##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2011

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)





FREMONT
MICHIGAN INSURACORP, INC.

(Exact name of Registrant as specified in its charter)







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

(231)
924-0300

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                         |  |                              
|------------------------------------------------------------------------ |  | -----------------------------
|Large accelerated filer   ̈                                               |  | Accelerated filer   ̈         
|Non-accelerated filer   ̈  (Do not check if a smaller reporting 
company) |  | Smaller reporting company   x

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

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



|                            |  |                                               
|--------------------------- |  | ----------------------------------------------
|                            |  | Number of Shares Outstanding
as of May 2, 2011
|COMMON STOCK (No Par Value) |  | 1,785,047                                     
|(Title of Class)            |  | (Outstanding Shares)                          









---

##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                       |    |  |    | 
|----------------------------- |  | ------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I. FINANCIAL INFORMATION |  |                                                                                       |    | 
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |    |  | 3  | 
|                              |  | Consolidated Balance Sheets                                                           |    |  | 3  | 
|                              |  | Consolidated Statements of Operations                                                 |    |  | 4  | 
|                              |  | Consolidated Statement of Stockholders Equity                                        |    |  | 5  | 
|                              |  | Consolidated Statements of Cash Flows                                                 |    |  | 6  | 
|                              |  | Notes to Consolidated Financial Statements                                            |    |  | 7  | 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |  | 17 | 
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |  | 25 | 
|Item 4.                       |  | Controls and Procedures                                                               |    |  | 25 | 
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                       |    | 
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |    |  | 26 | 
|Item 1A.                      |  | Risk Factors                                                                          |    |  | 26 | 
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |    |  | 26 | 
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |    |  | 27 | 
|Item 4.                       |  | Reserved                                                                              |    |  | 27 | 
|Item 5.                       |  | Other Information                                                                     |    |  | 27 | 
|Item 6.                       |  | Exhibits                                                                              |    |  | 27 | 
|                              | 
|SIGNATURES                    |  |                                                                                       | 28 | 



2



---

##### Table of Contents

PART IFINANCIAL INFORMATION



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

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- |  | ---------------- | - | ----------- | 
|                                                                                                                                                                             |  | March 31,2011 |             |  | December 31,2010 |  
|Assets                                                                                                                                                                       |  |               |             |  |                  |   |             | 
|Investments:                                                                                                                                                                 |  |               |             |  |                  |   |             | 
|Fixed maturities available for sale, at fair value                                                                                                                           |  | $             | 58,249,181  |  |                  | $ | 57,686,802  | 
|Equity securities available for sale, at fair value                                                                                                                          |  |               | 19,874,427  |  |                  |   | 18,121,044  | 
|Mortgage loans on real estate from related parties                                                                                                                           |  |               | 230,015     |  |                  |   | 231,942     | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|Total investments                                                                                                                                                            |  |               | 78,353,623  |  |                  |   | 76,039,788  | 
|Cash and cash equivalents                                                                                                                                                    |  |               | 6,619,288   |  |                  |   | 6,364,648   | 
|Premiums due from policyholders, net                                                                                                                                         |  |               | 12,102,661  |  |                  |   | 11,556,272  | 
|Amounts due from reinsurers                                                                                                                                                  |  |               | 11,988,645  |  |                  |   | 11,197,774  | 
|Prepaid reinsurance premiums                                                                                                                                                 |  |               | 2,668,818   |  |                  |   | 2,568,638   | 
|Accrued investment income                                                                                                                                                    |  |               | 530,602     |  |                  |   | 552,678     | 
|Income taxes recoverable                                                                                                                                                     |  |               | 121,485     |  |                  |   | 698,672     | 
|Deferred policy acquisition costs                                                                                                                                            |  |               | 4,260,493   |  |                  |   | 4,369,900   | 
|Deferred federal income taxes                                                                                                                                                |  |               | 2,602,930   |  |                  |   | 2,913,698   | 
|Property and equipment, net of accumulated depreciation                                                                                                                      |  |               | 3,400,981   |  |                  |   | 3,513,902   | 
|Other assets                                                                                                                                                                 |  |               | 75,960      |  |                  |   | 83,088      | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|                                                                                                                                                                             |  | $             | 122,725,486 |  |                  | $ | 119,859,058 | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|Liabilities and Stockholders Equity                                                                                                                                         |  |               |             |  |                  |   |             | 
|Liabilities:                                                                                                                                                                 |  |               |             |  |                  |   |             | 
|Losses and loss adjustment expenses                                                                                                                                          |  | $             | 29,551,568  |  |                  | $ | 29,344,160  | 
|Unearned premiums                                                                                                                                                            |  |               | 32,184,138  |  |                  |   | 32,579,456  | 
|Reinsurance funds withheld and premiums ceded payable                                                                                                                        |  |               | 233,433     |  |                  |   | 75,263      | 
|Accrued expenses and other liabilities                                                                                                                                       |  |               | 9,820,106   |  |                  |   | 8,877,625   | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|Total liabilities                                                                                                                                                            |  |               | 71,789,245  |  |                  |   | 70,876,504  | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|Commitments and contingencies                                                                                                                                                |  |               |             |  |                  |   |             | 
|Stockholders Equity                                                                                                                                                         |  |               |             |  |                  |   |             | 
|Preferred stock, no par value, authorized 4,500,000 shares, no shares issued and outstanding                                                                                 |  |               |            |  |                  |   |            | 
|Class A common stock, no par value, authorized 5,000,000 shares, 1,785,047 and 1,779,674 shares issued and outstanding at
March 31, 2011 and December 31, 2010, respectively |  |               |            |  |                  |   |            | 
|Class B common stock, no par value, authorized 500,000 shares, no shares issued and outstanding                                                                              |  |               |            |  |                  |   |            | 
|Additional paid-in capital                                                                                                                                                   |  |               | 9,986,276   |  |                  |   | 9,813,362   | 
|Retained earnings                                                                                                                                                            |  |               | 39,585,170  |  |                  |   | 38,388,455  | 
|Accumulated other comprehensive income                                                                                                                                       |  |               | 1,364,795   |  |                  |   | 780,737     | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|Total stockholders equity                                                                                                                                                   |  |               | 50,936,241  |  |                  |   | 48,982,554  | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 
|Total liabilities and stockholders equity                                                                                                                                   |  | $             | 122,725,486 |  |                  | $ | 119,859,058 | 
|                                                                                                                                                                             |  |               |             |  |                  |   |             | 

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



3



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Operations (Unaudited)

For the Three Months Ended March 31



|                                                   |  |      |            |  |      |   |            | 
|-------------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|                                                   |  | 2011 |            |  | 2010 |  
|Revenues:                                          |  |      |            |  |      |   |            | 
|Net premiums earned                                |  | $    | 15,912,231 |  |      | $ | 13,983,788 | 
|Net investment income                              |  |      | 279,476    |  |      |   | 440,211    | 
|Net realized gains on investments                  |  |      | 363,305    |  |      |   | 359,801    | 
|Other income, net                                  |  |      | 191,990    |  |      |   | 157,417    | 
|                                                   |  |      |            |  |      |   |            | 
|Total revenues                                     |  |      | 16,747,002 |  |      |   | 14,941,217 | 
|                                                   |  |      |            |  |      |   |            | 
|Expenses:                                          |  |      |            |  |      |   |            | 
|Losses and loss adjustment expenses, net           |  |      | 9,599,671  |  |      |   | 8,527,880  | 
|Policy acquisition and other underwriting expenses |  |      | 5,292,140  |  |      |   | 4,923,146  | 
|                                                   |  |      |            |  |      |   |            | 
|Total expenses                                     |  |      | 14,891,811 |  |      |   | 13,451,026 | 
|                                                   |  |      |            |  |      |   |            | 
|Income before federal income tax expense           |  |      | 1,855,191  |  |      |   | 1,490,191  | 
|Federal income tax expense                         |  |      | 587,075    |  |      |   | 460,586    | 
|                                                   |  |      |            |  |      |   |            | 
|Net income                                         |  | $    | 1,268,116  |  |      | $ | 1,029,605  | 
|                                                   |  |      |            |  |      |   |            | 
|Earnings per share                                 |  |      |            |  |      |   |            | 
|Basic                                              |  | $    | .71        |  |      | $ | .59        | 
|Diluted                                            |  | $    | .70        |  |      | $ | .57        | 

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



4



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statement of Stockholders Equity (Unaudited)

For the Three Months Ended March 31, 2011



|                                                 |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       |           |   |  |   |            |  
|------------------------------------------------ |  | ------------------------------------- | --------- |  | ------------------------ | - | --------- | ---------------- |  | - | ----------------------------------- | - |  | ----- | --------- | - |  | - | ---------- | -
|                                                 |  | Common StockClass A(Number of Shares) |           |  | AdditionalPaid-inCapital |   |           | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome |   |  | Total |          
|Balance, December 31, 2010                       |  |                                       | 1,779,674 |  |                          | $ | 9,813,362 |                  |  | $ | 38,388,455                          |   |  | $     | 780,737   |   |  | $ | 48,982,554 |  
|Comprehensive income:                            |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       |           |   |  |   |            |  
|Net income                                       |  |                                       |           |  |                          |   |           |                  |  |   | 1,268,116                           |   |  |       |           |   |  |   | 1,268,116  |  
|Net unrealized gains on investments, net of tax  |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       | 595,094   |   |  |   | 595,094    |  
|Amortization of prior service credit, net of tax |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       | (14,138   | ) |  |   | (14,138    | )
|Amortization of net actuarial loss, net of tax   |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       | 3,102     |   |  |   | 3,102      |  
|                                                 |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       |           |   |  |   |            |  
|Total comprehensive income                       |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       |           |   |  |   | 1,852,174  |  
|Common stock issued                              |  |                                       | 5,373     |  |                          |   | 132,504   |                  |  |   |                                     |   |  |       |           |   |  |   | 132,504    |  
|Dividends declared at $0.04 per share            |  |                                       |           |  |                          |   |           |                  |  |   | (71,401                             | ) |  |       |           |   |  |   | (71,401    | )
|Stock-based compensation                         |  |                                       |           |  |                          |   | 40,410    |                  |  |   |                                     |   |  |       |           |   |  |   | 40,410     |  
|                                                 |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       |           |   |  |   |            |  
|Balance, March 31, 2011                          |  |                                       | 1,785,047 |  |                          | $ | 9,986,276 |                  |  | $ | 39,585,170                          |   |  | $     | 1,364,795 |   |  | $ | 50,936,241 |  
|                                                 |  |                                       |           |  |                          |   |           |                  |  |   |                                     |   |  |       |           |   |  |   |            |  

