses:                                                |  |      |            |   |      |   |            |  
|Loss and loss adjustment expenses:                       |  |      |            |   |      |   |            |  
|Personal lines                                           |  |      | 9,973,372  |   |      |   | 8,095,380  |  
|Commercial lines                                         |  |      | 3,349,118  |   |      |   | 2,320,499  |  
|Farm                                                     |  |      | 1,935,371  |   |      |   | 1,034,923  |  
|Marine                                                   |  |      | 1,011,018  |   |      |   | 497,152    |  
|                                                         |  |      |            |   |      |   |            |  
|Total loss and loss adjustment expenses                  |  |      | 16,268,879 |   |      |   | 11,947,954 |  
|                                                         |  |      |            |   |      |   |            |  
|Policy acquisition and other underwriting expenses:      |  |      |            |   |      |   |            |  
|Personal lines                                           |  |      | 6,146,300  |   |      |   | 3,942,291  |  
|Commercial lines                                         |  |      | 2,065,579  |   |      |   | 1,586,771  |  
|Farm                                                     |  |      | 1,071,708  |   |      |   | 679,375    |  
|Marine                                                   |  |      | 367,730    |   |      |   | 220,165    |  
|                                                         |  |      |            |   |      |   |            |  
|Total policy acquisition and other underwriting expenses |  |      | 9,651,317  |   |      |   | 6,428,602  |  
|                                                         |  |      |            |   |      |   |            |  
|Underwriting gain (loss):                                |  |      |            |   |      |   |            |  
|Personal lines                                           |  |      | 2,307,537  |   |      |   | (645,054   | )
|Commercial lines                                         |  |      | 778,113    |   |      |   | 676,827    |  
|Farm                                                     |  |      | 206,007    |   |      |   | 247,434    |  
|Marine                                                   |  |      | (276,257   | ) |      |   | (79,776    | )
|                                                         |  |      |            |   |      |   |            |  
|Total underwriting gain                                  |  |      | 3,015,400  |   |      |   | 199,431    |  
|                                                         |  |     
|Net investment income                                    |  |      | 1,013,263  |   |      |   | 666,483    |  
|Net realized gains (losses) on investments               |  |      | 388,006    |   |      |   | (104,978   | )
|Other income, net                                        |  |      | 296,944    |   |      |   | 285,315    |  
|Interest expense                                         |  |      | (232,152   | ) |      |   | (398,631   | )
|Demutualization expenses                                 |  |      |           |   |      |   | (143,189   | )
|                                                         |  |      |            |   |      |   |            |  
|Income before federal income taxes                       |  | $    | 4,481,461  |   |      | $ | 504,431    |  
|                                                         |  |      |            |   |      |   |            |  



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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



|                                                         |  |      |            |   |      |   |           |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                         |  | 2005 |            |   | 2004 |  
|Revenues:                                                |  |      |            |   |      |   |           |  
|Net premiums earned:                                     |  |      |            |   |      |   |           |  
|Personal lines                                           |  | $    | 6,611,597  |   |      | $ | 4,534,087 |  
|Commercial lines                                         |  |      | 2,324,390  |   |      |   | 1,719,682 |  
|Farm                                                     |  |      | 1,155,574  |   |      |   | 757,902   |  
|Marine                                                   |  |      | 421,868    |   |      |   | 282,635   |  
|                                                         |  |      |            |   |      |   |           |  
|Total net premiums earned                                |  |      | 10,513,429 |   |      |   | 7,294,306 |  
|                                                         |  |      |            |   |      |   |           |  
|Expenses:                                                |  |      |            |   |      |   |           |  
|Loss and loss adjustment expenses:                       |  |      |            |   |      |   |           |  
|Personal lines                                           |  |      | 3,069,849  |   |      |   | 3,544,605 |  
|Commercial lines                                         |  |      | 670,426    |   |      |   | 435,359   |  
|Farm                                                     |  |      | 1,126,461  |   |      |   | 393,702   |  
|Marine                                                   |  |      | 421,307    |   |      |   | 397,238   |  
|                                                         |  |      |            |   |      |   |           |  
|Total loss and loss adjustment expenses                  |  |      | 5,288,043  |   |      |   | 4,770,904 |  
|                                                         |  |      |            |   |      |   |           |  
|Policy acquisition and other underwriting expenses:      |  |      |            |   |      |   |           |  
|Personal lines                                           |  |      | 1,987,150  |   |      |   | 1,675,129 |  
|Commercial lines                                         |  |      | 703,877    |   |      |   | 640,311   |  
|Farm                                                     |  |      | 347,454    |   |      |   | 281,188   |  
|Marine                                                   |  |      | 128,148    |   |      |   | 102,979   |  
|                                                         |  |      |            |   |      |   |           |  
|Total policy acquisition and other underwriting expenses |  |      | 3,166,629  |   |      |   | 2,699,607 |  
|                                                         |  |      |            |   |      |   |           |  
|Underwriting gain (loss):                                |  |      |            |   |      |   |           |  
|Personal lines                                           |  |      | 1,554,598  |   |      |   | (685,647  | )
|Commercial lines                                         |  |      | 950,087    |   |      |   | 644,012   |  
|Farm                                                     |  |      | (318,341   | ) |      |   | 83,012    |  
|Marine                                                   |  |      | (127,587   | ) |      |   | (217,582  | )
|                                                         |  |      |            |   |      |   |           |  
|Total underwriting gain (loss)                           |  |      | 2,058,757  |   |      |   | (176,205  | )
|                                                         |  |     
|Net investment income                                    |  |      | 271,672    |   |      |   | 256,292   |  
|Net realized gains (losses) on investments               |  |      | 5,586      |   |      |   | (96,606   | )
|Other income, net                                        |  |      | 103,033    |   |      |   | 98,889    |  
|Interest expense                                         |  |      | (77,111    | ) |      |   | (125,419  | )
|Demutualization expenses                                 |  |      |           |   |      |   | (101,962  | )
|                                                         |  |      |            |   |      |   |           |  
|Income (loss) before federal income taxes                |  | $    | 2,361,937  |   |      | $ | (145,011  | )
|                                                         |  |      |            |   |      |   |           |  



---

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 nine
months ended September 30 are as follows:



|                                                |  |      |         |   |      |   |        
|----------------------------------------------- |  | ---- | ------- | - | ---- | - | -------
|                                                |  | 2005 |         |   | 2004
|Components of net periodic benefit cost:        |  |      |         |   |      |   |        
|Service cost                                    |  | $    | 15,635  |   |      | $ | 191,718
|Interest cost                                   |  |      | 88,229  |   |      |   | 167,204
|Amortization of prior transition obligation     |  |      |        |   |      |   | 36,519 
|Amortization of unrecognized prior service cost |  |      | (64,262 | ) |      |   |       
|Amortization of unrecognized net actuarial loss |  |      | 28,121  |   |      |   | 38,655 
|                                                |  |      |         |   |      |   |        
|Net periodic benefit cost                       |  | $    | 67,723  |   |      | $ | 434,096
|                                                |  |      |         |   |      |   |        



The components of the
net periodic benefit cost for the three months ended September 30 are as follows:



|                                                |  |      |         |   |      |   |        
|----------------------------------------------- |  | ---- | ------- | - | ---- | - | -------
|                                                |  | 2005 |         |   | 2004
|Components of net periodic benefit cost:        |  |      |         |   |      |   |        
|Service cost                                    |  | $    | 5,212   |   |      | $ | 63,906 
|Interest cost                                   |  |      | 29,410  |   |      |   | 55,735 
|Amortization of prior transition obligation     |  |      |        |   |      |   | 12,173 
|Amortization of unrecognized prior service cost |  |      | (21,421 | ) |      |   |       
|Amortization of unrecognized net actuarial loss |  |      | 9,374   |   |      |   | 12,885 
|                                                |  |      |         |   |      |   |        
|Net periodic benefit cost                       |  | $    | 22,575  |   |      | $ | 144,699
|                                                |  |      |         |   |      |   |        



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, 2005 the Company has made contributions to the plan of approximately $88,000. During 2005 the Company
expects to contribute a total of $88,000 to the plan to cover anticipated benefit payments.



On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduces a prescription drug benefit under Medicare as well as a
federal subsidy to qualifying sponsors of retiree healthcare benefit plans. Based on the current structure of the Companys plan for retirees as well as the retiree population the Company does not expect that the Act will have a material impact
on the postretirement benefit obligation. Therefore, the valuation of the unfunded postretirement benefit obligation and the determination of the net postretirement benefit cost included in these financial statements do not reflect the effects, if
any, of the Act on the plan.



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



Premiums earned are net of amounts ceded of $4,448,000 and $11,763,000 for the nine months ended September 30, 2005 and 2004, respectively. Loss and
loss adjustment expenses are net of amounts ceded of $990,000 and $7,838,000 for the nine months ended September 30, 2005 and 2004, respectively.



Premiums earned are net of amounts ceded of $942,000 and $3,133,000 for the three months ended September 30, 2005 and 2004, respectively. Loss and
loss adjustment expenses are net of amounts ceded of ($36,000) and $2,467,000 for the three months ended September 30, 2005 and 2004, respectively.



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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



The provision for income taxes for the nine and three months ended September 30, 2005 and 2004 consists of the following:



|                                 |  |                                |            |   |                                 |   |          |      |  |   |            |   |  |   |          |  
|-------------------------------- |  | ------------------------------ | ---------- | - | ------------------------------- | - | -------- | ---- |  | - | ---------- | - |  | - | -------- | -
|                                 |  | Nine Months EndedSeptember 30, |            |   | Three Months EndedSeptember 30, |  
|                                 |  | 2005                           |            |   | 2004                            |   |          | 2005 |  |   | 2004       |  
|Current expense (benefit)        |  | $                              | 1,516,736  |   |                                 | $ | 75,000   |      |  | $ | 868,048    |   |  | $ | (15,000  | )
|Deferred expense (benefit)       |  |                                | 24,202     |   |                                 |   | 143,398  |      |  |   | (76,543    | ) |  |   | (233,794 | )
|Deferred tax valuation allowance |  |                                | (3,855,461 | ) |                                 |   | (143,398 | )    |  |   | (3,813,750 | ) |  |   | 233,794  |  
|                                 |  |                                |            |   |                                 |   |          |      |  |   |            |   |  |   |          |  
|Total                            |  | $                              | (2,314,523 | ) |                                 | $ | 75,000   |      |  | $ | (3,022,245 | ) |  | $ | (15,000  | )
|                                 |  |                                |            |   |                                 |   |          |      |  |   |            |   |  |   |          |  



