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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended March 31, 2005



OR



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



For the transition period from  to



No. 000-50926

(Commission File Number)



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FREMONT MICHIGAN INSURACORP, INC.

(Exact name of Registrant as specified in
its charter)



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



(231) 924-0300

(Registrants telephone number, including area code)



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



Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



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



|                            |  |                                               
|--------------------------- |  | ----------------------------------------------
|                            |  | Number of Shares Outstanding as of May 6, 2005
|COMMON STOCK (No Par Value) |  | 862,128                                       
|(Title of Class)            |  | (Outstanding Shares)                          



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FORWARD-LOOKING STATEMENTS



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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PART IFINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS.



Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Balance Sheets (Unaudited)

March 31, 2005 and December 31, 2004



|                                                                                                       |  |               |            |   |                  |   |           
|------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- | - | ---------------- | - | ----------
|                                                                                                       |  | March 31,2005 |            |   | December 31,2004
|Assets                                                                                                 |  |               |            |   |                  |   |           
|                                                                                                       |  |              
|Investments:                                                                                           |  |               |            |   |                  |   |           
|Fixed maturities available for sale, at fair value                                                     |  | $             | 37,019,861 |   |                  | $ | 37,205,694
|Equity securities available for sale, at fair value                                                    |  |               | 6,862,977  |   |                  |   | 5,071,758 
|                                                                                                       |  |               |            |   |                  |   |           
|Total investments                                                                                      |  |               | 43,882,838 |   |                  |   | 42,277,452
|Cash and cash equivalents                                                                              |  |               | 1,225,381  |   |                  |   | 3,672,254 
|Receivable from sale of investments                                                                    |  |               |           |   |                  |   | 739,150   
|Premiums due from policyholders, net                                                                   |  |               | 6,273,587  |   |                  |   | 6,846,286 
|Amounts due from reinsurers                                                                            |  |               | 9,997,143  |   |                  |   | 10,879,642
|Accrued investment income                                                                              |  |               | 370,857    |   |                  |   | 398,208   
|Property and equipment, net of accumulated depreciation                                                |  |               | 828,683    |   |                  |   | 848,103   
|Deferred policy acquisition costs                                                                      |  |               | 2,543,360  |   |                  |   | 2,860,621 
|Note receivable from related party                                                                     |  |               | 135,292    |   |                  |   | 136,262   
|Other assets                                                                                           |  |               | 2,120      |   |                  |   | 3,136     
|                                                                                                       |  |               |            |   |                  |   |           
|                                                                                                       |  | $             | 65,259,261 |   |                  | $ | 68,661,114
|                                                                                                       |  |               |            |   |                  |   |           
|Liabilities and Stockholders Equity                                                                   |  |               |            |   |                  |   |           
|                                                                                                       |  |              
|Liabilities:                                                                                           |  |               |            |   |                  |   |           
|Losses and loss adjustment expenses                                                                    |  | $             | 19,352,386 |   |                  | $ | 18,972,587
|Unearned premiums                                                                                      |  |               | 17,710,766 |   |                  |   | 19,675,548
|Reinsurance funds withheld and premiums ceded payable                                                  |  |               | 2,561,166  |   |                  |   | 3,018,710 
|Accrued expenses and other liabilities                                                                 |  |               | 5,823,172  |   |                  |   | 6,798,772 
|Surplus notes                                                                                          |  |               | 2,890,288  |   |                  |   | 2,890,288 
|                                                                                                       |  |               |            |   |                  |   |           
|Total liabilities                                                                                      |  |               | 48,337,778 |   |                  |   | 51,355,905
|                                                                                                       |  |               |            |   |                  |   |           
|Commitments and contingencies                                                                          |  |               |            |   |                  |   |           
|                                                                                                       |  |              
|Stockholders Equity                                                                                   |  |               |            |   |                  |   |           
|Preferred stock, no par value, authorized 4,500,000 shares, no shares issued and outstanding           |  |               |           |   |                  |   |          
|Class A common stock, no par value, authorized 5,000,000 shares, 862,128 shares issued and outstanding |  |               |           |   |                  |   |          
|Class B common stock, no par value, authorized 500,000 shares, no shares issued and outstanding        |  |               |           |   |                  |   |          
|Additional paid-in capital                                                                             |  |               | 7,522,413  |   |                  |   | 7,512,913 
|Retained earnings                                                                                      |  |               | 9,686,208  |   |                  |   | 9,213,811 
|Accumulated other comprehensive income:                                                                |  |               |            |   |                  |   |           
|Net unrealized (losses) gains on investments                                                           |  |               | (287,138   | ) |                  |   | 578,485   
|                                                                                                       |  |               |            |   |                  |   |           
|Total stockholders equity                                                                             |  |               | 16,921,483 |   |                  |   | 17,305,209
|                                                                                                       |  |               |            |   |                  |   |           
|Total liabilities and stockholders equity                                                             |  | $             | 65,259,261 |   |                  | $ | 68,661,114
|                                                                                                       |  |               |            |   |                  |   |           