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



5



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31



|                                                                           |  |      |            |   |      |   |             |  
|-------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                                                           |  | 2011 |            |   | 2010 |  
|Cash flows from operating activities:                                      |  |      |            |   |      |   |             |  
|Net income                                                                 |  | $    | 1,268,116  |   |      | $ | 1,029,605   |  
|Adjustments to reconcile net income to net cash from operating activities: |  |      |            |   |      |   |             |  
|Depreciation                                                               |  |      | 259,011    |   |      |   | 220,287     |  
|Deferred federal income taxes                                              |  |      | 9,889      |   |      |   | (12,468     | )
|Stock based compensation expense                                           |  |      | 40,410     |   |      |   | 31,203      |  
|Net realized gains on investments                                          |  |      | (363,305   | ) |      |   | (359,801    | )
|Net amortization of premiums on investments                                |  |      | 293,710    |   |      |   | 128,765     |  
|Excess tax benefit from stock options exercised                            |  |      |           |   |      |   | (20,220     | )
|Changes in assets and liabilities:                                         |  |      |            |   |      |   |             |  
|Premiums due from policyholders                                            |  |      | (546,389   | ) |      |   | (207,519    | )
|Amounts due from reinsurers                                                |  |      | (790,871   | ) |      |   | (2,227,048  | )
|Prepaid reinsurance premiums                                               |  |      | (100,180   | ) |      |   | (173,510    | )
|Accrued investment income                                                  |  |      | 22,076     |   |      |   | 60,527      |  
|Income taxes recoverable                                                   |  |      | 577,187    |   |      |   |            |  
|Deferred policy acquisition costs                                          |  |      | 109,407    |   |      |   | 163,928     |  
|Other assets                                                               |  |      | (6,984     | ) |      |   | 4,230       |  
|Losses and loss adjustment expenses                                        |  |      | 207,408    |   |      |   | 3,949,580   |  
|Unearned premiums                                                          |  |      | (395,318   | ) |      |   | (817,463    | )
|Reinsurance balances payable                                               |  |      | 158,170    |   |      |   | (20,699     | )
|Accrued expenses and other liabilities                                     |  |      | 214,677    |   |      |   | (593,732    | )
|                                                                           |  |      |            |   |      |   |             |  
|Net cash provided by operating activities                                  |  |      | 957,014    |   |      |   | 1,155,665   |  
|                                                                           |  |      |            |   |      |   |             |  
|Cash flows from investing activities:                                      |  |      |            |   |      |   |             |  
|Proceeds from sales and maturities of fixed maturity investments           |  |      | 3,239,955  |   |      |   | 16,872,064  |  
|Proceeds from sales of equity investments                                  |  |      | 4,005,297  |   |      |   | 1,601,680   |  
|Purchases of fixed maturity investments                                    |  |      | (4,134,102 | ) |      |   | (15,496,881 | )
|Purchases of equity investments                                            |  |      | (4,455,659 | ) |      |   | (3,595,399  | )
|Change in net payable from investment purchases                            |  |      | 725,195    |   |      |   | 10,570      |  
|Repayment of mortgage loans on real estate from related parties            |  |      | 1,927      |   |      |   | 1,790       |  
|Purchase of property and equipment, net                                    |  |      | (146,090   | ) |      |   | (620,399    | )
|                                                                           |  |      |            |   |      |   |             |  
|Net cash used in investing activities                                      |  |      | (763,477   | ) |      |   | (1,226,575  | )
|                                                                           |  |      |            |   |      |   |             |  
|Cash flows from financing activities:                                      |  |      |            |   |      |   |             |  
|Proceeds from issuance of common stock                                     |  |      | 132,504    |   |      |   | 256,241     |  
|Share repurchases of common stock                                          |  |      |           |   |      |   | (81,669     | )
|Dividends paid to stockholders                                             |  |      | (71,401    | ) |      |   | (70,381     | )
|Tax benefit from exercised stock options                                   |  |      |           |   |      |   | 20,220      |  
|                                                                           |  |      |            |   |      |   |             |  
|Net cash provided by financing activities                                  |  |      | 61,103     |   |      |   | 124,411     |  
|                                                                           |  |      |            |   |      |   |             |  
|Net increase in cash and cash equivalents                                  |  |      | 254,640    |   |      |   | 53,501      |  
|Cash and cash equivalents, beginning of period                             |  |      | 6,364,648  |   |      |   | 7,063,679   |  
|                                                                           |  |      |            |   |      |   |             |  
|Cash and cash equivalents, end of period                                   |  | $    | 6,619,288  |   |      | $ | 7,117,180   |  
|                                                                           |  |      |            |   |      |   |             |  



6



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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

Fremont Michigan InsuraCorp, Inc. and subsidiary (collectively, the Company) includes Fremont Michigan InsuraCorp, Inc.
(FMIC) and its wholly owned subsidiary Fremont Insurance Company (FIC). FIC is a Michigan licensed property and casualty insurance carrier operating exclusively in the State of Michigan and writing principally personal lines,
commercial lines and farm 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, 2010. The December 31, 2010 consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

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.



|2. | New Accounting Pronouncements
|-- | -----------------------------

Adopted Accounting Standards

In January 2010, an update to the
Accounting Standards Codification(ASC) was issued related to fair value measurements and disclosures. This ASC update provides for additional disclosure requirements to improve the transparency and comparability of fair value information in
financial reporting. Specifically, the new guidance requires separate disclosure of the amounts of significant transfers in and out of Levels 1 and 2, as well as the reasons for the transfers, and separate disclosure for the purchases, sales,
issuances and settlement activity in Level 3. In addition, this ASC update requires fair value measurement disclosure for each class of assets and liabilities, and disclosures about the input and valuation techniques used to measure fair value for
both recurring and nonrecurring fair value measurements in Levels 2 and 3. The new disclosures and clarifications of existing disclosures were adopted on January 1, 2010, except for the requirement to provide Level 3 activity detail which will
become effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Early adoption is permitted. These amendments do not require disclosures for earlier periods presented for comparative
purposes at initial adoption. The updated disclosures are included in note 3 to the consolidated financial statements.

Prospective Accounting Standards

In October 2010, updated guidance was issued to address the diversity in practice for the accounting for costs associated with acquiring or renewing insurance contracts. This guidance modifies the
definition of acquisition costs to specify that a cost must be directly related to the successful acquisition of a new or renewal insurance contract in order to be deferred. If application of this guidance would result in the capitalization of
acquisition costs that had not previously been capitalized by a reporting entity, the entity may elect not to capitalize those costs. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2011. The adoption of this guidance is not expected to have an impact on our financial statements.



|3. | Investments
|-- | -----------

The cost or
amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of investments at March 31, 2011 and December 31, 2010 are as follows:



7



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|------------------------------------------------------------------------------------- |  | -------------------- | ---------- |  | -------------------- | - | --------- | --------------------- |  | - | ------------------ |  |  | - | ---------- | 
|                                                                                      |  | March 31, 2011       |           
|                                                                                      |  | Cost orAmortizedCost |            |  | GrossUnrealizedGains |   |           | GrossUnrealizedLosses |  |   | EstimatedFairValue | 
|Fixed maturities:                                                                     |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 7,448,487  |  |                      | $ | 23,564    |                       |  | $ | 124,760            |  |  | $ | 7,347,291  | 
|States and political subdivisions                                                     |  |                      | 20,887,950 |  |                      |   | 187,867   |                       |  |   | 480,276            |  |  |   | 20,595,541 | 
|Corporate securities                                                                  |  |                      | 17,578,512 |  |                      |   | 105,658   |                       |  |   | 291,552            |  |  |   | 17,392,618 | 
|Mortgage-backed securities                                                            |  |                      | 12,950,855 |  |                      |   | 88,796    |                       |  |   | 125,920            |  |  |   | 12,913,731 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|                                                                                      |  |                      | 58,865,804 |  |                      |   | 405,885   |                       |  |   | 1,022,508          |  |  |   | 58,249,181 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|Equity securities                                                                     |  |                      | 17,638,861 |  |                      |   | 2,453,778 |                       |  |   | 218,212            |  |  |   | 19,874,427 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|Total                                                                                 |  | $                    | 76,504,665 |  |                      | $ | 2,859,663 |                       |  | $ | 1,240,720          |  |  | $ | 78,123,608 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|                                                                                      | 
|                                                                                      |  | December 31, 2010    |           
|                                                                                      |  | Cost orAmortizedCost |            |  | GrossUnrealizedGains |   |           | GrossUnrealizedLosses |  |   | EstimatedFairValue | 
|Fixed maturities:                                                                     |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 7,472,982  |  |                      | $ | 28,944    |                       |  | $ | 104,882            |  |  | $ | 7,397,044  | 
|States and political subdivisions                                                     |  |                      | 20,115,479 |  |                      |   | 175,824   |                       |  |   | 536,708            |  |  |   | 19,754,595 | 
|Corporate securities                                                                  |  |                      | 15,767,158 |  |                      |   | 119,232   |                       |  |   | 260,057            |  |  |   | 15,626,333 | 
|Mortgage-backed securities                                                            |  |                      | 14,896,617 |  |                      |   | 108,342   |                       |  |   | 96,129             |  |  |   | 14,908,830 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|                                                                                      |  |                      | 58,252,236 |  |                      |   | 432,342   |                       |  |   | 997,776            |  |  |   | 57,686,802 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|Equity securities                                                                     |  |                      | 16,838,326 |  |                      |   | 1,767,563 |                       |  |   | 484,845            |  |  |   | 18,121,044 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 
|Total                                                                                 |  | $                    | 75,090,562 |  |                      | $ | 2,199,905 |                       |  | $ | 1,482,621          |  |  | $ | 75,807,846 | 
|                                                                                      |  |                      |            |  |                      |   |           |                       |  |   |                    |  |  |   |            | 

The cost or amortized cost and estimated fair value of fixed maturities at March 31, 2011, by
contractual maturity, are shown below. Expected maturities on certain corporate and mortgage-backed investments may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or
prepayment penalties.



|                                       |  |                      |            |  |                     |   |            | 
|-------------------------------------- |  | -------------------- | ---------- |  | ------------------- | - | ---------- | 
|                                       |  | Cost orAmortizedCost |            |  | EstimatedFair Value |  
|Due in one year or less                |  | $                    | 1,830,664  |  |                     | $ | 1,853,272  | 
|Due after one year through five years  |  |                      | 19,440,104 |  |                     |   | 19,479,066 | 
|Due after five years through ten years |  |                      | 22,754,701 |  |                     |   | 22,182,296 | 
|Due after ten years                    |  |                      | 1,889,479  |  |                     |   | 1,820,816  | 
|Mortgage-backed securities             |  |                      | 12,950,856 |  |                     |   | 12,913,731 | 
|                                       |  |                      |            |  |                     |   |            | 
|                                       |  | $                    | 58,865,804 |  |                     | $ | 58,249,181 | 
|                                       |  |                      |            |  |                     |   |            | 



8



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



Evaluating Investments for Other-than-Temporary Impairments

The Company reviews the status and market value changes of its investment portfolio 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. The following tables are used as part of our impairment analysis.