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



|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|----------------------------------------- |  | -------------------------------- | ---------- | - | ---- | ------ | -- |  | - | -------- | - |  | ----- | --
|                                          |  | Nine Months Ended September 30,  |           
|                                          |  | 2005                             |            |   | 2004 |       
|Income before federal income taxes        |  | $                                | 4,481,461  |   |      |        |    |  | $ | 504,431  |   |  |       |   
|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|Tax at statutory rate                     |  |                                  | 1,523,697  |   |      | 34.0   | %  |  |   | 171,507  |   |  | 34.0  | % 
|Tax effect of :                           |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|Dividends received deduction              |  |                                  | (16,729    | ) |      | (0.4   | )% |  |   | (10,089  | ) |  | (2.0  | )%
|Nondeductible expenses, net               |  |                                  | 3,969      |   |      | 0.1    | %  |  |   | 40,354   |   |  | 8.0   | % 
|Provision to return variance              |  |                                  | 35,627     |   |      | 0.8    | %  |  |   | 45,138   |   |  | 8.9   | % 
|Other, net                                |  |                                  | (5,626     | ) |      | (0.1   | )% |  |   | 14,729   |   |  | 2.9   | % 
|Valuation allowance                       |  |                                  | (3,855,461 | ) |      | (86.0  | )% |  |   | (186,639 | ) |  | (37.0 | )%
|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|                                          |  | $                                | (2,314,523 | ) |      | (51.6  | )% |  | $ | 75,000   |   |  | 14.9  | % 
|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|                                          | 
|                                          |  | Three Months Ended September 30, |           
|                                          |  | 2005                             |            |   | 2004 |       
|Income (loss) before federal income taxes |  | $                                | 2,361,937  |   |      |        |    |  | $ | (145,011 | ) |  |       |   
|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|Tax at statutory rate                     |  |                                  | 803,059    |   |      | 34.0   | %  |  |   | (49,304  | ) |  | 34.0  | % 
|Tax effect of :                           |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|Dividends received deduction              |  |                                  | (4,461     | ) |      | (0.2   | )% |  |   | (2,900   | ) |  | 2.0   | % 
|Nondeductible expenses, net               |  |                                  | 1,386      |   |      | 0.1    | %  |  |   | 11,601   |   |  | (8.0  | )%
|Provision to return variance              |  |                                  |           |   |      |       |    |  |   | 45,138   |   |  | (31.1 | )%
|Other, net                                |  |                                  | (8,479     | ) |      | (0.4   | )% |  |   |         |   |  |       |   
|Valuation allowance                       |  |                                  | (3,813,750 | ) |      | (161.5 | )% |  |   | (19,535  | ) |  | 13.5  | % 
|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   
|                                          |  | $                                | (3,022,245 | ) |      | (128.0 | )% |  | $ | (15,000  | ) |  | 10.3  | % 
|                                          |  |                                  |            |   |      |        |    |  |   |          |   |  |       |   



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



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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 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, 2005 it is more likely than not that sufficient taxable income will exist in the periods of reversal and therefore a
portion of the recorded deferred tax asset will be realized. Accordingly, the Company has reversed a portion of the deferred tax asset valuation allowance as of the beginning of the nine-month and three-month periods ended September 30, 2005.



Based on the annual Section 382 limitation of the
utilization of net operating loss carryforwards management has determined that approximately $1,053,000 of net operating loss carryforwards will not be realized and therefore a full valuation allowance will be maintained for these amounts.



At September 30, 2005 and December 31, 2004 the tax
effects of temporary differences that give rise to deferred federal income tax assets and liabilities are as follows:



|                                                      |  |                   |            |   |                  |   |            |  
|----------------------------------------------------- |  | ----------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                      |  | September 30,2005 |            |   | December 31,2004 |  
|Deferred federal income tax assets arising from:      |  |                   |            |   |                  |   |            |  
|Loss and loss adjustment expense reserves             |  | $                 | 433,792    |   |                  | $ | 399,674    |  
|Unearned premium reserves                             |  |                   | 1,419,731  |   |                  |   | 1,346,649  |  
|Realized losses on investments                        |  |                   | 37,323     |   |                  |   | 3,740      |  
|Postretirement benefits accrued                       |  |                   | 930,772    |   |                  |   | 931,648    |  
|Net operating loss carryforward                       |  |                   | 2,742,271  |   |                  |   | 2,716,444  |  
|Capital loss carryfoward                              |  |                   | 41,886     |   |                  |   | 207,391    |  
|Alternative minimum tax credit carryforward           |  |                   | 357,697    |   |                  |   | 357,697    |  
|Other deferred tax assets                             |  |                   | 153,453    |   |                  |   | 155,046    |  
|                                                      |  |                   |            |   |                  |   |            |  
|Total deferred federal income tax assets              |  |                   | 6,116,925  |   |                  |   | 6,118,289  |  
|                                                      |  |                   |            |   |                  |   |            |  
|Deferred federal income tax liabilities arising from: |  |                   |            |   |                  |   |            |  
|Deferred policy acquisition costs                     |  |                   | (1,019,313 | ) |                  |   | (978,320   | )
|Unrealized gains on investments                       |  |                   | (66,235    | ) |                  |   | (196,685   | )
|Property and equipment                                |  |                   | (199,063   | ) |                  |   | (214,285   | )
|Other deferred tax liabilities                        |  |                   | (14,053    | ) |                  |   | (16,987    | )
|                                                      |  |                   |            |   |                  |   |            |  
|Total deferred federal income tax liabilities         |  |                   | (1,298,664 | ) |                  |   | (1,406,277 | )
|                                                      |  |                   |            |   |                  |   |            |  
|Net deferred federal income tax asset                 |  |                   | 4,818,261  |   |                  |   | 4,712,012  |  
|                                                      |  |                  
|Valuation allowance                                   |  |                   | (1,053,236 | ) |                  |   | (4,712,012 | )
|                                                      |  |                   |            |   |                  |   |            |  
|Net deferred tax asset                                |  | $                 | 3,765,025  |   |                  | $ |           |  
|                                                      |  |                   |            |   |                  |   |            |  



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



The following table shows the allocation of the change in the deferred tax valuation allowance for
the year ended December 31, 2004. The second table shows the impact of the reversal of the valuation allowance on federal income tax benefit included in net income and other comprehensive income for the nine and three month periods ended
September 30, 2005.



|                                                                               |  |                            |            |  
|------------------------------------------------------------------------------ |  | -------------------------- | ---------- | -
|                                                                               |  | Year EndedDecember 31,2004 |           
|Valuation allowance balance, January 1                                         |  | $                          | (5,327,589 | )
|Change in valuation allowance allocated to:                                    |  |                            |            |  
|Federal income tax benefit from operations                                     |  |                            | 604,500    |  
|Unrealized gains/losses on investments allocated to other comprehensive income |  |                            | 11,077     |  
|                                                                               |  |                            |            |  
|Valuation allowance balance, December 31                                       |  | $                          | (4,712,012 | )
|                                                                               |  |                            |            |  



|                                                                                                                   |  |                                    |            |   |                                   |   |            |  
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------- | ---------- | - | --------------------------------- | - | ---------- | -
|                                                                                                                   |  | Three MonthsEndedSeptember 30,2005 |            |   | Nine MonthsEndedSeptember 30,2005 |  
|Valuation allowance balance, July 1, or January 1                                                                  |  | $                                  | (4,741,718 | ) |                                   | $ | (4,712,012 | )
|Reversal of valuation allowance for unrealized gains/losses on investments allocated to other comprehensive income |  |                                    | (125,268   | ) |                                   |   | (196,685   | )
|Reversal of valuation allowance reported as federal income tax benefit                                             |  |                                    | 3,813,750  |   |                                   |   | 3,855,461  |  
|                                                                                                                   |  |                                    |            |   |                                   |   |            |  
|Valuation allowance balance, September 30                                                                          |  | $                                  | (1,053,236 | ) |                                   | $ | (1,053,236 | )
|                                                                                                                   |  |                                    |            |   |                                   |   |            |  



At September 30,
2005, the Company has net operating loss carryforwards which total approximately $8,066,000. As a result of the conversion and demutualization discussed in Note 1 the aforementioned net operating losses are subject to certain change in control
limitations under Section 382. The annual limitation on the utilization of the net operating losses is approximately $400,000. In addition to the net operating loss carryforwards the Company also has approximately $358,000 in alternative
minimum tax credit carryforwards which are also subject to the Section 382 limitation and can be carried forward indefinitely.



---

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



The Conversion Transaction and The Holding Company



Fremont Michigan InsuraCorp, Inc. is a holding company owning all of the
outstanding shares of Fremont Insurance Company. On October 12, 2004, the Insurance Company, formerly Fremont Mutual Insurance Company, converted from a mutual to a stock form of insurance company and subsequently on October 15, 2004, all
of its outstanding capital stock was transferred to Fremont Michigan InsuraCorp, Inc. thereby becoming a wholly owned subsidiary of Fremont Michigan InsuraCorp, Inc. Prior to the conversion and since 1876, Fremont Mutual Insurance Company
conducted business as a Michigan domiciled mutual property and casualty insurer. The Holding Company was formed on November 18, 2003 for the purpose of acquiring all of the stock of the Insurance Company. On October 15, 2004 the Holding
Company issued and sold 862,118 shares of its Common Stock at $10 per share (the Conversion). After subtracting the offering costs of $1,116,000 the net value of common stock issued was approximately $7,505,000. As part of the
Conversion, surplus note holders converted approximately $2,498,000 of principal and accrued interest on surplus notes into common stock of the Holding Company. The net cash received from the stock offering was approximately $5,007,000.



Except for $250,000 that was retained for administrative expenses, the
Holding Company, in exchange for all of the stock in the Insurance Company, contributed to the Insurance Company all of the net cash proceeds from the sale of the Holding Company Common Stock.



The Conversion has been accounted for as a simultaneous conversion,
recapitalization and share offering which did not change the historical accounting basis of the Insurance Companys financial statements.



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.



Overview
of Business



The 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 129 years. We market policies through approximately 162 independent insurance agencies. We have four business segments: personal, commercial, farm and marine. As of September 30, 2005, we had approximately 50,700 policies
in force and assets of $74.9 million.



The Companys
executive offices are located at 933 E. Main Street, Fremont, Michigan 49412-9753, and the telephone number is (231) 924-0300. Our website address is www.fmic.com. Information on the Companys website is not a part of this Form
10-Q. The Company makes available free of charge on its website, or provides a link to, the Companys Forms 3, 4, 5, 10-K, 10-Q and 8-K and any amendments to these Forms, that have been filed with the SEC as soon as reasonably practicable after
the Company electronically files such material with, or furnishes it to the SEC. To access these filings, go to the Companys website and click on Investor Information, then click on SEC Filings.



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, 2005 and 2004. The Companys fiscal year ends on December 31.