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







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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Operations (Unaudited)

For the Three Months Ended March 31, 2005 and 2004



|                                                   |  |      |           |      |   |           |  
|-------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                                   |  | 2005 |           | 2004 |  
|Revenues:                                          |  |      |           |      |   |           |  
|Net premiums earned                                |  | $    | 9,110,678 |      | $ | 5,087,148 |  
|Net investment income                              |  |      | 374,467   |      |   | 169,129   |  
|Net realized gains (losses) on investments         |  |      | 20,309    |      |   | (8,367    | )
|Other income, net                                  |  |      | 95,255    |      |   | 92,151    |  
|                                                   |  |      |           |      |   |           |  
|Total revenues                                     |  |      | 9,600,709 |      |   | 5,340,061 |  
|                                                   |  |      |           |      |   |           |  
|Expenses:                                          |  |      |           |      |   |           |  
|Losses and loss adjustment expenses, net           |  |      | 5,808,993 |      |   | 3,917,277 |  
|Policy acquisition and other underwriting expenses |  |      | 3,005,163 |      |   | 1,625,343 |  
|Interest expense                                   |  |      | 77,606    |      |   | 140,519   |  
|Demutualization expenses                           |  |      |          |      |   | 18,625    |  
|                                                   |  |      |           |      |   |           |  
|Total expenses                                     |  |      | 8,891,762 |      |   | 5,701,764 |  
|                                                   |  |      |           |      |   |           |  
|Income (loss) before federal income tax expense    |  |      | 708,947   |      |   | (361,703  | )
|Federal income tax expense                         |  |      | 236,550   |      |   |          |  
|                                                   |  |      |           |      |   |           |  
|Net income (loss)                                  |  | $    | 472,397   |      | $ | (361,703  | )
|                                                   |  |      |           |      |   |           |  
|Net income per common share                        |  |      |           |      |   |           |  
|Basic                                              |  | $    | .55       |      |   |           |  
|Diluted                                            |  | $    | .55       |      |   |           |  



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







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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statement of Stockholders Equity (Unaudited)

For the Three Months Ended March 31, 2005



|                                                   |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   |          |   |  |   |            |  
|-------------------------------------------------- |  | --------------- | ------- | ------------ | ------- | ------------------------- |  | ---------------- | --------- | --------------------------------------------- | - | --------- | ----- | - | -------- | - |  | - | ---------- | -
|                                                   |  | Preferred Stock |         | Common Stock |         | Additional Paid-inCapital |  | RetainedEarnings |           | Accumulated Other Comprehensive Income (Loss) |   |           | Total |  
|                                                   |  |                 | Class A |              | Class B |                           |  |                  |          
|Balance, December 31, 2004                         |  | $              |         | $           |         | $                        |  | $                | 7,512,913 |                                               | $ | 9,213,811 |       | $ | 578,485  |   |  | $ | 17,305,209 |  
|Comprehensive income:                              |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   |          |   |  |   |            |  
|Net income                                         |  |                 |         |              |         |                           |  |                  |           |                                               |   | 472,397   |       |   |          |   |  |   | 472,397    |  
|Net unrealized losses on investments, net of taxes |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   | (865,623 | ) |  |   | (865,623   | )
|                                                   |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   |          |   |  |   |            |  
|Total comprehensive income                         |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   |          |   |  |   | (393,226   | )
|Issuance of stock options                          |  |                 |         |              |         |                           |  |                  | 9,500     |                                               |   |           |       |   |          |   |  |   | 9,500      |  
|                                                   |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   |          |   |  |   |            |  
|Balance, March 31, 2005                            |  | $              |         | $           |         | $                        |  | $                | 7,522,413 |                                               | $ | 9,686,208 |       | $ | (287,138 | ) |  | $ | 16,921,483 |  
|                                                   |  |                 |         |              |         |                           |  |                  |           |                                               |   |           |       |   |          |   |  |   |            |  