The tables below show the total value of securities that were in an unrealized loss position as of March 31, 2011 and
December 31, 2010 including the length of time they have been in an unrealized loss position. As of March 31, 2011 and December 31, 2010, unrealized losses, as shown in the following tables, were 1.5% and 1.8%, respectively, of total
invested assets including cash and cash equivalents.



|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|------------------------------------------------------------------------------------- |  | ------------------- | ---------- |  | --------------------- | - | --------- | ------------------ |  | - | --------------------- |  |  | ------------------ | ------- |  | --------------------- | - | ---------- |  |  | - | --------- | 
|                                                                                      |  | March 31, 2011      |           
|                                                                                      |  | Less than 12 Months |            |  | 12 Months or More     |   |           | Total              | 
|                                                                                      |  | EstimatedFairValue  |            |  | GrossUnrealizedLosses |   |           | EstimatedFairValue |  |   | GrossUnrealizedLosses |  |  | EstimatedFairValue |         |  | GrossUnrealizedLosses |  
|Fixed maturities:                                                                     |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                   | 5,507,237  |  |                       | $ | 124,760   |                    |  | $ |                      |  |  | $                  |        |  |                       | $ | 5,507,237  |  |  | $ | 124,760   | 
|States and political subdivisions                                                     |  |                     | 13,032,848 |  |                       |   | 480,276   |                    |  |   |                      |  |  |                    |        |  |                       |   | 13,032,848 |  |  |   | 480,276   | 
|Corporate securities                                                                  |  |                     | 9,696,267  |  |                       |   | 291,552   |                    |  |   |                      |  |  |                    |        |  |                       |   | 9,696,267  |  |  |   | 291,552   | 
|Mortgage-backed securities                                                            |  |                     | 8,383,968  |  |                       |   | 125,920   |                    |  |   |                      |  |  |                    |        |  |                       |   | 8,383,968  |  |  |   | 125,920   | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|                                                                                      |  |                     | 36,620,320 |  |                       |   | 1,022,508 |                    |  |   |                      |  |  |                    |        |  |                       |   | 36,620,320 |  |  |   | 1,022,508 | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|Equity securities                                                                     |  |                     | 1,447,526  |  |                       |   | 85,573    |                    |  |   | 2,496,520             |  |  |                    | 132,639 |  |                       |   | 3,944,046  |  |  |   | 218,212   | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|Total                                                                                 |  | $                   | 38,067,846 |  |                       | $ | 1,108,081 |                    |  | $ | 2,496,520             |  |  | $                  | 132,639 |  |                       | $ | 40,564,366 |  |  | $ | 1,240,720 | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|                                                                                      | 
|                                                                                      |  | December 31, 2010   |           
|                                                                                      |  | Less than 12 Months |            |  | 12 Months or More     |   |           | Total              | 
|                                                                                      |  | EstimatedFairValue  |            |  | GrossUnrealizedLosses |   |           | EstimatedFairValue |  |   | GrossUnrealizedLosses |  |  | EstimatedFairValue |         |  | GrossUnrealizedLosses |  
|Fixed maturities:                                                                     |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                   | 5,541,392  |  |                       | $ | 104,882   |                    |  | $ |                      |  |  | $                  |        |  |                       | $ | 5,541,392  |  |  | $ | 104,882   | 
|States and political subdivisions                                                     |  |                     | 13,026,682 |  |                       |   | 536,708   |                    |  |   |                      |  |  |                    |        |  |                       |   | 13,026,682 |  |  |   | 536,708   | 
|Corporate securities                                                                  |  |                     | 8,071,331  |  |                       |   | 260,057   |                    |  |   |                      |  |  |                    |        |  |                       |   | 8,071,331  |  |  |   | 260,057   | 
|Mortgage-backed securities                                                            |  |                     | 8,980,215  |  |                       |   | 96,129    |                    |  |   |                      |  |  |                    |        |  |                       |   | 8,980,215  |  |  |   | 96,129    | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|                                                                                      |  |                     | 35,619,620 |  |                       |   | 997,776   |                    |  |   |                      |  |  |                    |        |  |                       |   | 35,619,620 |  |  |   | 997,776   | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|Equity securities                                                                     |  |                     | 1,585,866  |  |                       |   | 71,112    |                    |  |   | 4,339,739             |  |  |                    | 413,733 |  |                       |   | 5,925,605  |  |  |   | 484,845   | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 
|Total                                                                                 |  | $                   | 37,205,486 |  |                       | $ | 1,068,888 |                    |  | $ | 4,339,739             |  |  | $                  | 413,733 |  |                       | $ | 41,545,225 |  |  | $ | 1,482,621 | 
|                                                                                      |  |                     |            |  |                       |   |           |                    |  |   |                       |  |  |                    |         |  |                       |   |            |  |  |   |           | 

The following table shows the composition of the fixed maturity securities in unrealized loss positions at
March 31, 2011 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poors (S&P) and Moodys ratings. The vast majority of the securities are rated by S&P and/or
Moodys.



9



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|            |  |                       |  |                           |  |            |            |  |            |   |            |                |  |   |                 |  |  |  |       |  
|----------- |  | --------------------- |  | ------------------------- |  | ---------- | ---------- |  | ---------- | - | ---------- | -------------- |  | - | --------------- |  |  |  | ----- | -
|NAIC Rating |  | Equivalent S&P Rating |  | Equivalent Moody's Rating |  | Book Value |            |  | Fair Value |   |            | UnrealizedLoss |  |   | Percentto Total | 
|1           |  | AAA/AA/A              |  | Aaa/Aa/A                  |  | $          | 36,887,711 |  |            | $ | 35,872,508 |                |  | $ | 1,015,203       |  |  |  | 99.3  | %
|2           |  | BBB                   |  | Baa                       |  |            | 725,302    |  |            |   | 718,112    |                |  | $ | 7,190           |  |  |  | 0.7   | %
|3           |  | BB                    |  | Ba                        |  |            |           |  |            |   |           |                |  |   |                |  |  |  |      |  
|4           |  | B                     |  | B                         |  |            | 29,815     |  |            |   | 29,700     |                |  | $ | 115             |  |  |  | 0.0   | %
|5           |  | CCC or lower          |  | Caa or lower              |  |            |           |  |            |   |           |                |  |   |                |  |  |  |      |  
|            |  |                       |  |                           |  |            |            |  |            |   |            |                |  |   |                 |  |  |  |       |  
|            |  |                       |  |                           |  | $          | 37,642,828 |  |            | $ | 36,620,320 |                |  | $ | 1,022,508       |  |  |  | 100.0 | %
|            |  |                       |  |                           |  |            |            |  |            |   |            |                |  |   |                 |  |  |  |       |  

In reviewing its fixed maturity securities for other than temporary impairment, the Company takes into
consideration the securitys market price history, the length of time that the securitys fair value has been below cost, the issuers operating results, financial condition and liquidity, its ability to access capital markets, credit
rating trends, most current audit opinion, industry and securities market conditions, and analyst expectations, to reach its conclusions.

Current accounting standards require that any credit-related impairment related to fixed maturity securities that we do not plan to sell and for which we are not more likely than not to be required to
sell is recognized in net income, with the non-credit related impairment recognized in comprehensive income. Based on our analysis, our fixed maturity portfolio is of a high credit quality and we believe we will recover our amortized cost basis of
our fixed maturity securities. The fixed maturity unrealized losses can primarily be attributed to changes in interest rates and corresponding spread widening as opposed to fundamental changes in the credit quality of the issuers of the securities.
We continually monitor the credit quality of our fixed maturity investments to gauge the likelihood of principal and interest being collected.

In reviewing its equity securities, which include common stock and mutual funds, the Company takes into consideration the securitys market price history, the length of time that the securitys
fair value has been below cost, the individual investments held within the mutual fund, most current audit opinion, industry and securities market conditions, and analyst expectations to reach its conclusions. In addition to analyzing each
individual security that has a fair value below cost, the Company also considers its intent and ability to hold a security until its fair value is equal to or greater than its cost.

As of March 31, 2011, the investment portfolio included 70 fixed maturity securities and 40 equity securities in an unrealized loss
position for less than 12 months and 5 equity securities in an unrealized loss position for more than 12 months. Of the fixed maturity securities, 11 were trading between 91% and 95% and the remaining 59 were trading above 95% of amortized cost. One
fixed maturity security in an unrealized loss position is rated below investment grade. This security is trading above 95% of amortized cost. All remaining fixed maturity securities in an unrealized loss position and assigned a rating by a
commercial credit rating agency are rated investment grade securities.

As of March 31, 2011, the investment portfolio
included 45 equity securities in an unrealized loss position. Of these forty-five equity securities, 3 were trading below 75% of amortize cost, 1 was trading between 75% and 85% of amortized cost, 11 were trading between 86% and 95% of amortized
cost and the remaining 30 were trading above 95% of amortized cost.

As of December 31, 2010, the investment portfolio
included 64 fixed maturity securities and 32 equity securities in an unrealized loss position for less than 12 months and 9 equity securities in an unrealized loss position for more than 12 months. Of the fixed maturity securities, 11 were trading
between 91% and 95% of cost and 53 were trading above 95% of amortized cost. All of the fixed maturity securities in an unrealized loss position and assigned a rating by a commercial credit rating agency are rated investment grade securities.

As of December 31, 2010, the investment portfolio included 41 equity securities in an unrealized loss position. Of these
forty-one equity securities, 1 was trading under 75% of amortized cost, 3 were trading between 75% and 85% of amortized cost, 17 were trading between 86% and 95% of amortized cost and the remaining 20 were trading above 95% of amortized cost.

While all of these securities are monitored for potential impairment, the Companys experience indicates that they
generally do not present as great a risk of impairment, as fair value often recovers over time. The equity securities have generally been adversely affected by the downturn in the financial markets and overall economic conditions. Management
believes that the analysis of each of these securities, in addition to the fact that the Company has both the intent and ability to hold these securities until their recovery, supports our view that these securities were not other-than-temporarily
impaired.



10



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



Net realized gains (losses) on investments for the three months ended March 31, are
summarized as follows:



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2011 |         |   | 2010 |  
|Gross realized investment gains:  |  |      |         |   |      |   |         |  
|Fixed maturities                  |  | $    | 18,866  |   |      | $ | 287,481 |  
|Equity securities                 |  |      | 407,095 |   |      |   | 72,760  |  
|                                  |  |      |         |   |      |   |         |  
|                                  |  |      | 425,961 |   |      |   | 360,241 |  
|                                  |  |      |         |   |      |   |         |  
|Gross realized investment losses: |  |      |         |   |      |   |         |  
|Fixed maturities                  |  |      | (5,733  | ) |      |   |        |  
|Equity securities                 |  |      | (56,923 | ) |      |   | (440    | )
|                                  |  |      |         |   |      |   |         |  
|                                  |  |      | (62,656 | ) |      |   | (440    | )
|                                  |  |      |         |   |      |   |         |  
|Net realized gains on investments |  | $    | 363,305 |   |      | $ | 359,801 |  
|                                  |  |      |         |   |      |   |         |  



|4. | Fair Value Measurements
|-- | -----------------------

Investments

Our available-for-sale investment portfolio consists of fixed maturity and equity securities, and is recorded at fair value in the accompanying consolidated balance sheets. The change in the fair value of
these investments, unless deemed to be other than temporarily impaired, is recorded as a component of other comprehensive income.

We are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the
fair value option.

Accounting standards define fair value as the price that would be received to sell an asset or would be
paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date, and establishes a framework to make the measurement of fair value more consistent and comparable. In
determining fair value, we primarily use prices and other relevant information generated by market transactions involving identical or comparable assets (market approach).

Accounting standards provide a three-level hierarchy for fair value measurements that distinguishes between market participant assumptions
developed based on market data obtained from sources independent of the reporting entity (observable inputs) and the reporting entitys own assumptions about market participant assumptions developed based on the best information
available in the circumstances (unobservable inputs). The hierarchy level assigned to each security in our available-for-sale portfolio is based on our assessment of the transparency and reliability of the inputs used in the valuation of
such instrument at the measurement date. The three hierarchy levels are defined as follows:

Level 1

Valuations based on unadjusted quoted market prices in active markets for identical securities. The fair value of fixed maturity and
equity securities included in the Level 1 category were based on quoted prices that are readily and regularly available in an active market. The Level 1 category includes publicly traded equity securities and U.S. Government Treasury and Agency
securities.