Critical Accounting Policies



General. We are required to make estimates and
assumptions in certain circumstances that affect the amounts reported in our financial statements and related footnotes. We evaluate these estimates and assumptions on an on-going basis based on historical developments, market trends, industry
trends and other data we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to our estimates and assumptions, and that reported results of operation will not be adversely affected by the need
to make accounting adjustments to reflect changes in these estimates and assumptions from time to time.



The policies relating to liabilities for loss and loss adjustment expenses, investments, policy acquisition costs, reinsurance and income taxes are those
we believe to be most sensitive to estimates and judgments. These policies are more fully described below as well as in our 2004 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
(LAE). These liabilities are estimates of the ultimate unpaid cost of all losses incurred, including losses for claims that have not yet been reported to the Company. The amount of the reserve for reported



---

claims is based primarily on a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each occurrence, and the
insurance policy provisions relating to the type of loss. The amounts of loss reserves for incurred but unreported (IBNR) claims and loss adjustment expense are calculated by using historical and actuarial information by line of business
as adjusted to current conditions. Inflation is implicitly provided for in the reserving function through analysis of costs, trends and comparisons of historical reserving results to the ultimate results. Reserves are closely monitored and are
recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. Reserves are estimates. We expect that these estimates will be more or less than the amounts ultimately paid when the claim is
settled. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the current financial statements.



Loss reserving techniques, which rely on historical information as adjusted to reflect current conditions, have been consistently applied during the
periods presented. Changes in the estimate of the liability for losses and LAE reflect actual payments and evaluations of new information and data since the last report. Because of the nature of insurance claims, there are uncertainties inherent in
the estimates of the ultimate loss payment. Court decisions, regulatory changes and economic conditions can affect the ultimate cost of claims that occurred in the past as well as uncertainties regarding future loss cost trends. The ultimate
liability for unpaid losses and LAE will differ from the amount recorded at the last reported date.



The property and casualty insurance industry generally has incurred substantial aggregate losses from claims related to asbestos-related illnesses,
environmental remediation, product and construction defect liability, mold and other uncertain exposures. However, the Company has not experienced significant losses from these types of claims.



The following table shows the breakdown of our loss and LAE reserves between
reported losses and IBNR losses by segment as of September 30, 2005 and December 31, 2004 (in thousands):



|                |  |                   |        |                  |   |       
|--------------- |  | ----------------- | ------ | ---------------- | - | ------
|                |  | September 30,2005 |        | December 31,2004
|Reported losses |  |                   |        |                  |   |       
|Personal        |  | $                 | 5,185  |                  | $ | 5,182 
|Commercial      |  |                   | 3,073  |                  |   | 4,444 
|Farm            |  |                   | 1,830  |                  |   | 1,019 
|Marine          |  |                   | 308    |                  |   | 276   
|                |  |                   |        |                  |   |       
|                |  |                   | 10,396 |                  |   | 10,921
|                |  |                   |        |                  |   |       
|IBNR losses     |  |                   |        |                  |   |       
|Personal        |  |                   | 4,589  |                  |   | 4,577 
|Commercial      |  |                   | 3,079  |                  |   | 2,510 
|Farm            |  |                   | 800    |                  |   | 753   
|Marine          |  |                   | 227    |                  |   | 212   
|                |  |                   |        |                  |   |       
|                |  |                   | 8,695  |                  |   | 8,052 
|                |  |                   |        |                  |   |       
|Total           |  |                   |        |                  |   |       
|Personal        |  |                   | 9,774  |                  |   | 9,759 
|Commercial      |  |                   | 6,152  |                  |   | 6,954 
|Farm            |  |                   | 2,630  |                  |   | 1,772 
|Marine          |  |                   | 535    |                  |   | 488   
|                |  |                   |        |                  |   |       
|                |  | $                 | 19,091 |                  | $ | 18,973
|                |  |                   |        |                  |   |       



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, 2005 and December 31, 2004, was approximately $460,000 and $473,000,
respectively.



Investments.Our investments are
classified as available for sale. Investments classified as available for sale are available to be sold in the future in response to the Companys liquidity needs, changes in market interest rates, tax strategies and asset-liability management
strategies, among other reasons. Available for sale investments are reported at fair value, with unrealized gains and losses reported in the accumulated other comprehensive income component of stockholders equity, net of deferred taxes and the
corresponding deferred tax asset valuation allowance.



Other Than Temporary Impairments of Securities and Unrealized Losses on Investments. We review the status and market value changes of our investments on at least a quarterly
basis during the year, 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, we
consider, in addition to a securitys market price history, 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
markets conditions, analyst expectations, and our intent and ability to retain fixed maturity securities for a period of time sufficient to allow for anticipated recovery in market value, in their totality to reach our conclusions.



---

Additionally, our impairment evaluation and recognition for interests in mortgage-backed/asset-backed
securities is conducted in accordance with the guidance provided by the Emerging Issues Task Force of the Financial Accounting Standards Board. Under this guidance, impairment losses on investments must be recognized if the fair value of the
investment is less than both its book value and the net present value of expected future cash flows at the most recent (prior) estimation date. If these criteria are met, an impairment charge, calculated as the difference between the current book
value of the investment and its fair value, is included in earnings as a realized loss in the period the impairment arose. As a result of this evaluation process, there were no impairment losses recorded in mortgage-backed/asset-backed securities
during the three and nine month periods ended September 30, 2005 and 2004.



During the nine months ended September 30, 2005 the Company recognized approximately $99,000 in realized losses due to two equity investments that the Company deemed to be other than temporarily impaired. During
the nine months ended September 30, 2004 there were no investments that the Company determined to be other than temporarily impaired. At September 30, 2005 and December 31, 2004 gross unrealized losses on available for sale
investments, which were not impaired, was approximately $639,000 and $239,000, respectively. Management views the unrealized losses as being temporary.



Policy Acquisition Costs. We defer certain policy acquisition costs, which vary with, and are directly related to, the production of
business. In our case, these deferred costs consist primarily of agent commissions incurred net of ceding commissions earned. These costs are amortized over the effective period of the related insurance policies. The method followed in computing
deferred policy acquisition costs limits the amount of deferred costs to their estimated realizable value, which gives effect to the premiums earned, related investment income, loss and loss adjustment expense and certain other costs expected to be
incurred as the premium is earned. Future changes in estimates, the most significant of which is expected to be loss and loss adjustment expense, may require accelerated amortization of deferred policy acquisition costs. Deferred policy acquisition
costs at September 30, 2005 and December 31, 2004 were approximately $2,894,000 and $2,861,000, respectively.



Reinsurance. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured
policy. These balances are the amounts we expect to collect from our reinsurers for settled claims and for claims that are in the process of adjustment but have not been completely settled. Premiums paid for reinsurance contracts are recognized over
the contract period during which the reinsurance coverage attaches to the underlying policy. Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and LAE are reported separately as assets, instead of being netted
with the associated liabilities, because reinsurance does not relieve us of our legal liability to the claimants. Additionally, the same uncertainties associated with estimating unpaid loss and LAE affect the estimates for the ceded portion of these
liabilities. We continually monitor the financial condition of our reinsurers.



At September 30, 2005 and December 31, 2004, the Companys recoverable from reinsurers was comprised of the following:



|                            |  |                   |           |                  |   |           
|--------------------------- |  | ----------------- | --------- | ---------------- | - | ----------
|                            |  | September 30,2005 |           | December 31,2004
|Paid losses and LAE         |  | $                 | 1,607,932 |                  | $ | 1,486,039 
|Unpaid losses and LAE       |  |                   | 6,477,830 |                  |   | 9,186,686 
|Unearned premium            |  |                   | 197,029   |                  |   | 206,917   
|                            |  |                   |           |                  |   |           
|Amounts due from reinsurers |  | $                 | 8,282,791 |                  | $ | 10,879,642
|                            |  |                   |           |                  |   |           



---

The effect of reinsurance on premiums written and earned for the three and nine months ended
September 30, 2005 and 2004 are as follows:



|             |  |                                  |            |   |        |   |            |         |  |   |            |   |  |   |             |  
|------------ |  | -------------------------------- | ---------- | - | ------ | - | ---------- | ------- |  | - | ---------- | - |  | - | ----------- | -
|             |  | Three Months Ended September 30, |           
|             |  | 2005                             |            |   | 2004   |  
|             |  | Written                          |            |   | Earned |   |            | Written |  |   | Earned     |  
|Direct       |  | $                                | 12,805,962 |   |        | $ | 11,424,788 |         |  | $ | 12,142,495 |   |  | $ | 10,389,071  |  
|Assumed      |  |                                  | 27,293     |   |        |   | 31,077     |         |  |   | 43,298     |   |  |   | 38,239      |  
|Ceded        |  |                                  | (927,070   | ) |        |   | (942,436   | )       |  |   | (1,709,995 | ) |  |   | (3,133,004  | )
|             |  |                                  |            |   |        |   |            |         |  |   |            |   |  |   |             |  
|Net premiums |  | $                                | 11,906,185 |   |        | $ | 10,513,429 |         |  | $ | 10,475,798 |   |  | $ | 7,294,306   |  
|             |  |                                  |            |   |        |   |            |         |  |   |            |   |  |   |             |  
|             | 
|             |  | Nine Months Ended September 30,  |           
|             |  | 2005                             |            |   | 2004   |  
|             |  | Written                          |            |   | Earned |   |            | Written |  |   | Earned     |  
|Direct       |  | $                                | 34,047,970 |   |        | $ | 33,300,676 |         |  | $ | 31,107,840 |   |  | $ | 30,218,462  |  
|Assumed      |  |                                  | 64,107     |   |        |   | 83,209     |         |  |   | 115,289    |   |  |   | 120,125     |  
|Ceded        |  |                                  | (4,438,401 | ) |        |   | (4,448,289 | )       |  |   | (3,945,316 | ) |  |   | (11,762,600 | )
|             |  |                                  |            |   |        |   |            |         |  |   |            |   |  |   |             |  
|Net premiums |  | $                                | 29,673,676 |   |        | $ | 28,935,596 |         |  | $ | 27,277,813 |   |  | $ | 18,575,987  |  
|             |  |                                  |            |   |        |   |            |         |  |   |            |   |  |   |             |  



Income
Taxes. Deferred federal income tax assets and liabilities are recognized for the expected future tax consequences attributable to the differences between financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets primarily relate to deductible temporary differences for unpaid losses and loss adjustment expenses and unearned premiums, as well as net operating loss (NOL) and minimum tax credit carry
forwards. We review our net deferred federal tax asset on a regular basis for recoverability based on the availability of future taxable income in the years when the deductible temporary differences are expected to reverse. As a result of this
review, we have determined that as of September 30, 2005, it is more likely than not that sufficient taxable income will exist in the periods of reversal. Accordingly, as of the beginning of the three month and nine month periods ended
September 30, 2005 we have reversed the deferred tax asset valuation allowance except for a portion relating to NOL carryforwards which are expected to be lost due to the annual limitation on their utilization pursuant to Internal Revenue Code
Section 382 in conjunction with the NOL carryforwards expiration dates.