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







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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31, 2005 and 2004



|                                                                                     |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                     |  | 2005 |            |   | 2004 |  
|Cash flows from operating activities:                                                |  |      |            |   |      |   |            |  
|Net income (loss)                                                                    |  | $    | 472,397    |   |      | $ | (361,703   | )
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |      |            |   |      |   |            |  
|Depreciation                                                                         |  |      | 39,305     |   |      |   | 39,305     |  
|Stock based compensation expense                                                     |  |      | 9,500      |   |      |   |           |  
|Net realized (gains) losses on investments                                           |  |      | (20,309    | ) |      |   | 8,367      |  
|Net amortization of premiums on investments                                          |  |      | 58,813     |   |      |   | 50,466     |  
|Changes in assets and liabilities:                                                   |  |      |            |   |      |   |            |  
|Premiums due from policyholders                                                      |  |      | 572,699    |   |      |   | 632,762    |  
|Amounts due from reinsurers                                                          |  |      | 882,499    |   |      |   | 1,993,750  |  
|Accrued investment income                                                            |  |      | 27,351     |   |      |   | 21,210     |  
|Deferred policy acquisition costs                                                    |  |      | 317,261    |   |      |   | (841,848   | )
|Deferred equity offering expenses                                                    |  |      |           |   |      |   | (97,984    | )
|Other assets                                                                         |  |      | 1,016      |   |      |   | (812       | )
|Losses and loss adjustment expenses                                                  |  |      | 379,799    |   |      |   | 3,270,402  |  
|Unearned premiums                                                                    |  |      | (1,964,782 | ) |      |   | (1,951,370 | )
|Reinsurance funds withheld and premiums ceded payable                                |  |      | (457,544   | ) |      |   | (1,622,829 | )
|Accrued expenses and other liabilities                                               |  |      | (975,600   | ) |      |   | (1,168,015 | )
|                                                                                     |  |      |            |   |      |   |            |  
|Net cash used in operating activities                                                |  |      | (657,595   | ) |      |   | (28,299    | )
|                                                                                     |  |      |            |   |      |   |            |  
|Cash flows from investing activities:                                                |  |      |            |   |      |   |            |  
|Proceeds from sales and maturities of fixed maturity investments                     |  |      | 3,433,168  |   |      |   | 3,371,570  |  
|Proceeds from sales of equity investments                                            |  |      | 838,970    |   |      |   | 96,605     |  
|Purchases of fixed maturity investments                                              |  |      | (4,011,987 | ) |      |   | (6,044,777 | )
|Purchases of equity investments                                                      |  |      | (2,769,664 | ) |      |   | (2,531,857 | )
|Decrease in receivable from investments                                              |  |      | 739,150    |   |      |   |           |  
|Repayment of note receivable from related party                                      |  |      | 970        |   |      |   | 914        |  
|Purchase of equipment, net                                                           |  |      | (19,885    | ) |      |   | (59,585    | )
|                                                                                     |  |      |            |   |      |   |            |  
|Net cash used in investing activities                                                |  |      | (1,789,278 | ) |      |   | (5,167,130 | )
|                                                                                     |  |      |            |   |      |   |            |  
|Cash flows from financing activities:                                                |  |      |           |   |      |   |           |  
|                                                                                     |  |      |            |   |      |   |            |  
|Net decrease in cash and cash equivalents                                            |  |      | (2,446,873 | ) |      |   | (5,195,429 | )
|Cash and cash equivalents, beginning of period                                       |  |      | 3,672,254  |   |      |   | 6,977,804  |  
|                                                                                     |  |      |            |   |      |   |            |  
|Cash and cash equivalents, end of period                                             |  | $    | 1,225,381  |   |      | $ | 1,782,375  |  
|                                                                                     |  |      |            |   |      |   |            |  



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







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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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



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



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



The accompanying unaudited consolidated financial statements for the interim periods included herein are unaudited; however, such information reflects all adjustments (consisting of normal recurring adjustments) which
are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations, and cash flows for the interim periods. The results of operations for interim periods are not necessarily indicative of results to
be expected for the full year. The accompanying unaudited consolidated financial statements should be read with the annual consolidated financial statements and notes contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2004.