Level 2

Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are
observable, either directly or indirectly. The fair value of fixed maturity securities in the Level 2 category were based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset
class and incorporate available trade, bid and other market information. The independent pricing service also monitors market indicators, industry and economic events. For broker-quoted only securities, quotes are obtained from market makers or
broker-dealers that the Company recognizes to be market participants. The Level 2 category includes corporate bonds, municipal bonds, and mortgage-backed securities.

Level 3

Valuations based on inputs that are unobservable and significant
to the overall fair value measurement, and involve management judgment. The Company did not hold any available-for-sale investments on the measurement date that are classified in the Level 3 category.



11



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



If the inputs used to measure fair value fall in different levels of the fair value
hierarchy, a financial securitys hierarchy level is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present our available-for-sale investments measured at fair value on a recurring basis as of March 31, 2011 and December 31, 2010 classified by the valuation hierarchy (as
discussed above):



|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|------------------------------------------------------------------------------------- |  | ----------------- | ---------- |  | ----------------------------- | - | ---------- | ------- |  | - | ---------- |  |  | - | - | 
|                                                                                      |  | March 31, 2011    |           
|                                                                                      |  |                   |            |  | Fair Value Measurements Using |  
|                                                                                      |  | Total             |            |  | Level 1                       |   |            | Level 2 |  |   | Level 3    | 
|Available-for-Sale Investments:                                                       |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|Fixed Maturity Securities                                                             |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                 | 7,347,292  |  |                               | $ | 4,417,319  |         |  | $ | 2,929,973  |  |  | $ |  | 
|States and political subdivisions                                                     |  |                   | 20,595,541 |  |                               |   |           |         |  |   | 20,595,541 |  |  |   |  | 
|Corporate securities                                                                  |  |                   | 17,101,979 |  |                               |   |           |         |  |   | 17,101,979 |  |  |   |  | 
|Mortgage-backed securities                                                            |  |                   | 13,204,369 |  |                               |   |           |         |  |   | 13,204,369 |  |  |   |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|                                                                                      |  |                   | 58,249,181 |  |                               |   | 4,417,319  |         |  |   | 53,831,862 |  |  |   |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|Equity Securities                                                                     |  |                   | 19,874,427 |  |                               |   | 19,874,427 |         |  |   |           |  |  |   |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|Total                                                                                 |  | $                 | 78,123,608 |  |                               | $ | 24,291,746 |         |  | $ | 53,831,862 |  |  | $ |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|                                                                                      | 
|                                                                                      |  | December 31, 2010 |           
|                                                                                      |  |                   |            |  | Fair Value Measurements Using |  
|                                                                                      |  | Total             |            |  | Le vel 1                      |   |            | Level 2 |  |   | Level 3    | 
|Available-for-Sale Investments:                                                       |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|Fixed Maturity Securities                                                             |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                 | 7,397,044  |  |                               | $ | 4,441,453  |         |  | $ | 2,955,591  |  |  | $ |  | 
|States and political subdivisions                                                     |  |                   | 19,754,595 |  |                               |   |           |         |  |   | 19,754,595 |  |  |   |  | 
|Corporate securities                                                                  |  |                   | 15,626,333 |  |                               |   |           |         |  |   | 15,626,333 |  |  |   |  | 
|Mortgage-backed securities                                                            |  |                   | 14,908,830 |  |                               |   |           |         |  |   | 14,908,830 |  |  |   |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|                                                                                      |  |                   | 57,686,802 |  |                               |   | 4,441,453  |         |  |   | 53,245,349 |  |  |   |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|Equity Securities                                                                     |  |                   | 18,121,044 |  |                               |   | 18,121,044 |         |  |   |           |  |  |   |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 
|Total                                                                                 |  | $                 | 75,807,846 |  |                               | $ | 22,562,497 |         |  | $ | 53,245,349 |  |  | $ |  | 
|                                                                                      |  |                   |            |  |                               |   |            |         |  |   |            |  |  |   |   | 



|5. | Comprehensive Income
|-- | --------------------

The
Companys comprehensive income for the three months ended March 31, are as follows:



12



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|                                                                                     |  |      |           |   |      |   |           |  
|------------------------------------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                     |  | 2011 |           |   | 2010 |  
|Net income                                                                           |  | $    | 1,268,116 |   |      | $ | 1,029,605 |  
|Other comprehensive income, net of tax:                                              |  |      |           |   |      |   |           |  
|Unrealized gains on investments                                                      |  |      | 834,875   |   |      |   | 647,581   |  
|Reclassification adjustment for realized gains on investments included in net income |  |      | (239,781  | ) |      |   | (237,469  | )
|Amortization of prior service credit                                                 |  |      | (14,138   | ) |      |   | (14,136   | )
|Amortization of net actuarial loss                                                   |  |      | 3,102     |   |      |   | 409       |  
|                                                                                     |  |      |           |   |      |   |           |  
|Other comprehensive income (loss), net of tax                                        |  |      | 584,058   |   |      |   | 396,385   |  
|                                                                                     |  |      |           |   |      |   |           |  
|Comprehensive income                                                                 |  | $    | 1,852,174 |   |      | $ | 1,425,990 |  
|                                                                                     |  |      |           |   |      |   |           |  



|6. | Earnings Per Share
|-- | ------------------

Basic
earnings per share has been calculated by dividing net income by the weighted-average common shares outstanding. Diluted earnings per share has been calculated by dividing net income by the weighted-average common shares outstanding and the
weighted-average dilutive share equivalents outstanding. The computation of basic and diluted earnings per share for the three months ended March 31 is as follows:



|                                                                                          |  |      |           |  |      |   |           | 
|----------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                                                          |  | 2011 |           |  | 2010 |  
|Numerator for basic and diluted earnings per share:                                       |  |      |           |  |      |   |           | 
|Net income                                                                                |  | $    | 1,268,116 |  |      | $ | 1,029,605 | 
|                                                                                          |  |      |           |  |      |   |           | 
|Denominator:                                                                              |  |      |           |  |      |   |           | 
|Denominator for basic earnings per share  weighted average shares outstanding            |  |      | 1,781,262 |  |      |   | 1,758,284 | 
|Effect of dilutive stock options                                                          |  |      | 41,453    |  |      |   | 40,203    | 
|                                                                                          |  |      |           |  |      |   |           | 
|Denominator for diluted earnings per share  adjusted weighted average shares outstanding |  |      | 1,822,715 |  |      |   | 1,798,487 | 
|                                                                                          |  |      |           |  |      |   |           | 
|Basic earnings per share                                                                  |  | $    | 0.71      |  |      | $ | 0.59      | 
|Diluted earnings per share                                                                |  | $    | 0.70      |  |      | $ | 0.57      | 



|7. | Segment Information
|-- | -------------------

The
Company defines its operations as property and casualty insurance operations. Up until December 31, 2010, the Company classified its insurance products into four major lines: personal, commercial, farm and marine. The categorization of our
products into the four major insurance lines was consistent with the way results were regularly evaluated by management in deciding how to allocate resources and in assessing performance. Effective January 1, 2011, the Company reorganized its
internal underwriting operations which consolidated the marine products into personal lines. As such, beginning January 1, 2011, the Company now classifies its insurance products into three major lines: personal, commercial and farm. The
separate financial information of these three major insurance lines is consistent with the way results are evaluated by management in deciding how to allocate resources and in assessing performance. As a result of this change, all prior period data
has been restated to reflect the consolidation of the marine line into personal lines.

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 measurements including premiums, incurred losses or other departmental employee data. 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 on investments
or other income to its product lines. In addition, the Company does not separately identify depreciation expense related to the building by product line as such disclosure would be impracticable.



13



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



Segment data for the three months ended March 31 are as follows:



|                                                         |  |      |            |  |      |   |            |  
|-------------------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | -
|                                                         |  | 2011 |            |  | 2010 |  
|Net premiums earned:                                     |  |      |            |  |      |   |            |  
|Personal lines                                           |  | $    | 12,428,116 |  |      | $ | 10,854,317 |  
|Commercial lines                                         |  |      | 2,235,179  |  |      |   | 1,940,394  |  
|Farm                                                     |  |      | 1,248,936  |  |      |   | 1,189,077  |  
|                                                         |  |      |            |  |      |   |            |  
|Total net premiums earned                                |  |      | 15,912,231 |  |      |   | 13,983,788 |  
|                                                         |  |      |            |  |      |   |            |  
|Loss and loss adjustment expenses:                       |  |      |            |  |      |   |            |  
|Personal lines                                           |  |      | 7,954,264  |  |      |   | 7,164,411  |  
|Commercial lines                                         |  |      | 985,440    |  |      |   | 1,040,337  |  
|Farm                                                     |  |      | 659,967    |  |      |   | 323,132    |  
|                                                         |  |      |            |  |      |   |            |  
|Total loss and loss adjustment expenses                  |  |      | 9,599,671  |  |      |   | 8,527,880  |  
|                                                         |  |      |            |  |      |   |            |  
|Policy acquisition and other underwriting expenses:      |  |      |            |  |      |   |            |  
|Personal lines                                           |  |      | 3,690,422  |  |      |   | 3,414,131  |  
|Commercial lines                                         |  |      | 1,143,187  |  |      |   | 1,060,693  |  
|Farm                                                     |  |      | 458,531    |  |      |   | 448,322    |  
|                                                         |  |      |            |  |      |   |            |  
|Total policy acquisition and other underwriting expenses |  |      | 5,292,140  |  |      |   | 4,923,146  |  
|                                                         |  |      |            |  |      |   |            |  
|Underwriting gain:                                       |  |      |            |  |      |   |            |  
|Personal lines                                           |  |      | 783,430    |  |      |   | 275,775    |  
|Commercial lines                                         |  |      | 106,552    |  |      |   | (160,636   | )
|Farm                                                     |  |      | 130,438    |  |      |   | 417,623    |  
|                                                         |  |      |            |  |      |   |            |  
|Total underwriting gain                                  |  |      | 1,020,420  |  |      |   | 532,762    |  
|Net investment income                                    |  |      | 279,476    |  |      |   | 440,211    |  
|Net realized gains on investments                        |  |      | 363,305    |  |      |   | 359,801    |  
|Other income, net                                        |  |      | 191,990    |  |      |   | 157,417    |  
|                                                         |  |      |            |  |      |   |            |  
|Income before federal income taxes                       |  | $    | 1,855,191  |  |      | $ | 1,490,191  |  
|                                                         |  |      |            |  |      |   |            |  



|8. | Accrued Expenses and Other Liabilities
|-- | --------------------------------------

Accrued expenses and other liabilities included the following:



|                                              |  |               |           |  |                  |   |           | 
|--------------------------------------------- |  | ------------- | --------- |  | ---------------- | - | --------- | 
|                                              |  | March 31,2011 |           |  | December 31,2010 |  
|Commissions payable                           |  | $             | 2,501,551 |  |                  | $ | 2,886,243 | 
|Advance premiums                              |  |               | 1,340,370 |  |                  |   | 840,901   | 
|Accrued salaries & employee benefits          |  |               | 585,008   |  |                  |   | 995,806   | 
|Postretirement health care benefit obligation |  |               | 2,180,307 |  |                  |   | 2,152,865 | 
|Payable from investment purchases             |  |               | 840,665   |  |                  |   | 129,582   | 
|State mandated pool assessments               |  |               | 1,641,258 |  |                  |   | 1,187,992 | 
|Other                                         |  |               | 730,947   |  |                  |   | 684,236   | 
|                                              |  |               |           |  |                  |   |           | 
|                                              |  | $             | 9,820,106 |  |                  | $ | 8,877,625 | 
|                                              |  |               |           |  |                  |   |           | 



|9. | Other Postretirement Plan
|-- | -------------------------

The Company provides certain postretirement health care benefits for retired employees. The components of the net periodic benefit cost
for the three months ended March 31 are as follows:



14



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



|                                                  |  |      |         |   |      |   |         |  
|------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                  |  | 2011 |         |   | 2010 |  
|Components of net periodic benefit cost:          |  |      |         |   |      |   |         |  
|Service cost                                      |  | $    |        |   |      | $ |        |  
|Interest cost                                     |  |      | 27,355  |   |      |   | 25,352  |  
|Amortization of unrecognized prior service credit |  |      | (21,421 | ) |      |   | (21,420 | )
|Amortization of unrecognized net actuarial loss   |  |      | 4,700   |   |      |   | 620     |  
|                                                  |  |      |         |   |      |   |         |  
|Net periodic benefit cost                         |  | $    | 10,634  |   |      | $ | 4,552   |  
|                                                  |  |      |         |   |      |   |         |  

As this plan is not pre-funded, no contributions other than those necessary to cover benefit payments are
anticipated. For the three months ended March 31, 2011, the Company has made contributions to the plan of approximately $12,000. During 2011, the Company expects to contribute a total of $81,000 to the plan to cover anticipated benefit
payments.



|10. | Reinsurance
|--- | -----------

The effect
of reinsurance on premiums written and earned and losses and LAE incurred for the three months ended March 31, was as follows:



|                          |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  
|------------------------- |  | ------- | ---------- | - | ------ | - | ---------- | ------- |  | - | ---------- | - |  | - | ---------- | -
|                          |  | 2011    |            |   | 2010   |  
|                          |  | Written |            |   | Earned |   |            | Written |  |   | Earned     |  
|Direct                    |  | $       | 18,818,589 |   |        | $ | 19,207,730 |         |  | $ | 16,086,582 |   |  | $ | 16,900,954 |  
|Assumed                   |  |         | 21,420     |   |        |   | 27,595     |         |  |   | 13,440     |   |  |   | 16,531     |  
|Ceded                     |  |         | (3,545,414 | ) |        |   | (3,323,094 | )       |  |   | (3,100,663 | ) |  |   | (2,933,697 | )
|                          |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  
|Net premiums              |  | $       | 15,294,595 |   |        | $ | 15,912,231 |         |  | $ | 12,999,359 |   |  | $ | 13,983,788 |  
|                          |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  
|                          |  |         |            |  
|                          |  |         |            |   |        |   |            | 2011    |  |   | 2010       |  
|Loss and LAE incurred     |  |         |            |   |        |   |            |         |  | $ | 11,342,831 |   |  | $ | 11,464,997 |  
|Reinsurance recoveries    |  |         |            |   |        |   |            |         |  |   | (1,743,160 | ) |  |   | (2,937,117 | )
|                          |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  
|Net loss and LAE incurred |  |         |            |   |        |   |            |         |  | $ | 9,599,671  |   |  | $ | 8,527,880  |  
|                          |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  



|11. | Federal Income Taxes
|--- | --------------------

For
the three months ended March 31, the provision for income taxes consists of the following:



|                           |  |      |         |  |      |   |         |  
|-------------------------- |  | ---- | ------- |  | ---- | - | ------- | -
|                           |  | 2011 |         |  | 2010 |  
|Current expense            |  | $    | 577,186 |  |      | $ | 473,054 |  
|Deferred expense (benefit) |  |      | 9,889   |  |      |   | (12,468 | )
|                           |  |      |         |  |      |   |         |  
|Total                      |  | $    | 587,075 |  |      | $ | 460,586 |  
|                           |  |      |         |  |      |   |         |  

For the three months ended March 31, actual federal income taxes vary from amounts computed by applying
the current federal income tax rate of 34 percent to income before federal income taxes due to the following:



|                                   |  |      |           |   |      |  |      |    |  |   |           |   |  |  |      |   
|---------------------------------- |  | ---- | --------- | - | ---- |  | ---- | -- |  | - | --------- | - |  |  | ---- | --
|                                   |  | 2011 |           |   | 2010 | 
|Income before federal income taxes |  | $    | 1,855,191 |   |      |  |      |    |  | $ | 1,490,191 |   |  |  |      |   
|                                   |  |      |           |   |      |  |      |    |  |   |           |   |  |  |      |   
|Tax at statutory rate              |  |      | 630,765   |   |      |  | 34.0 | %  |  |   | 506,665   |   |  |  | 34.0 | % 
|Tax effect of:                     |  |      |           |   |      |  |      |    |  |   |           |   |  |  |      |   
|Nontaxable investment income       |  |      | (55,921   | ) |      |  | (3.0 | %) |  |   | (56,727   | ) |  |  | (3.8 | %)
|Nondeductible expenses             |  |      | 12,231    |   |      |  | 0.7  | %  |  |   | 10,648    |   |  |  | 0.7  | % 
|                                   |  |      |           |   |      |  |      |    |  |   |           |   |  |  |      |   
|                                   |  | $    | 587,075   |   |      |  | 31.7 | %  |  | $ | 460,586   |   |  |  | 30.9 | % 
|                                   |  |      |           |   |      |  |      |    |  |   |           |   |  |  |      |   



15



---

##### Table of Contents

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



Deferred federal income tax assets and liabilities are recognized for the estimated
future tax consequences attributable to the difference between financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. A valuation allowance is established when necessary to reduce deferred tax assets
to the amount expected to be realized. In determining the need for a valuation allowance, the Companys management reviews both positive and negative evidence, including current and historical results of operations, the annual limitation on
utilization of net operating loss carryforwards pursuant to Internal Revenue Code Section 382 (Section 382), future income projections and the overall prospects of our business. Based 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 March 31, 2011 it is more
likely than not that sufficient taxable income will exist in the periods of reversal in order to realize the net deferred tax asset. Based on the annual Section 382 limitation of the utilization of net operating loss carryforwards management
has determined that approximately $2,605,000 of net operating loss carryforwards will not be realized and therefore a valuation allowance of approximately $886,000 will be maintained for the deferred tax asset associated with these amounts.

The tax effects of temporary differences that give rise to deferred federal income tax assets and liabilities are as follows:



|                                                      |  |               |            |   |                  |   |            |  
|----------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                      |  | March 31,2011 |            |   | December 31,2010 |  
|Deferred federal income tax assets arising from:      |  |               |            |   |                  |   |            |  
|Loss and loss adjustment expense reserves             |  | $             | 533,335    |   |                  | $ | 539,107    |  
|Unearned premium reserves                             |  |               | 2,101,280  |   |                  |   | 2,109,316  |  
|Postretirement benefits accrued                       |  |               | 741,304    |   |                  |   | 731,974    |  
|Net operating loss carryforward                       |  |               | 1,931,948  |   |                  |   | 1,965,950  |  
|Alternative minimum tax credit carryforward           |  |               | 357,697    |   |                  |   | 357,697    |  
|Other deferred tax assets                             |  |               | 335,027    |   |                  |   | 306,672    |  
|                                                      |  |               |            |   |                  |   |            |  
|Total deferred federal income tax assets              |  |               | 6,000,591  |   |                  |   | 6,010,716  |  
|                                                      |  |               |            |   |                  |   |            |  
|Deferred federal income tax liabilities arising from: |  |               |            |   |                  |   |            |  
|Deferred policy acquisition costs                     |  |               | (1,510,756 | ) |                  |   | (1,524,469 | )
|Unrealized gains on investments                       |  |               | (550,441   | ) |                  |   | (243,876   | )
|Property and equipment                                |  |               | (447,945   | ) |                  |   | (440,186   | )
|Other deferred tax liabilities                        |  |               | (2,948     | ) |                  |   | (2,916     | )
|                                                      |  |               |            |   |                  |   |            |  
|Total deferred federal income tax liabilities         |  |               | (2,512,090 | ) |                  |   | (2,211,447 | )
|                                                      |  |               |            |   |                  |   |            |  
|Net deferred federal income tax asset                 |  |               | 3,488,501  |   |                  |   | 3,799,269  |  
|Valuation allowance                                   |  |               | (885,571   | ) |                  |   | (885,571   | )
|                                                      |  |               |            |   |                  |   |            |  
|Deferred federal income taxes                         |  | $             | 2,602,930  |   |                  | $ | 2,913,698  |  
|                                                      |  |               |            |   |                  |   |            |  



|12. | Subsequent Event
|--- | ----------------

On
April 18, 2011 the Company announced that it entered into a definitive agreement to be acquired by Auto Club Insurance Association for $36.15 per share. Under the terms of the agreement, Company shareholders will receive $36.15 per share in cash.
Completion of the transaction, which is expected to occur in the third quarter of 2011, is subject to the approval of Company shareholders, customary closing conditions and regulatory approvals. A copy of the press release announcing the transaction
was filed as an exhibit to the Companys Current Report on Form 8-K, filed with Securities and Exchange Commission on April 18, 2011. A copy of the Agreement and Plan of Merger was filed as an exhibit to the Companys Current Report
on Form 8-K, filed on April 21, 2011.



16



---

##### Table of Contents

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

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the Notes
thereto included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2010, particularly Item 7  Managements Discussion and Analysis of Financial Condition and Results of
Operations in the Annual Report.

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

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



| |  |  | the failure of the Company to close its pending Agreement and Plan of Merger with Auto Club Insurance Association;
| | - |  | ------------------------------------------------------------------------------------------------------------------



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



| |  |  | the effect of Federal legislative or regulatory matters; and
| | - |  | ------------------------------------------------------------



| |  |  | the effect of Federal or state judicial rulings.
| | - |  | ------------------------------------------------

Because forward-looking information is subject to various risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking information. Therefore, we
caution you not to place undue reliance on this forward-looking information, which speaks only as of the date of this filing.

All subsequent written and oral forward-looking information attributable to the Holding Company or the Insurance Company or any person
acting on our behalf is expressly qualified in its entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to publicly release any revisions that may be made to any forward-looking
statements to reflect events or circumstances occurring after the date of this filing.

Overview of Fremont Michigan InsuraCorp

Fremont Michigan InsuraCorp, Inc. is a holding company owning all of the outstanding shares of Fremont Insurance Company.
Fremont Insurance Company is a Michigan licensed property and casualty insurer operating exclusively in the State of Michigan and writing principally personal lines, commercial lines and farm insurance policies through independent agents. We were
founded in 1876 and have served Michigan policyholders for over 134 years. We market policies through approximately 175 independent insurance agencies. Fremont Insurance Company has a financial strength rating of A- (Excellent) by A.M.
Best. The Holding Company is subject to regulation by the Michigan Office of Financial and Insurance Regulation (OFIR) as its primary regulator



17



---

##### Table of Contents

because it is the holding company for Fremont Insurance Company. As of March 31, 2011, we had approximately 75,900 policies in force and assets of $122.7 million.

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 months
ended March 31, 2011 and 2010. The Companys fiscal year ends on December 31.

Critical Accounting Policies and Estimates

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

We believe the critical accounting policies and estimates discussed below reflect our more
significant judgments and estimates used in the preparation of the consolidated financial statements. These may be further commented upon in applicable sections on Results of Operations and Liquidity and Capital Resources that follow. These policies
are more fully described below as well as in our 2010 Annual Report on Form 10-K. There have been no material changes to these policies during the most recent quarter.