The reversal of the valuation allowance as of the beginning of the three month and nine month periods ended September 30, 2005, was credited to federal income tax benefit, with the exception of that portion of
the valuation allowance that pertains to unrealized gains/losses allocated to other comprehensive income. See Note 8 of Notes to Consolidated Financial Statements, included elsewhere in this report, for additional information regarding the specific
effects of the reversal of the valuation allowance.



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, 2005 and 2004



The discussion that follows should be read in connection with the unaudited
consolidated financial statements and notes thereto included elsewhere in this report.



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, 2005 and 2004. 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 | 
|                                           |  | 2005 |           |   | 2004 |   |          | Dollar |  |   | Percentage |  
|Underwriting gain (loss)                   |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Personal                                   |  | $    | 1,554,598 |   |      | $ | (685,647 | )      |  | $ | 2,240,245  |   |  | 326.7   | % 
|Commercial                                 |  |      | 950,087   |   |      |   | 644,012  |        |  |   | 306,075    |   |  | 47.5    | % 
|Farm                                       |  |      | (318,341  | ) |      |   | 83,012   |        |  |   | (401,353   | ) |  | (483.5  | )%
|Marine                                     |  |      | (127,587  | ) |      |   | (217,582 | )      |  |   | 89,995     |   |  | 41.4    | % 
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Total underwriting gain (loss)             |  |      | 2,058,757 |   |      |   | (176,205 | )      |  |   | 2,234,962  |   |  | (1268.4 | )%
|                                           |  |      |           |  
|Other revenue (expense) items              |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Net investment income                      |  |      | 271,672   |   |      |   | 256,292  |        |  |   | 15,380     |   |  | 6.0     | % 
|Net realized gains (losses) on investments |  |      | 5,586     |   |      |   | (96,606  | )      |  |   | 102,192    |   |  | 105.8   | % 
|Other income                               |  |      | 103,033   |   |      |   | 98,889   |        |  |   | 4,144      |   |  | 4.2     | % 
|Interest expense                           |  |      | (77,111   | ) |      |   | (125,419 | )      |  |   | 48,308     |   |  | (38.5   | )%
|Demutualization expense                    |  |      |          |   |      |   | (101,962 | )      |  |   | 101,962    |   |  | (100.0  | )%
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Total other revenue (expense) items        |  |      | 303,180   |   |      |   | 31,194   |        |  |   | 271,986    |   |  | 871.9   | % 
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Income (loss) before federal income taxes  |  |      | 2,361,937 |   |      |   | (145,011 | )      |  |   | 2,506,948  |   |  | 1728.8  | % 
|Federal income tax benefit                 |  |      | 3,022,245 |   |      |   | 15,000   |        |  |   | 3,007,245  |   |  | 20048.3 | % 
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Net income (loss)                          |  | $    | 5,384,182 |   |      | $ | (130,011 | )      |  | $ | 5,514,193  |   |  | 4241.3  | % 
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   



Underwriting
Results. The following table shows the components of the Companys underwriting gain or loss for the three months ended September 30, 2005 and 2004.



|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |        |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | -- |  | ------ | -
|                                                        |  | 2005 |            |   | 2004 |   |            | Change |  |   | % Change  |   
|Direct premiums written                                 |  | $    | 12,805,962 |   |      | $ | 12,142,495 |        |  | $ | 663,467   |    |  | 5.5    | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |        |  
|Net premiums written                                    |  | $    | 11,906,185 |   |      | $ | 10,475,798 |        |  | $ | 1,430,387 |    |  | 13.7   | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |        |  
|Net premiums earned                                     |  | $    | 10,513,429 |   |      | $ | 7,294,306  |        |  | $ | 3,219,123 |    |  | 44.1   | %
|Loss and LAE                                            |  |      | 5,288,043  |   |      |   | 4,770,904  |        |  |   | 517,139   |    |  | 10.8   | %
|Policy acquisition and other underwriting expenses      |  |      | 3,166,629  |   |      |   | 2,699,607  |        |  |   | 467,022   |    |  | 17.3   | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |        |  
|Underwriting gain (loss)                                |  | $    | 2,058,757  |   |      | $ | (176,205   | )      |  | $ | 2,234,962 |    |  | 1268.4 | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |        |  
|Loss and LAE ratio                                      |  |      | 50.3       | % |      |   | 65.4       | %      |  |   | (15.1     | )% |  |        |  
|Policy acquisition and other underwriting expense ratio |  |      | 30.1       | % |      |   | 37.0       | %      |  |   | (6.9      | )% |  |        |  
|Combined ratio                                          |  |      | 80.4       | % |      |   | 102.4      | %      |  |   | (22.0     | )% |  |        |  



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:



|                         |  |      |            |      |   |            |  |   |         |   |  |      |   
|------------------------ |  | ---- | ---------- | ---- | - | ---------- |  | - | ------- | - |  | ---- | --
|                         |  | 2005 |            | 2004 |   | $ Change   |  |   | %Change |  
|Direct Premiums Written: |  |      |            |      |   |            |  |   |         |   |  |      |   
|Personal                 |  | $    | 8,762,826  |      | $ | 8,112,430  |  | $ | 650,396 |   |  | 8.0  | % 
|Commercial               |  |      | 2,156,745  |      |   | 2,253,564  |  |   | (96,819 | ) |  | (4.3 | )%
|Farm                     |  |      | 1,359,084  |      |   | 1,313,553  |  |   | 45,531  |   |  | 3.5  | % 
|Marine                   |  |      | 527,307    |      |   | 462,948    |  |   | 64,359  |   |  | 13.9 | % 
|                         |  |      |            |      |   |            |  |   |         |   |  |      |   
|                         |  | $    | 12,805,962 |      | $ | 12,142,495 |  | $ | 663,467 |   |  | 5.5  | % 
|                         |  |      |            |      |   |            |  |   |         |   |  |      |   



Direct premiums
written for the personal segment increased 8.0%, driven by an increase of 25% in private passenger auto with homeowners increasing 1.3%. The growth in the personal segment is primarily driven by renewal premiums which were up 11.2%. Renewal premiums
were up 37.2% for private passenger auto and 4.8% for the homeowner product lines. With the softening of the market extending into personal lines this year, new business production was down 20.4% for the quarter as compared to the same period in
2004. Private passenger auto new business was down 19% while homeowners new business was down 21.9%. The decline in new business in these lines is reflective of the softening and increasingly competitive market in Michigan. The Company continually
monitors the pricing of its products in relation to the market to ensure that our products are competitively priced. This process is critically important particularly during the soft market in order to ensure that our products are appropriately
priced for the risk accepted. The commercial segment was down 4.3%, driven by an 8.7% decrease in renewal premiums. However, new business remains strong and was up 32.8%. The Company continues to be successful in writing new commercial exposures
within our target market which is focused on small to medium size business operations. Farm direct premium written was up 3.5%, driven by renewal premiums which were up 6.7%, with new business premium down 31.1%. Direct premium written for the
marine business increased 13.9%, driven by both an increase in new and renewal premiums of 4.9% and 17.1% respectively. Overall, direct premiums written were up 5.5%, with new business premiums down 9.5% and renewal premiums up 6.9%.



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



|                      |  |      |            |      |   |            |  |         |           |  |      |  
|--------------------- |  | ---- | ---------- | ---- | - | ---------- |  | ------- | --------- |  | ---- | -
|                      |  | 2005 |            | 2004 |   | $ Change   |  | %Change |          
|Net Premiums Written: |  |      |            |      |   |            |  |         |           |  |      |  
|Personal              |  | $    | 7,944,906  |      | $ | 6,901,869  |  | $       | 1,043,037 |  | 15.1 | %
|Commercial            |  |      | 2,120,805  |      |   | 1,993,689  |  |         | 127,116   |  | 6.4  | %
|Farm                  |  |      | 1,327,950  |      |   | 1,164,801  |  |         | 163,149   |  | 14.0 | %
|Marine                |  |      | 512,524    |      |   | 415,439    |  |         | 97,085    |  | 23.4 | %
|                      |  |      |            |      |   |            |  |         |           |  |      |  
|                      |  | $    | 11,906,185 |      | $ | 10,475,798 |  | $       | 1,430,387 |  | 13.7 | %
|                      |  |      |            |      |   |            |  |         |           |  |      |  



Net premiums written
increased approximately $663,000 due to the overall increase in direct premiums written coupled with a reduction in ceded premiums written under the Companys reinsurance agreements of approximately $767,000.



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



|                     |  |      |            |      |   |           |  |         |           |  |      |  
|-------------------- |  | ---- | ---------- | ---- | - | --------- |  | ------- | --------- |  | ---- | -
|                     |  | 2005 |            | 2004 |   | $ Change  |  | %Change |          
|Net Premiums Earned: |  |      |            |      |   |           |  |         |           |  |      |  
|Personal             |  | $    | 6,611,597  |      | $ | 4,534,087 |  | $       | 2,077,510 |  | 45.8 | %
|Commercial           |  |      | 2,324,390  |      |   | 1,719,682 |  |         | 604,708   |  | 35.2 | %
|Farm                 |  |      | 1,155,574  |      |   | 757,902   |  |         | 397,672   |  | 52.5 | %
|Marine               |  |      | 421,868    |      |   | 282,635   |  |         | 139,233   |  | 49.3 | %
|                     |  |      |            |      |   |           |  |         |           |  |      |  
|                     |  | $    | 10,513,429 |      | $ | 7,294,306 |  | $       | 3,219,123 |  | 44.1 | %
|                     |  |      |            |      |   |           |  |         |           |  |      |  



Net premiums earned
increased $1,036,000 as a result of overall volume growth coupled with an increase of $2,039,000 due to the decline in earned premium ceded to the reinsurer under the quota share reinsurance contract which was placed into runoff on January 1,
2004. Ceded premiums earned under the Companys other reinsurance agreements declined $144,000 during the quarter which also contributed to the increased net premiums earned.