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



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



Conversion and Demutualization



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



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



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





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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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



The Companys comprehensive (loss) income for the three months ended March 31, 2005 and 2004 is as follows:



|                                                                                                                      |  |      |          |   |      |   |          |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                                                      |  | 2005 |          |   | 2004 |  
|Net income (loss)                                                                                                     |  | $    | 472,397  |   |      | $ | (361,703 | )
|Other comprehensive income:                                                                                           |  |      |          |   |      |   |          |  
|Unrealized (loss) gain on investments arising during the period                                                       |  |      | (845,314 | ) |      |   | 552,917  |  
|Deferred income tax benefit (expense) of unrealized (loss) gain on investments arising during the period              |  |      | 287,407  |   |      |   | (187,992 | )
|Change in deferred tax valuation allowance                                                                            |  |      | (287,407 | ) |      |   | 187,992  |  
|                                                                                                                      |  |      |          |   |      |   |          |  
|Unrealized (loss) gain on investments arising during the period, net of deferred income taxes and valuation allowance |  |      | (845,314 | ) |      |   | 552,917  |  
|Adjustment for pretax realized (gains) losses on investments included in net income (loss)                            |  |      | (20,309  | ) |      |   | 8,367    |  
|Deferred income tax expense (benefit) of realized gains included in net income (loss)                                 |  |      | 6,905    |   |      |   | (2,845   | )
|Change in deferred tax valuation allowance                                                                            |  |      | (6,905   | ) |      |   | 2,845    |  
|                                                                                                                      |  |      |          |   |      |   |          |  
|                                                                                                                      |  |      | (865,623 | ) |      |   | 561,284  |  
|                                                                                                                      |  |      |          |   |      |   |          |  
|Comprehensive income                                                                                                  |  | $    | (393,226 | ) |      | $ | 199,581  |  
|                                                                                                                      |  |      |          |   |      |   |          |  



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



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



|                                                                                            |  |      |         |      |  
|------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | -
|                                                                                            |  | 2005 |         | 2004
|Numerator for basic and diluted net income per share:                                       |  |      |         |      |  
|Net income                                                                                  |  | $    | 472,397 |      | 
|                                                                                            |  |      |         |      |  
|Denominator:                                                                                |  |      |         |      |  
|Denominator for basic net income per share  weighted average shares outstanding            |  |      | 862,128 |      | 
|Effect of dilutive stock options                                                            |  |      |        |      | 
|                                                                                            |  |      |         |      |  
|Denominator for diluted net income per share  adjusted weighted average shares outstanding |  |      | 862,128 |      | 
|                                                                                            |  |      |         |      |  
|Basic net income per share                                                                  |  | $    | 0.55    |      | 
|Diluted net income per share                                                                |  | $    | 0.55    |      | 



Options to purchase
39,500 shares of common stock were not included in the computation of diluted net income per share because to do so would have been anti-dilutive for the period presented.



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



The Company defines its operations as property and casualty insurance operations. The Company writes four major insurance lines exclusively in the State
of Michigan: Personal Lines, Commercial Lines, Farm and Marine. All revenues are generated from external customers and the Company does not have a significant reliance on any single major customer.







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Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



The Company evaluates product line profitability based on underwriting gain (loss). Certain expenses are allocated based on assumptions and estimates made
by management. Underwriting gain (loss) by product line would change if different methods were applied.