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

Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. Specifically, on a quarterly basis, we review
existing reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior accident years. We use historical paid and incurred losses and accident year data to derive expected ultimate loss and loss
adjustment expense ratios by line of business. We then apply these expected loss and loss adjustment expense ratios to earned premiums to derive a reserve level for each line of business. In connection with the determination of the reserves, we also
consider other specific factors such as recent weather-related losses, trends in historical paid losses, and legal and judicial trends with respect to theories of liability. Some of our business relates to coverage for short-term risks, and for
these risks loss development is comparatively rapid and historical paid losses, adjusted for known variables, have been a reliable predictive measure of future losses for purposes of our reserving. Some of our business relates to longer-term risks,
where the claims are slower to emerge and the estimate of damage is more difficult to predict. For these lines of business, more sophisticated actuarial methods, such as the Bornhuetter-Ferguson loss development methods (see Methods
below) must be employed to project an ultimate loss expectation, and then the related loss history must be regularly evaluated and loss expectations updated, with the possibility of variability from the initial estimate of ultimate losses.

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

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

Reserves are estimates because there are uncertainties inherent in the determination of ultimate losses. Court
decisions, regulatory changes and economic conditions can affect the ultimate cost of claims that occurred in the past as well as create uncertainties regarding future loss cost trends. Accordingly, the ultimate liability for unpaid losses and loss
adjustment expenses will likely differ from the amount recorded at March 31, 2011.



18



---

##### Table of Contents

We have three business segments: personal, commercial and farm. The following table shows
the breakdown of our loss and LAE reserves between reported losses and IBNR losses by segment as of March 31, 2011 and December 31, 2010 (in thousands):



|                |  |               |        |  |                  |   |        | 
|--------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                |  | March 31,2011 |        |  | December 31,2010 |  
|Reported losses |  |               |        |  |                  |   |        | 
|Personal        |  | $             | 15,201 |  |                  | $ | 14,376 | 
|Commercial      |  |               | 2,519  |  |                  |   | 3,182  | 
|Farm            |  |               | 1,327  |  |                  |   | 1,772  | 
|                |  |               |        |  |                  |   |        | 
|                |  |               | 19,047 |  |                  |   | 19,330 | 
|                |  |               |        |  |                  |   |        | 
|IBNR losses     |  |               |        |  |                  |   |        | 
|Personal        |  |               | 6,355  |  |                  |   | 6,290  | 
|Commercial      |  |               | 3,835  |  |                  |   | 3,435  | 
|Farm            |  |               | 315    |  |                  |   | 289    | 
|                |  |               |        |  |                  |   |        | 
|                |  |               | 10,505 |  |                  |   | 10,014 | 
|                |  |               |        |  |                  |   |        | 
|Total           |  |               |        |  |                  |   |        | 
|Personal        |  |               | 21,556 |  |                  |   | 20,666 | 
|Commercial      |  |               | 6,354  |  |                  |   | 6,617  | 
|Farm            |  |               | 1,642  |  |                  |   | 2,061  | 
|                |  |               |        |  |                  |   |        | 
|                |  | $             | 29,552 |  |                  | $ | 29,344 | 
|                |  |               |        |  |                  |   |        | 

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 March 31, 2011 and December 31, 2010, was approximately $33,000 and $79,000, respectively.

Investments.At March 31, 2011 and December 31, 2010, all of the Companys investments are classified as available-for-sale and are investments that would be
available to be sold in response to the Companys liquidity needs, changes in market interest rates and asset-liability management strategies, among others. Available-for-sale investments are recorded at fair value, with the corresponding
unrealized appreciation or depreciation, net of deferred income taxes, reported as a component of accumulated other comprehensive income or loss until realized.

The Company reviews the status and market value changes of its investment portfolio 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. When a fixed maturity security has a decline in value, where fair value is below amortized cost, an OTTI write-down is triggered in circumstances where
(1) the Company has the intent to sell the security, (2) it is more-likely-than-not that the Company will be required to sell the security before recovery of its amortized cost basis, or (3) the Company does not expect to recover the
entire amortized cost basis of the security. If the Company intends to sell the security or if it is more-likely-than-not the Company will be required to sell the security before recovery, an OTTI write-down is recognized as a realized loss in
the statement of operations equal to the difference between the securitys amortized cost and its fair value. If the Company does not intend to sell the security or it is not more-likely-than-not that the Company will be required to sell the
security before recovery, the OTTI write-down is separated into an amount representing the credit loss, which is recognized as a realized loss in the statement of operations, and the amount related to all other factors, which is recognized in other
comprehensive income.

When an equity security has a decline in value, where fair value is below cost, that is deemed to be
other than temporary, the Company reduces the book value of such security to its current fair value, recognizing the decline as a realized loss in the statement of operations. Any future increases in the market value of investments written down are
reflected as changes in unrealized gains as part of accumulated other comprehensive income within stockholders equity.

In reviewing its fixed maturity securities for other than temporary impairment, the Company takes into consideration the securitys
market price history, the length of time that the securitys fair value has been below cost, the issuers operating results, financial condition and liquidity, its ability to access capital markets, credit rating trends, most current audit
opinion, industry and securities market conditions, and analyst expectations, to reach its conclusions.

In reviewing its
equity securities, which include common stock and mutual funds, the Company takes into consideration the securitys market price history, the length of time that the securitys fair value has been below cost, the individual investments
held



19



---

##### Table of Contents

within the mutual fund, most current audit opinion, industry and securities market conditions, and analyst expectations to reach its conclusions. In addition to analyzing each individual security
that has a fair value below cost, the Company also considers its intent and ability to hold a security until its fair value is equal to or greater than its cost.

Reinsurance.Net premiums earned, losses and LAE and policy acquisition and other underwriting expenses are reported net of the amounts related to reinsurance ceded to other
companies. Amounts recoverable from reinsurers related to the portions of the liability for losses and LAE and unearned premiums ceded to them are reported as assets. Reinsurance assumed from other companies, including assumed premiums written and
earned and losses and LAE, is accounted for in the same manner as direct insurance written.

Reinsurance recoverables
include balances due from reinsurance companies for paid and unpaid losses and LAE that will be recovered from reinsurers, based on contracts in force. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability
associated with the reinsured policy. Reinsurance contracts do not relieve the Company from its primary obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk with respect to the individual reinsurer that participates in its ceded programs to minimize its exposure to significant losses from reinsurer insolvencies. When
necessary the Company holds collateral in the form of letters of credit or trust accounts for amounts recoverable from reinsurers that are not considered authorized insurers by the State of Michigan Office of Financial and Insurance Regulation.

At March 31, 2011 and December 31, 2010, the Companys recoverable from reinsurers was comprised of the
following:



|                            |  |               |            |  |                  |   |            | 
|--------------------------- |  | ------------- | ---------- |  | ---------------- | - | ---------- | 
|                            |  | March 31,2011 |            |  | December 31,2010 |  
|Paid losses and LAE         |  | $             | 1,503,387  |  |                  | $ | 1,081,212  | 
|Unpaid losses and LAE       |  |               | 10,485,258 |  |                  |   | 10,116,562 | 
|                            |  |               |            |  |                  |   |            | 
|Amounts due from reinsurers |  | $             | 11,988,645 |  |                  | $ | 11,197,774 | 
|                            |  |               |            |  |                  |   |            | 

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

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



20



---

##### Table of Contents

Results of Operations  Three Months Ended March 31, 2011 and 2010

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 March 31, 2011 and 2010. 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 | 
|                                   |  | 2011 |           |   | 2010 |   |           | Dollar |  |   | Percentage |  
|Underwriting gain (loss)           |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   
|Personal                           |  |      | 783,430   |   |      |   | 275,775   |        |  | $ | 507,655    |   |  |  | 184.1 | % 
|Commercial                         |  |      | 106,552   |   |      |   | (160,636  | )      |  |   | 267,188    |   |  |  | 166.3 | % 
|Farm                               |  |      | 130,438   |   |      |   | 417,623   |        |  |   | (287,185   | ) |  |  | (68.8 | %)
|                                   |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   
|Total underwriting gain            |  |      | 1,020,420 |   |      |   | 532,762   |        |  |   | 487,658    |   |  |  | 91.5  | % 
|Other revenue items                |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   
|Net investment income              |  |      | 279,476   |   |      |   | 440,211   |        |  |   | (160,735   | ) |  |  | (36.5 | %)
|Net realized gains on investments  |  |      | 363,305   |   |      |   | 359,801   |        |  |   | 3,504      |   |  |  | 1.0   | % 
|Other income                       |  |      | 191,990   |   |      |   | 157,417   |        |  |   | 34,573     |   |  |  | 22.0  | % 
|                                   |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   
|Total other revenue items          |  |      | 834,771   |   |      |   | 957,429   |        |  |   | (122,658   | ) |  |  | (12.8 | %)
|                                   |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   
|Income before federal income taxes |  |      | 1,855,191 |   |      |   | 1,490,191 |        |  |   | 365,000    |   |  |  | 24.5  | % 
|Federal income tax expense         |  |      | (587,075  | ) |      |   | (460,586  | )      |  |   | (126,489   | ) |  |  | 27.5  | % 
|                                   |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   
|Net income                         |  | $    | 1,268,116 |   |      | $ | 1,029,605 |        |  | $ | 238,511    |   |  |  | 23.2  | % 
|                                   |  |      |           |   |      |   |           |        |  |   |            |   |  |  |       |   

Underwriting Results. The following table shows the components of the Companys
underwriting gain or loss for the three months ended March 31, 2011 and 2010.



|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | -- |  |  | ---- | -
|                                                        |  | 2011 |            |   | 2010 |   |            | Change |  |   | %Change   |   
|Direct premiums written                                 |  | $    | 18,818,589 |   |      | $ | 16,086,582 |        |  | $ | 2,732,007 |    |  |  | 17.0 | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Net premiums written                                    |  | $    | 15,294,595 |   |      | $ | 12,999,359 |        |  | $ | 2,295,236 |    |  |  | 17.7 | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Net premiums earned                                     |  | $    | 15,912,231 |   |      | $ | 13,983,788 |        |  | $ | 1,928,443 |    |  |  | 13.8 | %
|Loss and LAE                                            |  |      | 9,599,671  |   |      |   | 8,527,880  |        |  |   | 1,071,791 |    |  |  | 12.6 | %
|Policy acquisition and other underwriting expenses      |  |      | 5,292,140  |   |      |   | 4,923,146  |        |  |   | 368,994   |    |  |  | 7.5  | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Underwriting gain (loss)                                |  | $    | 1,020,420  |   |      | $ | 532,762    |        |  | $ | 487,658   |    |  |  | 91.5 | %
|                                                        |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Loss and LAE ratio                                      |  |      | 60.3       | % |      |   | 61.0       | %      |  |   | (0.7      | %) |  |  |      |  
|Policy acquisition and other underwriting expense ratio |  |      | 33.3       | % |      |   | 35.2       | %      |  |   | (1.9      | %) |  |  |      |  
|Combined ratio                                          |  |      | 93.6       | % |      |   | 96.2       | %      |  |   | (2.6      | %) |  |  |      |  

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 March 31 are presented in the table below:



|                         |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|------------------------ |  | ---- | ---------- |  | ---- | - | ---------- | -------- |  | - | --------- |  |  |  | ---- | -
|                         |  | 2011 |            |  | 2010 |   |            | $ Change |  |   | %Change   | 
|Direct Premiums Written: |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|Personal                 |  | $    | 13,698,581 |  |      | $ | 12,052,175 |          |  | $ | 1,646,406 |  |  |  | 13.7 | %
|Commercial               |  |      | 3,695,404  |  |      |   | 2,720,218  |          |  |   | 975,186   |  |  |  | 35.8 | %
|Farm                     |  |      | 1,424,604  |  |      |   | 1,314,189  |          |  |   | 110,415   |  |  |  | 8.4  | %
|                         |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|                         |  | $    | 18,818,589 |  |      | $ | 16,086,582 |          |  | $ | 2,732,007 |  |  |  | 17.0 | %
|                         |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  



21



---

##### Table of Contents

The market continues to be very competitive for target market personal lines and commercial
lines business. While personal lines have seen some rate hardening, commercial lines continues to be soft. Despite these market conditions, we continue to be able to grow target market business. Direct premium written for the personal segment
increased 13.7%, with personal auto up 19.9% and homeowners up 6.8%. Personal auto renewal business is up 23.3% and is the main driver of growth as new business growth is relatively flat at 0.4%. Renewal business growth is a result of rate increases
taken over the last 12 months coupled with our retention ratio which is in the low nineties. Growth in our homeowners line is a result of renewal premium which is up 11.3% offset by a decline in new business which is down 14.8%.