---

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:



|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -------- |  | - | -------- | - |  | ----- | --
|                                |  | 2005 |           |   | 2004 |   |           | $ Change |  |   | % Change |  
|Loss and LAE:                   |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Personal                        |  | $    | 3,069,850 |   |      | $ | 3,544,605 |          |  | $ | (474,755 | ) |  | (13.4 | )%
|Commercial                      |  |      | 670,425   |   |      |   | 435,359   |          |  |   | 235,066  |   |  | 54.0  | % 
|Farm                            |  |      | 1,126,461 |   |      |   | 393,702   |          |  |   | 732,759  |   |  | 186.1 | % 
|Marine                          |  |      | 421,307   |   |      |   | 397,238   |          |  |   | 24,069   |   |  | 6.1   | % 
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|                                |  | $    | 5,288,043 |   |      | $ | 4,770,904 |          |  | $ | 517,139  |   |  | 10.8  | % 
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Incurred Claim Count:           |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Personal                        |  |      | 1,367     |   |      |   | 1,243     |          |  |   | 124      |   |  | 10.0  | % 
|Commercial                      |  |      | 185       |   |      |   | 209       |          |  |   | (24      | ) |  | (11.5 | )%
|Farm                            |  |      | 141       |   |      |   | 156       |          |  |   | (15      | ) |  | (9.6  | )%
|Marine                          |  |      | 112       |   |      |   | 78        |          |  |   | 34       |   |  | 43.6  | % 
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|                                |  |      | 1,805     |   |      |   | 1,686     |          |  |   | 119      |   |  | 7.1   | % 
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Average Loss and LAE per Claim: |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Personal                        |  | $    | 2,246     |   |      | $ | 2,852     |          |  | $ | (606     | ) |  | (21.2 | )%
|Commercial                      |  |      | 3,624     |   |      |   | 2,083     |          |  |   | 1,541    |   |  | 74.0  | % 
|Farm                            |  |      | 7,989     |   |      |   | 2,524     |          |  |   | 5,465    |   |  | 216.6 | % 
|Marine                          |  |      | 3,762     |   |      |   | 5,093     |          |  |   | (1,331   | ) |  | (26.1 | )%
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|                                |  | $    | 2,930     |   |      | $ | 2,830     |          |  | $ | 100      |   |  | 3.5   | % 
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Loss and LAE Ratio:             |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|Personal                        |  |      | 46.4      | % |      |   | 78.2      | %        |  |   |          |   |  |       |   
|Commercial                      |  |      | 28.8      | % |      |   | 25.3      | %        |  |   |          |   |  |       |   
|Farm                            |  |      | 97.5      | % |      |   | 51.9      | %        |  |   |          |   |  |       |   
|Marine                          |  |      | 99.9      | % |      |   | 140.5     | %        |  |   |          |   |  |       |   
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   
|                                |  |      | 50.3      | % |      |   | 65.4      | %        |  |   |          |   |  |       |   
|                                |  |      |           |   |      |   |           |          |  |   |          |   |  |       |   



The increase in loss
and LAE of $517,000 is due to the impact of the runoff of the quota share reinsurance agreement which increased incurred loss and LAE by $1,827,000 during the three months ended September 30, 2005 as compared to the same period in 2004.
However, this increase was offset by the fact that during the quarter ended September 30, 2004 the Company recorded incurred loss and LAE of approximately $1.0 million due to severe thunderstorms that passed through the northeast section of
Michigan. The Companys loss and LAE ratio deceased from 65.4% in 2004 to 50.3% in 2005. The decline in the ratio is driven by the growth in net premiums earned of approximately $2.0 million as a result of the effect of no longer ceding earned
premium under the quota share agreement coupled with the fact that there were no significant weather related losses during the quarter in 2005. During the quarter in 2004 the Company incurred approximately $1.0 million in net losses and LAE,
primarily in the personal segment, as a result of a July thunderstorm which passed through the northeast section of Michigan. This storm added 22.1 percentage points to the personal segments loss and LAE ratio during the 2004 quarter. The farm
segment experienced an increase in severity during the 2005 quarter due to 4 larger fire losses which drove up the segments loss and LAE ratio to 97.5% as compared to 51.9% in the 2004 quarter. Although the marine segments loss ratio
decreased in the 2005 quarter compared to 2004 it remained high due to the on-going boating season in Michigan which typically comes to an end in September. Marine losses are typically at their highest during the peak boating season in Michigan.



---

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



|                                                         |  |      |            |   |      |   |           |        |  |   |           |    |  |      |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | ------ |  | - | --------- | -- |  | ---- | -
|                                                         |  | 2005 |            |   | 2004 |   |           | Change |  |   | % Change  |   
|Amortization of deferred policy acquisition costs        |  | $    | 1,501,544  |   |      | $ | 1,035,634 |        |  | $ | 465,910   |    |  | 45.0 | %
|Other underwriting expenses                              |  |      | 1,665,085  |   |      |   | 1,663,973 |        |  |   | 1,112     |    |  | 0.1  | %
|                                                         |  |      |            |   |      |   |           |        |  |   |           |    |  |      |  
|Total policy acquisition and other underwriting expenses |  | $    | 3,166,629  |   |      | $ | 2,699,607 |        |  | $ | 467,022   |    |  | 17.3 | %
|                                                         |  |      |            |   |      |   |           |        |  |   |           |    |  |      |  
|Net premiums earned                                      |  | $    | 10,513,429 |   |      | $ | 7,294,306 |        |  | $ | 3,219,123 |    |  | 44.1 | %
|                                                         |  |      |            |   |      |   |           |        |  |   |           |    |  |      |  
|Expense ratio                                            |  |      | 30.1       | % |      |   | 37.0      | %      |  |   | (6.9      | )% |  |      |  
|                                                         |  |      |            |   |      |   |           |        |  |   |           |    |  |      |  



Amortization of
deferred policy acquisition costs increased during the period in 2005 as compared to the same period in 2004 as a result of the reduction in the quota share reinsurance ceding commission income component of deferred policy acquisition costs. The
expense ratio, defined as the ratio of policy acquisition and other underwriting expenses to net earned premium, fell from 37.0% in the 2004 quarter to 30.1% in the 2005 quarter due to the increased net premiums earned during the quarter coupled
with stable other underwriting expenses.



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



|                                               |  |      |            |   |      |   |            |        |  |   |            |    |  |      |  
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | ---------- | -- |  | ---- | -
|                                               |  | 2005 |            |   | 2004 |   |            | Change |  |   | % Change   |   
|                                               |  |      |            |   |      |   |            |        |  |   |            |    |  |      |  
|Gross investment income                        |  | $    | 442,700    |   |      | $ | 404,644    |        |  | $ | 38,056     |    |  | 9.4  | %
|Less: Investment expenses                      |  |      | (171,028   | ) |      |   | (148,352   | )      |  |   | (22,676    | )  |  | 15.3 | %
|                                               |  |      |            |   |      |   |            |        |  |   |            |    |  |      |  
|Net investment income                          |  | $    | 271,672    |   |      | $ | 256,292    |        |  | $ | 15,380     |    |  | 6.0  | %
|                                               |  |      |            |   |      |   |            |        |  |   |            |    |  |      |  
|Average invested assets (amortized cost basis) |  | $    | 50,258,736 |   |      | $ | 36,873,639 |        |  | $ | 13,385,097 |    |  | 36.3 | %
|                                               |  |      |            |   |      |   |            |        |  |   |            |    |  |      |  
|Rate of return on average invested assets      |  |      | 2.2        | % |      |   | 2.8        | %      |  |   | (0.6       | %) |  |      |  
|                                               |  |      |            |   |      |   |            |        |  |   |            |    |  |      |  



Gross investment
income increased during the three months ended September 30, 2005 as a result of a higher invested asset balance however this was somewhat offset by a decline in pretax yields in the fixed maturity portfolio during the quarter. The yield on the
fixed maturity portfolio has declined due to a strategic shift that occurred towards the end of the second quarter which shortened the portfolios duration. The effective duration of the fixed maturity portfolio was reduced from 5.3 as of
March 31, 2005, to 3.9 as of September 30, 2005. This move, intended to minimize unrealized losses on the fixed maturity portfolio in a rising interest rate environment, does have the effect of reducing the income produced by the portfolio
which is evident in the decline in the rate of return. The average invested asset balance (amortized cost basis), including cash and cash equivalents, increased $13.4 million as a result of the net cash proceeds of $5.0 million received in October
2004 from the Companys stock offering coupled with approximately $8.0 million of cash provided by operations from September 2004 through September 30, 2005. As a result of the aforementioned items the annualized rate of return on average
invested assets decreased to 2.2% for the three months ended September 30, 2005 compared to 2.8% for the same period in 2004.



The Company had very little sale activity in its investment portfolio during the three months ended September 30, 2005. However, during the three
months ended September 30, 2004 the Company sold several equity securities that were in a loss position which resulted in net realized losses of approximately $97,000.



Interest Expense. Interest expense decreased from $125,000 to $77,000 for the three month period ended
September 30, 2004 and 2005, respectively. The decrease is due to the decline in the outstanding balance of surplus notes during the two periods as well as the decline in the quota share funds withheld account balance. The quota share
reinsurance contract was structured on a funds withheld basis and requires the Company to accrue interest at an annual rate of 2.5%.



Income Tax Expense. During the three months ended September 30, 2005 the Company recorded an income tax
benefit of approximately $3,022,000 resulting in an effective tax rate of 128.0%. Federal income taxes do not bear the usual relationship to pre-tax income as a result of the effects of the deferred tax asset valuation allowance. During the quarter
ended September 30, 2005 the Companys management reassessed the need for a full valuation allowance, and based on 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, concluded that a full valuation allowance was no longer necessary. The reversal of the valuation allowance is the reason for the unusually large
federal income tax benefit reported for the three and nine months ended September 30, 2005. See Note 8 to the unaudited consolidated financial statements, included elsewhere in this report, for further information regarding federal income
taxes. Such information is incorporated herein by reference.



Results of
Operations  Nine Months Ended September 30, 2005 and 2004



The discussion that follows should be read in connection with the unaudited consolidated financial statements and notes thereto included elsewhere in this report.