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



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



|                                                         |  |      |           |   |      |   |           |  
|-------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                         |  | 2005 |           |   | 2004 |  
|Revenues:                                                |  |      |           |   |      |   |           |  
|Net premiums earned:                                     |  |      |           |   |      |   |           |  
|Personal lines                                           |  | $    | 5,821,994 |   |      | $ | 3,054,208 |  
|Commercial lines                                         |  |      | 1,929,594 |   |      |   | 1,325,162 |  
|Farm                                                     |  |      | 1,007,827 |   |      |   | 541,989   |  
|Marine                                                   |  |      | 351,263   |   |      |   | 165,789   |  
|                                                         |  |      |           |   |      |   |           |  
|Total net premiums earned                                |  |      | 9,110,678 |   |      |   | 5,087,148 |  
|                                                         |  |      |           |   |      |   |           |  
|Expenses:                                                |  |      |           |   |      |   |           |  
|Loss and loss adjustment expenses:                       |  |      |           |   |      |   |           |  
|Personal lines                                           |  |      | 3,792,771 |   |      |   | 2,421,244 |  
|Commercial lines                                         |  |      | 1,371,811 |   |      |   | 1,321,386 |  
|Farm                                                     |  |      | 419,415   |   |      |   | 212,634   |  
|Marine                                                   |  |      | 224,996   |   |      |   | (37,988   | )
|                                                         |  |      |           |   |      |   |           |  
|Total loss and loss adjustment expenses                  |  |      | 5,808,993 |   |      |   | 3,917,276 |  
|                                                         |  |      |           |   |      |   |           |  
|Policy acquisition and other underwriting expenses:      |  |      |           |   |      |   |           |  
|Personal lines                                           |  |      | 1,920,227 |   |      |   | 975,798   |  
|Commercial lines                                         |  |      | 636,770   |   |      |   | 423,360   |  
|Farm                                                     |  |      | 332,864   |   |      |   | 173,372   |  
|Marine                                                   |  |      | 115,302   |   |      |   | 52,814    |  
|                                                         |  |      |           |   |      |   |           |  
|Total policy acquisition and other underwriting expenses |  |      | 3,005,163 |   |      |   | 1,625,344 |  
|                                                         |  |      |           |   |      |   |           |  
|Underwriting gain (loss):                                |  |      |           |   |      |   |           |  
|Personal lines                                           |  |      | 108,996   |   |      |   | (342,834  | )
|Commercial lines                                         |  |      | (78,987   | ) |      |   | (419,584  | )
|Farm                                                     |  |      | 255,548   |   |      |   | 155,983   |  
|Marine                                                   |  |      | 10,965    |   |      |   | 150,963   |  
|                                                         |  |      |           |   |      |   |           |  
|Total underwriting gain (loss)                           |  |      | 296,522   |   |      |   | (455,472  | )
|Net investment income                                    |  |      | 374,467   |   |      |   | 169,129   |  
|Net realized gains (losses) on investments               |  |      | 20,309    |   |      |   | (8,367    | )
|Other income (expense)                                   |  |      | 95,255    |   |      |   | 92,151    |  
|Interest expense                                         |  |      | (77,606   | ) |      |   | (140,519  | )
|Demutualization expenses                                 |  |      |          |   |      |   | (18,625   | )
|                                                         |  |      |           |   |      |   |           |  
|Income (loss) before federal income taxes                |  | $    | 708,947   |   |      | $ | (361,703  | )
|                                                         |  |      |           |   |      |   |           |  



---

Fremont Michigan InsuraCorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



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



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



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



As this plan is not
pre-funded, no contributions other than those necessary to cover benefit payments are anticipated. For the three months ended March 31, 2005 the Company has made contributions to the plan of approximately $18,000. During 2005 the Company expects to
contribute a total of $51,000 to the plan to cover anticipated benefit payments.



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



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



Premiums earned are net of amounts ceded of $1,688,524 and $4,492,018 for the three months ended March 31, 2005 and 2004, respectively. Loss and loss
adjustment expenses are net of amounts ceded of $717,311 and $3,385,147 for the three months ended March 31, 2005 and 2004, respectively.





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



The Conversion Transaction and The Holding Company



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



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



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



The Holding Company is subject to regulation by the Michigan Office of Financial and Insurance Services (OFIS) as its primary regulator
because it is the holding company for Fremont Insurance Company.



Overview
of Business



The Insurance Company is a Michigan licensed
property and casualty insurer operating exclusively in the State of Michigan and writing principally personal lines, commercial lines, farm and marine insurance policies through independent agents. We were founded in 1876 and have served Michigan
policyholders for over 128 years. We market policies through approximately 170 independent insurance agencies. We have four business segments: personal, commercial, farm and marine. As of March 31, 2005, we had approximately 49,900 policies in force
and assets of $65.3 million.



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



General



We use accounting principles that are in compliance with those generally accepted in the United States of America (GAAP).
Managements discussion and analysis covers the Companys financial condition and results of operations for the three months ended March 31, 2005 and 2004. The Companys fiscal year ends on December 31.