Direct premium written for the commercial segment increased 35.8% driven by both new and renewal premium growth. New commercial business
is up 64.3% while renewal business is up 20.0%. In August 2010, we launched a new commercial package web-based rating platform that has significantly increased the ease of quoting and issuing commercial business. The new rating platform along with a
strong emphasis from marketing on commercial growth is driving additional commercial business. Farm direct written premium was up 8.4%, driven by new and renewal premiums which were up 9.7% and 6.7% respectively.

Net premiums written by major business segment for the three months ended March 31 are presented in the table below:



|                      |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|--------------------- |  | ---- | ---------- |  | ---- | - | ---------- | -------- |  | - | --------- |  |  |  | ---- | -
|                      |  | 2011 |            |  | 2010 |   |            | $ Change |  |   | %Change   | 
|Net Premiums Written: |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|Personal              |  | $    | 11,307,507 |  |      | $ | 9,950,819  |          |  | $ | 1,356,688 |  |  |  | 13.6 | %
|Commercial            |  |      | 2,781,324  |  |      |   | 1,967,434  |          |  |   | 813,890   |  |  |  | 41.4 | %
|Farm                  |  |      | 1,205,764  |  |      |   | 1,081,106  |          |  |   | 124,658   |  |  |  | 11.5 | %
|                      |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|                      |  | $    | 15,294,595 |  |      | $ | 12,999,359 |          |  | $ | 2,295,236 |  |  |  | 17.7 | %
|                      |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  

The increase in net premiums written is due to growth in direct premiums written of $2,732,000 offset by an
increase of $437,000 in ceded premiums written under the Companys reinsurance agreements.

Net premiums earned by major
business segment for the three months ended March 31 are presented in the table below:



|                     |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|-------------------- |  | ---- | ---------- |  | ---- | - | ---------- | -------- |  | - | --------- |  |  |  | ---- | -
|                     |  | 2011 |            |  | 2010 |   |            | $ Change |  |   | %Change   | 
|Net Premiums Earned: |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|Personal             |  | $    | 12,428,116 |  |      | $ | 10,854,317 |          |  | $ | 1,573,799 |  |  |  | 14.5 | %
|Commercial           |  |      | 2,235,179  |  |      |   | 1,940,394  |          |  |   | 294,785   |  |  |  | 15.2 | %
|Farm                 |  |      | 1,248,936  |  |      |   | 1,189,077  |          |  |   | 59,859    |  |  |  | 5.0  | %
|                     |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  
|                     |  | $    | 15,912,231 |  |      | $ | 13,983,788 |          |  | $ | 1,928,443 |  |  |  | 13.8 | %
|                     |  |      |            |  |      |   |            |          |  |   |           |  |  |  |      |  

The increase in net premiums earned is due to the overall increase in direct premiums earned of $2,306,000
offset by an increase of $378,000 in ceded premiums earned under the Companys reinsurance agreements.

Loss and
Loss Adjustment Expenses (LAE). The Companys net loss and LAE, incurred claim count, average loss and LAE per claim and the loss and LAE ratios for the three months ended March 31 are shown in the tables below:



22



---

##### Table of Contents

|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -------- |  | - | --------- | - |  |  | ----- | --
|                                |  | 2011 |           |   | 2010 |   |           | $ Change |  |   | %Change   |  
|Loss and LAE:                   |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Personal                        |  | $    | 7,954,264 |   |      | $ | 7,164,411 |          |  | $ | 789,853   |   |  |  | 11.0  | % 
|Commercial                      |  |      | 985,440   |   |      |   | 1,040,337 |          |  |   | (54,897   | ) |  |  | (5.3  | %)
|Farm                            |  |      | 659,967   |   |      |   | 323,132   |          |  |   | 336,835   |   |  |  | 104.2 | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|                                |  | $    | 9,599,671 |   |      | $ | 8,527,880 |          |  | $ | 1,071,791 |   |  |  | 12.6  | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Incurred Claim Count:           |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Personal                        |  |      | 2,544     |   |      |   | 2,125     |          |  |   | 419       |   |  |  | 19.7  | % 
|Commercial                      |  |      | 298       |   |      |   | 225       |          |  |   | 73        |   |  |  | 32.4  | % 
|Farm                            |  |      | 105       |   |      |   | 75        |          |  |   | 30        |   |  |  | 40.0  | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|                                |  |      | 2,947     |   |      |   | 2,425     |          |  |   | 522       |   |  |  | 21.5  | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Average Loss and LAE per Claim: |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Personal                        |  | $    | 3,127     |   |      | $ | 3,371     |          |  | $ | (244      | ) |  |  | (7.2  | %)
|Commercial                      |  |      | 3,307     |   |      |   | 4,624     |          |  |   | (1,317    | ) |  |  | (28.5 | %)
|Farm                            |  |      | 6,285     |   |      |   | 4,308     |          |  |   | 1,977     |   |  |  | 45.9  | % 
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|                                |  | $    | 3,257     |   |      | $ | 3,517     |          |  | $ | (260      | ) |  |  | (7.4  | %)
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Loss and LAE Ratio:             |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|Personal                        |  |      | 64.0      | % |      |   | 66.0      | %        |  |   |           |   |  |  |       |   
|Commercial                      |  |      | 44.1      | % |      |   | 53.6      | %        |  |   |           |   |  |  |       |   
|Farm                            |  |      | 52.8      | % |      |   | 27.2      | %        |  |   |           |   |  |  |       |   
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   
|                                |  |      | 60.3      | % |      |   | 61.0      | %        |  |   |           |   |  |  |       |   
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |  |       |   

The loss ratio for the personal segment decreased 2 percentage points to 64% during the first
quarter of 2011 compared to 2010. The loss ratio for personal auto decreased from 69.1% in the 2010 quarter to 64.2% in the first quarter of 2011. The decrease in the loss ratio for personal auto was primarily a result of a decline in severity from
casualty related losses partially offset by an increase in auto physical damage claim frequency and severity. The loss ratio for homeowners increased to 74.8% in the first quarter of 2011, up from 69.6% in the first quarter of 2010. The increase in
the homeowners loss ratio was a result of increased weather related claims from wind, freezing and water damage.

The
commercial segments loss ratio decreased 9.5 percentage points to 44.1% for the first quarter of 2011. The lower loss ratio was impacted by a decrease in both fire and weather related losses. The farm segments loss ratio increased to
52.8% from 27.2% as a result of increased fire and weather related losses during the 2011 quarter.

Policy Acquisition
and Other Underwriting Expenses.Policy acquisition and other underwriting expenses for the three months ended March 31 were as follows:



|                                                         |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|-------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | -- |  |  | ---- | -
|                                                         |  | 2011 |            |   | 2010 |   |            | Change |  |   | %Change   |   
|Amortization of deferred policy acquisition costs        |  | $    | 2,484,265  |   |      | $ | 2,235,837  |        |  | $ | 248,428   |    |  |  | 11.1 | %
|Other underwriting expenses                              |  |      | 2,807,875  |   |      |   | 2,687,309  |        |  |   | 120,566   |    |  |  | 4.5  | %
|                                                         |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Total policy acquisition and other underwriting expenses |  | $    | 5,292,140  |   |      | $ | 4,923,146  |        |  | $ | 368,994   |    |  |  | 7.5  | %
|                                                         |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Net premiums earned                                      |  | $    | 15,912,231 |   |      | $ | 13,983,788 |        |  | $ | 1,928,443 |    |  |  | 13.8 | %
|                                                         |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  
|Expense ratio                                            |  |      | 33.3       | % |      |   | 35.2       | %      |  |   | (1.9      | %) |  |  |      |  
|                                                         |  |      |            |   |      |   |            |        |  |   |           |    |  |  |      |  

Amortization of deferred policy acquisition costs (DAC) increased during the first
quarter of 2011 as compared to the same period in 2010 as a result of increased earned premium volume. As a percentage of net premiums earned, DAC amortization decreased slightly from 16.0% to 15.6% as a result of continued growth in our personal
auto book of business which is a lower commission product. Other underwriting expenses as a percentage of net premiums earned decreased from 19.2% for the first quarter 2010 to 17.6% for the 2011 first quarter. The decrease is a result of continued
growth in net premiums earned and a modest increase in other underwriting expenses.

Investment Income.The
Companys net investment income excluding realized gains, average invested assets including cash and cash equivalents and the rate of return for the three months ended March 31 are as follows:



23



---

##### Table of Contents

|                                               |  |      |            |   |      |   |            |        |  |   |           |    |  |  |       |   
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | -- |  |  | ----- | --
|                                               |  | 2011 |            |   | 2010 |   |            | Change |  |   | %Change   |   
|Fixed maturities                               |  | $    | 305,612    |   |      | $ | 472,130    |        |  | $ | (166,518  | )  |  |  | (35.3 | %)
|Equity securities                              |  |      | 86,035     |   |      |   | 34,826     |        |  |   | 51,209    |    |  |  | 147.0 | % 
|Cash and cash equivalents                      |  |      | 6,571      |   |      |   | 11,460     |        |  |   | (4,889    | )  |  |  | (42.7 | %)
|                                               |  |      |            |   |      |   |            |        |  |   |           |    |  |  |       |   
|Gross investment income                        |  |      | 398,218    |   |      |   | 518,416    |        |  |   | (120,198  | )  |  |  | (23.2 | %)
|Less: Investment expenses                      |  |      | (118,742   | ) |      |   | (78,205    | )      |  |   | 40,537    |    |  |  | 51.8  | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |    |  |  |       |   
|Net investment income                          |  | $    | 279,476    |   |      | $ | 440,211    |        |  | $ | (160,735  | )  |  |  | (36.5 | %)
|                                               |  |      |            |   |      |   |            |        |  |   |           |    |  |  |       |   
|Average invested assets (amortized cost basis) |  | $    | 82,520,561 |   |      | $ | 75,263,075 |        |  | $ | 7,257,486 |    |  |  | 9.6   | % 
|                                               |  |      |            |   |      |   |            |        |  |   |           |    |  |  |       |   
|Rate of return on average invested assets      |  |      | 1.4        | % |      |   | 2.3        | %      |  |   | (0.9      | %) |  |  |       |   
|                                               |  |      |            |   |      |   |            |        |  |   |           |    |  |  |       |   

Gross investment income from the fixed portfolio was lower in the first quarter of 2011 than in
same period in 2010 as a result of realized gains from the sale of securities in 2010. While bond yields remained low through much of 2010, a significant number of appreciated securities were sold and gains were realized from these
transactions. During 2011 investment income is expected to be lower than 2010, because the book yield of the portfolio declined as a result of the sales. As interest rates moved higher over the first quarter of 2011, the portfolio
tax-equivalent book yield increased from 3.01% to 3.05%.