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 statement of income for the nine months ended September 30, 2005 and 2004. 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 | 
|                                           |  | 2005 |           |   | 2004 |   |          | Dollar |  |   | Percentage |  
|Underwriting gain (loss)                   |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Personal                                   |  | $    | 2,307,537 |   |      | $ | (645,054 | )      |  | $ | 2,952,591  |   |  | 457.7   | % 
|Commercial                                 |  |      | 778,113   |   |      |   | 676,827  |        |  |   | 101,286    |   |  | 15.0    | % 
|Farm                                       |  |      | 206,007   |   |      |   | 247,434  |        |  |   | (41,427    | ) |  | (16.7   | )%
|Marine                                     |  |      | (276,257  | ) |      |   | (79,776  | )      |  |   | (196,481   | ) |  | (246.3  | )%
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Total underwriting gain                    |  |      | 3,015,400 |   |      |   | 199,431  |        |  |   | 2,815,969  |   |  | 1412.0  | % 
|                                           |  |      |           |  
|Other revenue (expense) items              |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Net investment income                      |  |      | 1,013,263 |   |      |   | 666,483  |        |  |   | 346,780    |   |  | 52.0    | % 
|Net realized gains (losses) on investments |  |      | 388,006   |   |      |   | (104,978 | )      |  |   | 492,984    |   |  | 469.6   | % 
|Other income                               |  |      | 296,944   |   |      |   | 285,315  |        |  |   | 11,629     |   |  | 4.1     | % 
|Interest expense                           |  |      | (232,152  | ) |      |   | (398,631 | )      |  |   | 166,479    |   |  | (41.8   | )%
|Demutualization expense                    |  |      |          |   |      |   | (143,189 | )      |  |   | 143,189    |   |  | (100.0  | )%
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Total other revenue (expense) items        |  |      | 1,466,061 |   |      |   | 305,000  |        |  |   | 1,161,061  |   |  | 380.7   | % 
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Income before federal income taxes         |  |      | 4,481,461 |   |      |   | 504,431  |        |  |   | 3,977,030  |   |  | 788.4   | % 
|Federal income tax benefit (expense)       |  |      | 2,314,523 |   |      |   | (75,000  | )      |  |   | 2,389,523  |   |  | (3186.0 | )%
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   
|Net income                                 |  | $    | 6,795,984 |   |      | $ | 429,431  |        |  | $ | 6,366,553  |   |  | 1482.6  | % 
|                                           |  |      |           |   |      |   |          |        |  |   |            |   |  |         |   



Underwriting
Results. The following table shows the components of the Companys underwriting gain or loss for the nine months ended September 30, 2005 and 2004.



|                                                        |  |      |            |   |      |   |            |        |  |   |            |    |  |        |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | ---------- | -- |  | ------ | -
|                                                        |  | 2005 |            |   | 2004 |   |            | Change |  |   | % Change   |   
|Direct premiums written                                 |  | $    | 34,047,970 |   |      | $ | 31,107,840 |        |  | $ | 2,940,130  |    |  | 9.5    | %
|                                                        |  |      |            |   |      |   |            |        |  |   |            |    |  |        |  
|Net premiums written                                    |  | $    | 29,673,676 |   |      | $ | 27,277,813 |        |  | $ | 2,395,863  |    |  | 8.8    | %
|                                                        |  |      |            |   |      |   |            |        |  |   |            |    |  |        |  
|Net premiums earned                                     |  | $    | 28,935,596 |   |      | $ | 18,575,987 |        |  | $ | 10,359,609 |    |  | 55.8   | %
|Loss and LAE                                            |  |      | 16,268,879 |   |      |   | 11,947,954 |        |  |   | 4,320,925  |    |  | 36.2   | %
|Policy acquisition and other underwriting expenses      |  |      | 9,651,317  |   |      |   | 6,428,602  |        |  |   | 3,222,715  |    |  | 50.1   | %
|                                                        |  |      |            |   |      |   |            |        |  |   |            |    |  |        |  
|Underwriting gain (loss)                                |  | $    | 3,015,400  |   |      | $ | 199,431    |        |  | $ | 2,815,969  |    |  | 1412.0 | %
|                                                        |  |      |            |   |      |   |            |        |  |   |            |    |  |        |  
|Loss and LAE ratio                                      |  |      | 56.2       | % |      |   | 64.3       | %      |  |   | (8.1       | )% |  |        |  
|Policy acquisition and other underwriting expense ratio |  |      | 33.4       | % |      |   | 34.6       | %      |  |   | (1.3       | )% |  |        |  
|Combined ratio                                          |  |      | 89.6       | % |      |   | 98.9       | %      |  |   | (9.3       | )% |  |        |  



---

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



|                         |  |      |            |      |   |            |  |   |           |   |  |      |   
|------------------------ |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | - |  | ---- | --
|                         |  | 2005 |            | 2004 |   | Change     |  |   | %Change   |  
|Direct Premiums Written: |  |      |            |      |   |            |  |   |           |   |  |      |   
|Personal                 |  | $    | 22,107,191 |      | $ | 19,559,486 |  | $ | 2,547,705 |   |  | 13.0 | % 
|Commercial               |  |      | 6,777,408  |      |   | 6,802,242  |  |   | (24,834   | ) |  | (0.4 | )%
|Farm                     |  |      | 3,598,720  |      |   | 3,397,107  |  |   | 201,613   |   |  | 5.9  | % 
|Marine                   |  |      | 1,564,651  |      |   | 1,349,005  |  |   | 215,646   |   |  | 16.0 | % 
|                         |  |      |            |      |   |            |  |   |           |   |  |      |   
|                         |  | $    | 34,047,970 |      | $ | 31,107,840 |  | $ | 2,940,130 |   |  | 9.5  | % 
|                         |  |      |            |      |   |            |  |   |           |   |  |      |   



The increase of 13.0%
in direct premiums written for the personal segment continues to be driven by the private passenger auto and homeowner product lines. Although renewal premium volume for the private passenger auto and homeowner product lines increased 40.2% and
7.8%, respectively, the soft market continues to impact personal lines, as new business volume for the private passenger auto product line has decreased 2.5% while the homeowner product line experienced a decrease of 13.5%. Overall, the personal
lines segment renewal premiums have increased 15.3% while new business premiums have decreased 9.5%. The Company expects that the soft market will continue to impact direct premiums written in the personal segment throughout the remainder of 2005.
Despite the soft market conditions experienced in the commercial segment we have been successful writing new commercial exposures within our target market which is focused on small business operations. Although total commercial direct premiums
written are down 0.4% new business direct premiums written increased 43.2%. However, due to an agency cancellation and underwriting actions taken to non-renew larger commercial exposures deemed outside the Companys target market, renewal
premiums are still down 7.2%. Direct premiums written for the farm segment are up 5.9% driven by an increase of 8.4% in renewal premiums offset by a decline in new business of 18.6%. Direct premiums written for the marine segment are up 16.0% driven
by a combination of both new and renewal premiums which are up 4.2% and 20.1%, respectively. Overall, direct premiums written are up 9.5% with new business premiums up 2.8% and renewal premiums up 9.5%.



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



|                      |  |      |            |      |   |            |  |   |           |   |  |      |   
|--------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | - |  | ---- | --
|                      |  | 2005 |            | 2004 |   | Change     |  |   | %Change   |  
|Net Premiums Written: |  |      |            |      |   |            |  |   |           |   |  |      |   
|Personal              |  | $    | 18,922,295 |      | $ | 16,868,964 |  | $ | 2,053,331 |   |  | 12.2 | % 
|Commercial            |  |      | 6,016,714  |      |   | 6,137,678  |  |   | (120,964  | ) |  | (2.0 | )%
|Farm                  |  |      | 3,297,943  |      |   | 3,052,204  |  |   | 245,739   |   |  | 8.1  | % 
|Marine                |  |      | 1,436,724  |      |   | 1,218,967  |  |   | 217,757   |   |  | 17.9 | % 
|                      |  |      |            |      |   |            |  |   |           |   |  |      |   
|                      |  | $    | 29,673,676 |      | $ | 27,277,813 |  | $ | 2,395,863 |   |  | 8.8  | % 
|                      |  |      |            |      |   |            |  |   |           |   |  |      |   



Net premiums written
increased $2,940,000 due to the overall increase in direct premiums written offset by growth in ceded premiums written under the Companys reinsurance agreements of approximately $545,000.



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



|                     |  |      |            |      |   |            |  |         |            |  |      |  
|-------------------- |  | ---- | ---------- | ---- | - | ---------- |  | ------- | ---------- |  | ---- | -
|                     |  | 2005 |            | 2004 |   | Change     |  | %Change |           
|Net Premiums Earned: |  |      |            |      |   |            |  |         |            |  |      |  
|Personal             |  | $    | 18,427,209 |      | $ | 11,392,617 |  | $       | 7,034,592  |  | 61.7 | %
|Commercial           |  |      | 6,192,810  |      |   | 4,584,097  |  |         | 1,608,713  |  | 35.1 | %
|Farm                 |  |      | 3,213,086  |      |   | 1,961,732  |  |         | 1,251,354  |  | 63.8 | %
|Marine               |  |      | 1,102,491  |      |   | 637,541    |  |         | 464,950    |  | 72.9 | %
|                     |  |      |            |      |   |            |  |         |            |  |      |  
|                     |  | $    | 28,935,596 |      | $ | 18,575,987 |  | $       | 10,359,609 |  | 55.8 | %
|                     |  |      |            |      |   |            |  |         |            |  |      |  



Net premiums earned increased $3,082,000 as a result of overall volume growth coupled with an increase of $7,827,000 due to the decline in earned premium ceded to the reinsurer under the quota
share reinsurance contract which was placed into runoff on January 1, 2004. The increase was offset by higher ceded premiums earned of $549,000 under the Companys excess of loss and catastrophe 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:



|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | - |  | ----- | --
|                                |  | 2005 |            |   | 2004 |   |            | Change |  |   | % Change  |  
|Loss and LAE:                   |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  | $    | 9,973,372  |   |      | $ | 8,095,380  |        |  | $ | 1,877,992 |   |  | 23.2  | % 
|Commercial                      |  |      | 3,349,118  |   |      |   | 2,320,499  |        |  |   | 1,028,619 |   |  | 44.3  | % 
|Farm                            |  |      | 1,935,371  |   |      |   | 1,034,923  |        |  |   | 900,448   |   |  | 87.0  | % 
|Marine                          |  |      | 1,011,018  |   |      |   | 497,152    |        |  |   | 513,866   |   |  | 103.4 | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  | $    | 16,268,879 |   |      | $ | 11,947,954 |        |  | $ | 4,320,925 |   |  | 36.2  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Incurred Claim Count:           |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  |      | 3,168      |   |      |   | 2,954      |        |  |   | 214       |   |  | 7.2   | % 
|Commercial                      |  |      | 384        |   |      |   | 445        |        |  |   | (61       | ) |  | (13.7 | )%
|Farm                            |  |      | 264        |   |      |   | 322        |        |  |   | (58       | ) |  | (18.0 | )%
|Marine                          |  |      | 150        |   |      |   | 136        |        |  |   | 14        |   |  | 10.3  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  |      | 3,966      |   |      |   | 3,857      |        |  |   | 109       |   |  | 2.8   | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Average Loss and LAE per Claim: |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  | $    | 3,148      |   |      | $ | 2,740      |        |  | $ | 408       |   |  | 14.9  | % 
|Commercial                      |  |      | 8,722      |   |      |   | 5,215      |        |  |   | 3,507     |   |  | 67.3  | % 
|Farm                            |  |      | 7,331      |   |      |   | 3,214      |        |  |   | 4,117     |   |  | 128.1 | % 
|Marine                          |  |      | 6,740      |   |      |   | 3,656      |        |  |   | 3,085     |   |  | 84.4  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  | $    | 4,102      |   |      | $ | 3,098      |        |  | $ | 1,004     |   |  | 32.4  | % 
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Loss and LAE Ratio:             |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|Personal                        |  |      | 54.1       | % |      |   | 71.1       | %      |  |   |           |   |  |       |   
|Commercial                      |  |      | 54.1       | % |      |   | 50.6       | %      |  |   |           |   |  |       |   
|Farm                            |  |      | 60.2       | % |      |   | 52.8       | %      |  |   |           |   |  |       |   
|Marine                          |  |      | 91.7       | % |      |   | 78.0       | %      |  |   |           |   |  |       |   
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   
|                                |  |      | 56.2       | % |      |   | 64.3       | %      |  |   |           |   |  |       |   
|                                |  |      |            |   |      |   |            |        |  |   |           |   |  |       |   



The increase in loss
and LAE of $4,321,000 is due primarily to the impact of the runoff of the quota share reinsurance agreement which accounted for approximately $4,295,000 of the increase in net incurred loss and LAE. In addition, the Companys net incurred loss
and LAE for the nine months ended September 30, 2005 was approximately $521,000 higher than the prior year due to an increase in the Companys excess of loss reinsurance retention level from $125,000 in 2004 to $150,000 in 2005. These
increases however were offset by a decline in the personal segments claim severity before considering the impact of reinsurance which is due to fewer weather related losses during the nine months ended September 30, 2005 as compared to
2004. In July 2004 severe thunderstorms passed through the northeast section of Michigan resulting in net incurred loss and LAE of approximately $1.0 million.