Critical Accounting Policies



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



The policies relating to liabilities for loss and loss adjustment expenses, investments, policy acquisition costs, reinsurance and income taxes are those
we believe to be most sensitive to estimates and judgments. These policies are more fully described below. There have been no material changes to these policies during the most recent quarter.



Liabilities for Loss and Loss Adjustment Expenses (LAE). These
liabilities are estimates of the ultimate unpaid cost of all losses incurred, including losses for claims that have not yet been reported to the Insurance Company. The amount of the reserve for reported claims is based primarily on a case-by-case
evaluation of the type of risk involved, knowledge of the circumstances surrounding each occurrence, and the insurance policy provisions relating to the type of loss. The amounts of loss reserves for incurred but unreported (IBNR) claims
and loss adjustment expense are calculated by using historical and actuarial information by line of business as adjusted to current conditions. Inflation is implicitly provided for in the reserving function through analysis of costs, trends and
comparisons of historical reserving results to the ultimate results. Reserves are closely monitored and are recomputed periodically





---

using the most recent information on reported claims and a variety of statistical techniques. Reserves are estimates. We
expect that these estimates will be more or less than the amounts ultimately paid when the claim is settled. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the current financial statements.



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



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



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



|                |  |               |        |                  |   |       
|--------------- |  | ------------- | ------ | ---------------- | - | ------
|                |  | March 31,2005 |        | December 31,2004
|Reported losses |  |               |        |                  |   |       
|Personal        |  | $             | 5,538  |                  | $ | 5,182 
|Commercial      |  |               | 3,985  |                  |   | 4,444 
|Farm            |  |               | 972    |                  |   | 1,019 
|Marine          |  |               | 369    |                  |   | 276   
|                |  |               |        |                  |   |       
|                |  |               | 10,864 |                  |   | 10,921
|                |  |               |        |                  |   |       
|IBNR losses     |  |               |        |                  |   |       
|Personal        |  |               | 4,613  |                  |   | 4,577 
|Commercial      |  |               | 2,910  |                  |   | 2,510 
|Farm            |  |               | 753    |                  |   | 753   
|Marine          |  |               | 212    |                  |   | 212   
|                |  |               |        |                  |   |       
|                |  |               | 8,488  |                  |   | 8,052 
|                |  |               |        |                  |   |       
|Total           |  |               |        |                  |   |       
|Personal        |  |               | 10,151 |                  |   | 9,759 
|Commercial      |  |               | 6,895  |                  |   | 6,954 
|Farm            |  |               | 1,725  |                  |   | 1,772 
|Marine          |  |               | 581    |                  |   | 488   
|                |  |               |        |                  |   |       
|                |  | $             | 19,352 |                  | $ | 18,973
|                |  |               |        |                  |   |       



The reserves are
reported gross of any amounts recoverable from reinsurers and are reduced for anticipated salvage and subrogation. Anticipated salvage and subrogation as of March 31, 2005 and December 31, 2004, was approximately $527,000 and $473,000, respectively.



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



Other Than Temporary Impairments of Securities and Unrealized Losses on Investments. We review the status and market value changes of our investments on at least a quarterly basis during the year, and any provisions for other
than temporary impairments in the portfolios value are evaluated and established at each quarterly balance sheet date. In reviewing investments for other than temporary impairment, we consider, in addition to a securitys market price
history, the issuers operating results, financial condition and liquidity, its ability to access capital markets, credit rating trends, most current audit opinion, industry and securities markets conditions, analyst expectations, and our
intent and ability to retain fixed maturity securities for a period of time sufficient to allow for anticipated recovery in market value, in their totality to reach our conclusions.



Additionally, our impairment evaluation and recognition for interests in mortgage-backed/asset-backed securities is
conducted in accordance with the guidance provided by the Emerging Issues Task Force of the Financial Accounting Standards Board. Under





---

this guidance, impairment losses on investments must be recognized if the fair value of the investment is less than both
its book value and the net present value of expected future cash flows at the most recent (prior) estimation date. If these criteria are met, an impairment charge, calculated as the difference between the current book value of the investment and its
fair value, is included in earnings as a realized loss in the period the impairment arose. As a result of this evaluation process, there were no impairment losses recorded in mortgage-backed/asset-backed securities during the three months ended
March 31, 2005 and 2004.