Portfolio duration was 4.68 at March 31, 2011, below the 5.12
duration of the Barclays Aggregate Index. The shorter portfolio duration compared to the Aggregate Index should result in lower price volatility from interest rate movements. The bulk of the portfolio consists of bonds maturing in less
than 10 years. Average credit quality of the portfolio remains at AA. Tax-exempt municipal bonds and taxable corporate bonds make up 30% and 26% of the portfolio, respectively.

The increase in gross income from the equity portfolio is due to the Company increasing its holdings of dividend paying common stocks.
The decline in income from cash and cash equivalents is a result a lower average cash balance during the first quarter of 2010 compared to the same period in the prior year.

The table below summarizes the net realized gains generated during the three month period ended March 31:



|                                       |  |      |         |  |      |   |         |        |  |   |          |   |  |  |       |   
|-------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ------ |  | - | -------- | - |  |  | ----- | --
|                                       |  | 2011 |         |  | 2010 |   |         | Change |  |   | %Change  |  
|Net realized gains - fixed maturities  |  | $    | 13,133  |  |      | $ | 287,481 |        |  | $ | (274,348 | ) |  |  | (95.4 | %)
|Net realized gains - equity securities |  |      | 350,172 |  |      |   | 72,320  |        |  |   | 277,852  |   |  |  | 384.2 | % 
|                                       |  |      |         |  |      |   |         |        |  |   |          |   |  |  |       |   
|Total net realized gains               |  | $    | 363,305 |  |      | $ | 359,801 |        |  | $ | 3,504    |   |  |  | 1.0   | % 
|                                       |  |      |         |  |      |   |         |        |  |   |          |   |  |  |       |   

During the quarter ended March 31, 2011, the Company had sales and maturities of fixed
maturity securities of approximately $3.3 million which generated realized gains of $13,133. In addition, the Company had equity sales of approximately $4.0 million which generated realized gains of $350,172. During the quarter ended March 31,
2010, the Company had sales and maturities of fixed maturity securities of approximately $16.9 million which generated realized gains of $287,481. In addition, the Company had equity sales of approximately $1.6 million which generated realized gains
of $72,320.

Income Tax Expense. During the quarters ended March 31, 2011 and 2010, the Company recorded
income tax expense of approximately $587,000 and $461,000, respectively. The increase is due to higher pre-tax income in the 2011 quarter compared to the prior year quarter. The effective tax rate for the quarter ended March 31, 2011 was 31.6%
compared to 30.9% in the prior year quarter. The increase in the effective tax rate is due to increased income from underwriting during the first quarter 2011 as compared to the prior year quarter.

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 shareholder dividends. 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.



24



---

##### Table of Contents

We maintain investment and reinsurance programs that are 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 $957,000 and 1,156,000 for the three months ended
March 31, 2011 and 2010, respectively, a decrease of $199,000. During the three months ended March 31, 2011 as compared to the same period in 2010, net premiums collected increased $2,345,000, net loss and LAE payments increased
$3,378,000, policy acquisition and other underwriting expenses paid decreased $195,000 and federal income taxes paid decreased $650,000. Other cash provided by operations decreased $11,000 during the three months ended March 31, 2011 compared
to the same period in 2010.

During the three months ended March 31, 2011 and 2010, cash flow used in investing
activities was $763,000 and $1,227,000, respectively. Net cash invested into the investment portfolio was $1,345,000 during the quarter ended March 31, 2011 while capital expenditures were approximately $146,000. We continue to invest in our
technology platform including our web-based rating software, Fremont Complete, as well as our back-end policy administration software.

Cash provided by financing activities was $61,000 and $124,000 for the three months ended March 31, 2011 and 2010, respectively. During the three months ended March 31, 2011, financing
activities consisted of the issuance of common stock which generated $132,000 in proceeds and a cash dividend of $71,000 paid to stockholders.

The Company paid a quarterly cash dividend of $.04 per common share on March 31, 2011 which totaled approximately $71,000. The Boards current intention is evaluate each quarter whether a cash
dividend will be declared. The payment of future dividends will depend upon the availability of cash resources at the Holding Company, the financial condition and results of operations of the Company and such other factors as are deemed relevant by
the Board of Directors.

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

Changes in Interest Rates

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. The following table shows the effects of a change in interest rates 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 |        |  | Changein Value |  
|               |  | (In thousands) |       
|2%             |  | $              | 53,072 |  |                | $ | (5,177 | )
|1%             |  |                | 55,575 |  |                |   | (2,674 | )
|0              |  |                | 58,249 |  |                |   |       |  
|-1%            |  |                | 61,095 |  |                |   | 2,846  |  
|-2%            |  |                | 64,112 |  |                |   | 5,863  |  



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

Not applicable.



|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.



25



---

##### Table of Contents

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.

There have not been any changes in our internal
control over financial reporting, as defined by the Securities and Exchange Commission Rule 13a-15(f), during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

PART IIOTHER INFORMATION



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

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



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

There have
been no material changes to the risk factors previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2010 except as noted below.

The Failure to Complete the Pending Merger of the Company Could have a Materially Adverse Impact.

On April 15, 2011, we entered into a definitive agreement to be acquired by Auto Club Insurance Association (the Merger).
The consummation of the Merger is subject to the terms and conditions of the Agreement and Plan of Merger, including, but not limited to, the approval of the Companys shareholders and certain required regulatory approvals. There can be no
assurance that the Companys shareholders will approve the Merger or that the other conditions to the completion of the Merger will be satisfied. If the Merger is not completed for any reason, the price of the Companys common stock will
likely decline to the extent that the market price of the common stock reflects market assumptions that the Merger will be completed. Additionally, the Company is subject to additional risks in connection with the Merger, including: (1) the
occurrence of an event, change or circumstance that could give rise to the payment of a termination fee to Auto Club Insurance Association pursuant to the terms of the Agreement and Plan of Merger, (2) the outcome of any legal proceedings that
may be instituted against the Company and others relating to the transactions contemplated by the Agreement and Plan of Merger, (3) the failure of the Merger to close for any reason, (4) the restrictions imposed on the Companys
business and operations pursuant to the affirmative and negative covenants set forth in the Agreement and Plan of Merger and the potential impact of such covenants on the Companys business, (5) the risk that the proposed transaction will
divert managements attention resulting in a potential disruption of the Companys current business plan, (6) potential difficulties in employee retention arising from the Merger, (7) the effect of the announcement of the Merger
on the Companys business relationships, operating results and business generally and (8) the amount of fees, expenses and charges incurred by the Company in connection with the Merger.



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

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 he 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, 2011, the Insurance Company can pay a non-extraordinary dividend of up to $3,219,000
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.

On November 25, 2008, the Companys Board of Directors adopted the Agent Stock
Purchase Plan (Plan). The Plan provides for the sale of up to 100,000 shares of the Companys Class A Common Stock over the five year estimated term of the Plan. The Plan was established by the Company to provide incentive to
independent insurance agencies that sell products and services of its subsidiary, Fremont Insurance Company, by enabling them to participate in the Companys long-term growth and success and to help align their success with the interests of the
Companys stockholders.

The Common Stock offered by the Company under this Plan has not been registered with, or
approved, by the United States Securities and Exchange Commission (SEC). The offering of the Common Stock under the Plan is based on an exemption from such registration as set forth in §4(2) of the Securities Act of 1933, as amended
(Act), and Rule 506 of Regulation D issued under the Act. The offering was made only to eligible agencies of the Insurance Company and eligible persons designated by those agencies who are accredited investors as defined
under Regulation D issued under the Act and to not more than 35 eligible persons in any 12 month period who may not be accredited investors, but are sophisticated investors. Resales of the unregistered Class A Common Stock will
require registration or the availability of an exemption to registration such as SEC Rule 144.

The Common Stock has been
offered directly to participants through our officers, and we will not use a broker or a dealer. We have not paid commissions, discounts or any other payments to any person for services in connection with the offer or sale of shares under the Plan.
Participants have not incurred brokerage commissions or service charges. The Company intends to use the proceeds of this offering for general corporate purposes which include making investments in and advances to the Insurance Company, which in turn
will use the proceeds for general corporate purposes.

In conjunction with the Companys announcement on April 18,
2011 that it had agreed to be acquired by Auto Club Insurance Association, the Company terminated the Agent Stock Purchase Plan effective April 15, 2011.



26



---

##### Table of Contents

The following table sets forth the sales of unregistered securities under the Plan during
the quarter ended March 31, 2011:

Recent Sales of Unregistered Securities



|              |  |                      |       |  |               |   |       |                            |  |   |        | 
|------------- |  | -------------------- | ----- |  | ------------- | - | ----- | -------------------------- |  | - | ------ | 
|Date of Sale  |  | Number ofShares Sold |       |  | OfferingPrice |   |       | TotalConsiderationReceived | 
|March 7, 2011 |  |                      | 3,382 |  |               | $ | 24.02 |                            |  | $ | 81,236 | 

The following table
sets forth the repurchases of common stock for the quarter ended March 31, 2011:

Issuer Purchases of Equity Securities



|                              |  |                                |   |  |                             |   |   |                                                                       |  |  |                                                                 |  |  |  |        | 
|----------------------------- |  | ------------------------------ | - |  | --------------------------- | - | - | --------------------------------------------------------------------- |  |  | --------------------------------------------------------------- |  |  |  | ------ | 
|                              |  | Total Numberof SharesPurchased |   |  | Average PricePaid per Share |   |   | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans
(1) |  |  | Maximum Number ofShares that May Yet BePurchased Under
thePlans | 
|Month ended January 31, 2011  |  |                                |   |  |                             |   |   |                                                                       |  |  |                                                                 |  |  |  | 35,886 | 
|Month ended February 28, 2011 |  |                                |  |  |                             | $ |  |                                                                       |  |  |                                                                |  |  |  | 35,886 | 
|Month ended March 31, 2011    |  |                                |  |  |                             | $ |  |                                                                       |  |  |                                                                |  |  |  | 35,886 | 
|Total                         |  |                                |  |  |                             |   |   |                                                                       |  |  |                                                                |  |  |  |        | 

|(1) | On May 8, 2008, the Company announced a share repurchase plan for up to 100,000 shares of common stock.
|--- | -------------------------------------------------------------------------------------------------------



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

None



|ITEM 4. | RESERVED.
|------- | ---------



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

None



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



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



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



27



---

##### Table of Contents

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: May 16, 2011 |  | By:                               |  | /s/ Richard E. Dunning                                                
|                   |  |                                   |  | Richard E. Dunning                                                    
|                   |  |                                   |  | President and Chief Executive Officer                                 
|                   |  |                                  
|Date: May 16, 2011 |  | By:                               |  | /s/ Kevin G. Kaastra                                                  
|                   |  |                                   |  | Kevin G. Kaastra                                                      
|                   |  |                                   |  | Vice President of Finance
(principal financial and accounting officer)



28