The Companys loss and LAE ratio declined to 56.2% during the nine months ended September 30, 2005 compared to 64.3% for the same period in
2004 as a result of the quota share runoff as well as lower weather related losses during the period. As noted above the Companys net premium earned increased $7,827,000 due to the decline in earned premium ceded under the quota share
agreement. While at the same time loss and LAE increased only $4,295,000 due to the decline in ceded loss and LAE under the quota share agreement.



For the personal segment the decline in the loss ratio is due to higher net premiums earned coupled with the fact that the Company did not experience the
weather related losses it did during the same period in 2004. The commercial segments loss ratio increased slightly as a result of increased claim severity during the period ended September 30, 2005. The farm segments loss ratio was
driven up over the prior year due to increased claim severity as a result of several larger fire losses. The increase in the loss ratio for the marine segment, the Companys smallest and therefore most volatile segment in terms of its loss
ratio is due primarily to increased severity during the nine months ended September 30, 2005. During that time period, the Company had 16 reported claims, each in excess of $10,000, that totaled $467,000 while during the same period in 2004 the
Company had only 5 claims reported in excess of $10,000 that totaled $141,000.



---

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



|                                                         |  |      |            |   |      |   |            |        |  |   |            |    |  |       |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | ---------- | -- |  | ----- | -
|                                                         |  | 2005 |            |   | 2004 |   |            | Change |  |   | % Change   |   
|Amortization of deferred policy acquisition costs        |  | $    | 4,600,808  |   |      | $ | 1,942,877  |        |  | $ | 2,657,931  |    |  | 136.8 | %
|Other underwriting expenses                              |  |      | 5,050,509  |   |      |   | 4,485,725  |        |  |   | 564,784    |    |  | 12.6  | %
|                                                         |  |      |            |   |      |   |            |        |  |   |            |    |  |       |  
|Total policy acquisition and other underwriting expenses |  | $    | 9,651,317  |   |      | $ | 6,428,602  |        |  | $ | 3,222,715  |    |  | 50.1  | %
|                                                         |  |      |            |   |      |   |            |        |  |   |            |    |  |       |  
|Net premiums earned                                      |  | $    | 28,935,596 |   |      | $ | 18,575,987 |        |  | $ | 10,359,609 |    |  | 55.8  | %
|                                                         |  |      |            |   |      |   |            |        |  |   |            |    |  |       |  
|Expense ratio                                            |  |      | 33.4       | % |      |   | 34.6       | %      |  |   | (1.3       | )% |  |       |  
|                                                         |  |      |            |   |      |   |            |        |  |   |            |    |  |       |  



Amortization of
deferred policy acquisition costs increased during the period in 2005 as compared to the same period in 2004 as a result of the reduction in the quota share reinsurance ceding commission income component of deferred policy acquisition costs. Factors
impacting the growth in other underwriting expenses include an increase in the provision for agent incentives including the Companys profit sharing commission as well as other marketing incentives and an increase in premium taxes as a result
of a reduction in tax credits utilized in prior years. The expense ratio, defined as the ratio of policy acquisition and other underwriting expenses to net earned premium, decreased due to the increase in net premiums earned attributable to the
quota share runoff.



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



|                                               |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | ---------- | - |  | ----- | --
|                                               |  | 2005 |            |   | 2004 |   |            | Change |  |   | % Change   |  
|Gross investment income                        |  | $    | 1,415,786  |   |      | $ | 1,126,663  |        |  | $ | 289,123    |   |  | 25.7  | % 
|Less: Investment expenses                      |  |      | (402,523   | ) |      |   | (460,180   | )      |  |   | 57,657     |   |  | (12.5 | )%
|                                               |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Net investment income                          |  | $    | 1,013,263  |   |      | $ | 666,483    |        |  | $ | 346,780    |   |  | 52.0  | % 
|                                               |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Average invested assets (amortized cost basis) |  | $    | 48,408,460 |   |      | $ | 35,824,418 |        |  | $ | 12,584,042 |   |  | 35.1  | % 
|                                               |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   
|Rate of return on average invested assets      |  |      | 2.8        | % |      |   | 2.5        | %      |  |   | 0.3        | % |  |       |   
|                                               |  |      |            |   |      |   |            |        |  |   |            |   |  |       |   



Gross investment
income increased during the nine months ended September 30, 2005 as a result of a higher invested asset balance while pretax yields decreased slightly during the nine month period. The yield on the fixed maturity portfolio has declined due to a
strategic shift that occurred towards the end of the second quarter which shortened the portfolios duration. The effective duration of the fixed maturity portfolio was reduced from 5.3 as of March 31, 2005, to 3.9 as of September 30,
2005. Investment expenses decreased due to lower internal costs related to the management of the fixed maturity portfolio as a result of increased utilization of the Companys outside investment management consultant. In addition, during the
nine months ended September 30, 2004 the Company incurred $31,000 related to a letter of credit associated with the quota share reinsurance agreement. These fees were not incurred during the same period in 2005. The average invested asset
balance (amortized cost basis), including cash and cash equivalents, increased $12.6 million as a result of the net cash proceeds of $5.0 million received in October 2004 from the Companys stock offering coupled with approximately $8.0 million
of cash provided by operations from September 2004 through September 30, 2005.



The Company reported a net realized gain of $388,000 and a net realized loss of $105,000 during the nine months ended September 30, 2005 and 2004, respectively. The increase is due to more selling activity during
the nine month period in 2005 compared to 2004. During the nine months ended September 30, 2005 the Company continued to shift its equity portfolio from common stocks to mutual funds resulting in net realized gains from the sale of equity
securities of $218,000 offset by realized losses of $100,000 related to two equity investments that the Company deemed to be other than temporarily impaired. During the nine months ended September 30, 2005 the Company focused on reducing the
duration in the fixed maturity portfolio in order to temper the fluctuations in the market value of the fixed maturity portfolio. This resulted in net realized gains on the sale of fixed maturity securities of $269,000 during the nine months ended
September 30, 2005.



Interest Expense. Interest expense decreased from $399,000 to $232,000 for the nine month period ended September 30, 2004 and 2005, respectively. The decrease is due to the
decline in the outstanding balance of surplus notes during the two periods as well as the decline in the quota share funds withheld account balance. The quota share reinsurance contract was structured on a funds withheld basis and requires the
Company to accrue interest at an annual rate of 2.5%.



---

Income Tax Expense. During the nine months ended September 30, 2005 the Company
recorded an income tax benefit of approximately $2,315,000 resulting in an effective tax rate of 51.6%. Federal income taxes do not bear the usual relationship to pre-tax income as a result of the effects of the deferred tax asset valuation
allowance. During the three months ended September 30, 2005 the Companys management reassessed the need for a full valuation allowance, and based on 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, concluded that a full valuation allowance was no longer necessary. The reversal of the valuation allowance is the reason for the unusually large
federal income tax benefit reported for the nine months ended September 30, 2005. See Note 8 to the unaudited consolidated financial statements, included elsewhere in this report, for further information regarding federal income taxes.
Such information is incorporated herein by reference.



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 $4,970,000 and $3,927,000 for the nine months ended September 30, 2005 and 2004, respectively, an increase of $1,043,000. During the nine months ended September 30, 2005 as compared to the same period in 2004 net premiums
collected increased $1,825,000, net loss and LAE payments increased $2,792,000 while policy acquisition and other underwriting expenses paid increased $1,435,000. During the nine months ended September 30, 2005, net cash used under the quota
share funds withheld account decreased $3,378,000 from the same period in 2004. Other cash provided by operations increased $67,000 during the nine months ended September 30, 2005 compared to the same period in 2004.



Cash flow used in investing activities decreased $1,508,000 during the nine
months ended September 30, 2005 compared to 2004. Cash used in investing activities was higher during the nine months ended September 30, 2004 due to a higher cash balance at the beginning of that period which was invested into both fixed
maturity and equity securities during the period.



Our debt
structure consists of Series B Surplus Notes which carry a 7 percent interest rate and mature on September 30, 2007. At September 30, 2005 and December 31, 2004, there were $2,890,000 Series B Surplus Notes outstanding.



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, 2005 and December 31, 2004 are as follows:



---

|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|------------------------------------------------------------------------------------- |  | -------------------- | ---------- | -------------------- | - | --------------------- |  | ------------------- | ------- |  | - | ----------
|                                                                                      |  | September 30, 2005  
|                                                                                      |  | Cost orAmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Fixed maturities:                                                                     |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 4,412,848  |                      | $ | 1,449                 |  | $                   | 79,313  |  | $ | 4,334,984 
|States and political subdivisions                                                     |  |                      | 7,376,893  |                      |   |                      |  |                     | 84,510  |  |   | 7,292,383 
|Corporate securities                                                                  |  |                      | 14,931,384 |                      |   | 47,275                |  |                     | 242,946 |  |   | 14,735,713
|Mortgage-backed securities                                                            |  |                      | 14,260,406 |                      |   | 5,627                 |  |                     | 187,119 |  |   | 14,078,914
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 40,981,531 |                      |   | 54,351                |  |                     | 593,888 |  |   | 40,441,994
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Preferred stocks                                                                      |  |                      | 426,200    |                      |   |                      |  |                     | 30,200  |  |   | 396,000   
|Common stocks and mutual funds                                                        |  |                      | 7,107,117  |                      |   | 779,000               |  |                     | 14,454  |  |   | 7,871,663 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 7,533,317  |                      |   | 779,000               |  |                     | 44,654  |  |   | 8,267,663 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Total                                                                                 |  | $                    | 48,514,848 |                      | $ | 833,351               |  | $                   | 638,542 |  | $ | 48,709,657
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      | 
|                                                                                      |  | December 31, 2004   
|                                                                                      |  | Cost orAmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Fixed maturities:                                                                     |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 4,467,011  |                      | $ | 11,248                |  | $                   | 61,148  |  | $ | 4,417,111 
|States and political subdivisions                                                     |  |                      | 244,126    |                      |   |                      |  |                     | 2,002   |  |   | 242,124   
|Corporate securities                                                                  |  |                      | 20,952,374 |                      |   | 247,820               |  |                     | 105,795 |  |   | 21,094,399
|Mortgage-backed securities                                                            |  |                      | 11,449,913 |                      |   | 55,832                |  |                     | 53,685  |  |   | 11,452,060
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 37,113,424 |                      |   | 314,900               |  |                     | 222,630 |  |   | 37,205,694
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Preferred stocks                                                                      |  |                      | 498,800    |                      |   | 6,800                 |  |                     |        |  |   | 505,600   
|Common stocks and mutual funds                                                        |  |                      | 4,086,743  |                      |   | 496,260               |  |                     | 16,845  |  |   | 4,566,158 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 4,585,543  |                      |   | 503,060               |  |                     | 16,845  |  |   | 5,071,758 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Total                                                                                 |  | $                    | 41,698,967 |                      | $ | 817,960               |  | $                   | 239,475 |  | $ | 42,277,452
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           



At September 30,
2005, corporate securities accounted for 36% of our fixed maturity portfolio, mortgage backed securities were 35%, states and political subdivisions were 18% and U. S. government and government agency bonds were 11%. At September 30, 2005, our
equity portfolio had a concentration in the U.S. industrial and miscellaneous sector of 88%, while 6% was in the energy sector and 6% was in the financial and insurance services sector.



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, 2005 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, 2005 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.



---

The following table summarizes the length of time securities with unrealized losses at September 30,
2005 have been in an unrealized loss position:



|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|------------------------------------------------------------------------------------- |  | ------------------- | ---------- | --------------------- | - | ------------------- |  | --------------------- | --------- | ------------------- | - | --------------------- |  | - | ---------- |  | - | -------
|                                                                                      |  | Less than 12 Months |            | 12 Months or More     |   | Total              
|                                                                                      |  | EstimatedFair Value |            | GrossUnrealizedLosses |   | EstimatedFair Value |  | GrossUnrealizedLosses |           | EstimatedFair Value |   | GrossUnrealizedLosses
|Fixed maturities:                                                                     |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                   | 1,617,649  |                       | $ | 28,385              |  | $                     | 2,203,465 |                     | $ | 50,928                |  | $ | 3,821,114  |  | $ | 79,313 
|States and political subdivisions                                                     |  |                     | 7,052,234  |                       |   | 83,905              |  |                       | 240,149   |                     |   | 605                   |  |   | 7,292,383  |  |   | 84,510 
|Corporate securities                                                                  |  |                     | 10,254,337 |                       |   | 170,320             |  |                       | 2,568,097 |                     |   | 72,626                |  |   | 12,822,434 |  |   | 242,946
|Mortgage-backed securities                                                            |  |                     | 9,058,958  |                       |   | 105,374             |  |                       | 2,882,516 |                     |   | 81,745                |  |   | 11,941,474 |  |   | 187,119
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|                                                                                      |  |                     | 27,983,178 |                       |   | 387,984             |  |                       | 7,894,227 |                     |   | 205,904               |  |   | 35,877,405 |  |   | 593,888
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|Preferred stocks                                                                      |  |                     | 396,000    |                       |   | 30,200              |  |                       |          |                     |   |                      |  |   | 396,000    |  |   | 30,200 
|Common stocks and mutual funds                                                        |  |                     | 698,638    |                       |   | 14,454              |  |                       |          |                     |   |                      |  |   | 698,638    |  |   | 14,454 
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|                                                                                      |  |                     | 1,094,638  |                       |   | 44,654              |  |                       |          |                     |   |                      |  |   | 1,094,638  |  |   | 44,654 
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|Total                                                                                 |  | $                   | 29,077,816 |                       | $ | 432,638             |  | $                     | 7,894,227 |                     | $ | 205,904               |  | $ | 36,972,043 |  | $ | 638,542
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        



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.



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 three months ended September 30, 2005.



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 losses reflected in the balance sheet. During the second quarter the Company reduced the duration in the fixed maturity portfolio in order to lessen the impact of interest rate risk. At March 31, 2005 the portfolios during was
5.3 years which has decreased to 3.9 years at September 30, 2005. Although the reduction in duration is expected to reduce the overall interest rate risk associated with our fixed maturity portfolio, it will also likely decrease future
investment income which the Company saw during the quarter ended September 30, 2005. A consequence of shortening duration is a reduction in the yield of the overall portfolio. In a normal economic environment, investors are
compensated for purchasing longer maturity securities because it exposes them to an increasing amount of interest rate risk. The compensation received for pushing further out the yield curve is represented by higher yields offered on these longer
term securities. As such, the decision to shorten duration represents a swap from higher to lower yielding securities. If interest rates were to rise, however, unrealized losses in the fixed maturity portfolio are expected to be smaller because of
the shortened duration position.



---

The change in the fixed maturity portfolios net unrealized gain from $92,000 at December 31,
2004 to a net unrealized loss of $594,000 at September 30, 2005 is due to increasing interest rates during the period. During the nine months ended September 30, 2005 the yields on the 2, 5 and 10 year treasuries increased 1.12, .58 and
..11 basis points, respectively.



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 |  | PortfolioValue |        | Change inValue |  
|               |  | (In thousands) |       
|2%             |  | $              | 37,393 |                | $ | (3,049 | )
|1%             |  |                | 38,873 |                |   | (1,569 | )
|0              |  |                | 40,442 |                |   |       |  
|-1%            |  |                | 42,011 |                |   | 1,569  |  
|-2%            |  |                | 43,491 |                |   | 3,049  |  



Credit
Risk. At September 30, 2005, all of our fixed maturity securities were rated by Moodys as investment grade with an average credit quality rating of AA and an average duration of 3.9 years.



Equity Risk. Equity price risk is the risk that we will
incur economic losses due to adverse changes in equity prices. Our exposure to changes in equity prices primarily results from our holdings of common stocks, mutual funds and other equities. 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 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.



None



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, 2005, the Insurance Company can pay a non-extraordinary dividend of up to $2,027,000 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.



Section 11(a) Earnings Statement. The Registrants Common Stock was issued pursuant to a Registration Statement on Form
S-1 and declared effective by the Securities and Exchange Commission on August 6, 2004. As permitted by Section 11(a) of the Securities Act of 1933, as amended, the Registrant is hereby making available to its stockholders an earnings
statement covering the twelve month period from October 1, 2004 through September 30, 2005. The earnings statement is attached as Exhibit 99.1 to this Form 10-Q and incorporated by reference herein.



Proposed Ban on Insurance Scoring. The financial stability of
an insured, in all lines of business, has always been a strong consideration in underwriting and pricing. The Company currently uses insurance scoring (similar to a credit score) as a pricing tool in its homeowners, mobilowners, personal auto,
marine and farm lines of business. Numerous studies have verified the validity of insurance scoring as a predictor of future losses.



On January 12, 2005, the Governor of Michigan and the Commissioner of the Office of Financial and Insurance Services issued proposed rules to reduce
base insurance rates and ban the use of insurance credit scores as a rating factor or as a basis to refuse to insure or limit coverage on personal insurance. Personal insurance includes private passenger automobile, homeowners, motorcycle, boat,
personal watercraft, snowmobile, recreational vehicle, mobile-homeowners and non-commercial dwelling fire lines. The proposed ban was to be effective on July 1, 2005.



The Insurance Institute of Michigan (IIM), of which the Company is a member, mounted a legal challenge to the
ban and filed a suit on March 25, 2005 seeking relief from the proposed ban. On April 25, 2005 the presiding judge issued a final order in the matter of IIM et al v. OFIS, pertaining to insurers use of insurance credit scores
to provide discounts on personal lines of insurance. In his final order the judge ruled in favor of IIM, stating that, It is ordered that Plaintiffs request for declaratory relief is granted, and the OFIS rules, R 500.2151-2155 are
declared illegal, invalid and unenforceable. It is further ordered that Defendant is permanently enjoined from enforcing these rules against any Plaintiff in this action. The Company was pleased with the outcome of the legal challenge and
intends to continue to utilize insurance scoring as a pricing tool. The Commissioner of the OFIS has filed an appeal to this ruling in the Michigan Court of Appeals.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.



| | (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    |  | 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).                                                                                                                          
|       | 
|3.2    |  | Bylaws of Fremont Michigan InsuraCorp, Inc. (Incorporated by reference to Exhibit 3.2 to Registration Statement No. 333-112414 on Form S-1).                                                                                                                                             
|       | 
|4.1    |  | See Articles of Incorporation, filed as Exhibit 3.1                                                                                                                                                                                                                                      
|       | 
|4.2    |  | Shareholder Rights Agreement dated November 1, 2004 by and between the Company and Registrar and Transfer Company, as Rights Agent (Incorporated by reference to Exhibit 4.2 to the
Companys Form 8-K filed with the Securities and Exchange Commission on November 3, 2004).           
|       | 
|4.3    |  | Certificate of Adoption of Resolution Designating and Prescribing Rights, Preferences and Limitations of Junior Participating Preferred Stock (Incorporated by reference to Exhibit 4.3 to the
Companys Form 8-K filed with the Securities and Exchange Commission on November 3, 2004).



---

|     |  |                                                                                                                                                                            
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                            
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350.                                                                                                                          
|     | 
|99.1 |  | Earnings Statement for the twelve month period October 1, 2004 through September 30, 2005 filed in accordance with Section 11(a) of the Securities Act of 1933, as amended.



| | (b) | Reports on Form 8-K. The following reports on Form 8-K was filed during the period covered by this report:
| | --- | ----------------------------------------------------------------------------------------------------------



In a report on Form 8-K dated August 10, 2005, the
Company reported, under Item 2.02 Results of Operations and Financial Condition, a press release, dated August 10, 2005, announcing and commenting on its results of operations for the quarter and six month period ended
June 30, 2005.



In a report on Form 8-K
dated September 30, 2005, the Company reported, under Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers, the appointment of Marvin R. Deur as Senior Vice President
of Administration and Treasurer and Kevin G. Kaastra as Vice President of Finance.



---

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 10, 2005 |  | By:                               |  | /s/ Richard E. Dunning                      
|                        |  |                                   |  | Richard E. Dunning                          
|                        |  |                                   |  | President and Chief Executive Officer       
|                        |  |                                  
|Date: November 10, 2005 |  | By:                               |  | /s/ Kevin G. Kaastra                        
|                        |  |                                   |  | Kevin G. Kaastra                            
|                        |  |                                   |  | Vice President of Finance                   
|                        |  |                                   |  | (principal financial and accounting officer)