During the three months ended March
31, 2005 the Company recognized approximately $99,000 in realized losses due to two equity investments that the Company deemed to be other than temporarily impaired. During the three months ended March 31, 2004 there were no investments that the
Insurance Company determined to be other than temporarily impaired. At March 31, 2005 and December 31, 2004 gross unrealized losses on available for sale investments, which were not impaired, was approximately $768,000 and $239,000, respectively.
Management views the unrealized losses as being temporary.



Policy Acquisition Costs. We defer certain policy acquisition costs, which vary with, and are directly related to, the production of business. In our case, these deferred costs consist primarily of agent commissions
incurred net of ceding commissions earned. These costs are amortized over the effective period of the related insurance policies. The method followed in computing deferred policy acquisition costs limits the amount of deferred costs to their
estimated realizable value, which gives effect to the premium earned, related investment income, loss and loss adjustment expense and certain other costs expected to be incurred as the premium is earned. Future changes in estimates, the most
significant of which is expected to be loss and loss adjustment expense, may require accelerated amortization of deferred policy acquisition costs. Deferred policy acquisition costs at March 31, 2005 and December 31, 2004 were approximately
$2,543,000 and $2,861,000, respectively.



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



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



|                            |  |               |           |                  |   |           
|--------------------------- |  | ------------- | --------- | ---------------- | - | ----------
|                            |  | March 31,2005 |           | December 31,2004
|Paid losses and LAE         |  | $             | 1,262,706 |                  | $ | 1,486,039 
|Unpaid losses and LAE       |  |               | 8,535,958 |                  |   | 9,186,686 
|Unearned premium            |  |               | 198,479   |                  |   | 206,917   
|                            |  |               |           |                  |   |           
|Amounts due from reinsurers |  | $             | 9,997,143 |                  | $ | 10,879,642
|                            |  |               |           |                  |   |           



The effect of
reinsurance on premiums written and earned for the three months ended March 31, 2005 and 2004, are as follows:



|             |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  
|------------ |  | ------- | ---------- | - | ------ | - | ---------- | ------- |  | - | ---------- | - |  | - | ---------- | -
|             |  | 2005    |            |   | 2004   |  
|             |  | Written |            |   | Earned |   |            | Written |  |   | Earned     |  
|Direct       |  | $       | 8,809,158  |   |        | $ | 10,765,913 |         |  | $ | 7,868,574  |   |  | $ | 9,808,779  |  
|Assumed      |  |         | 25,262     |   |        |   | 33,289     |         |  |   | 36,806     |   |  |   | 47,971     |  
|Ceded        |  |         | (1,680,086 | ) |        |   | (1,688,524 | )       |  |   | (1,003,853 | ) |  |   | (4,769,602 | )
|             |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  
|Net premiums |  | $       | 7,154,334  |   |        | $ | 9,110,678  |         |  | $ | 6,901,527  |   |  | $ | 5,087,148  |  
|             |  |         |            |   |        |   |            |         |  |   |            |   |  |   |            |  



Income
Taxes. Deferred federal income tax assets and liabilities are recognized for the expected future tax consequences attributable to the differences between financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets primarily relate to deductible temporary differences for unpaid losses and loss adjustment expenses and unearned premiums, as well as net operating loss and minimum tax credit carry forwards. We review our
net deferred federal tax asset on a regular basis for recoverability based on the availability of future taxable income in the years when the deductible temporary differences are expected to reverse. As a result of this review, we continue to carry
a 100% valuation allowance at March 31, 2005, which reduces the Insurance Companys net deferred tax asset to zero.





---

Results of Operations  Three Months Ended March 31, 2005 and 2004



Premiums. Direct written premium by major business segment for
the three months ended March 31 was as follows:



|                             |  |      |           |      |   |           |  |      |                   |  |       |  
|---------------------------- |  | ---- | --------- | ---- | - | --------- |  | ---- | ----------------- |  | ----- | -
|                             |  | 2005 |           | 2004 |   | %Change   |  |      | 2005 %of Business | 
|Personal                     |  | $    | 5,560,750 |      | $ | 4,580,961 |  | 21.4 | %                 |  | 63.1  | %
|Commercial                   |  |      | 1,998,279 |      |   | 2,145,082 |  | -6.8 | %                 |  | 22.7  | %
|Farm                         |  |      | 997,261   |      |   | 920,627   |  | 8.3  | %                 |  | 11.3  | %
|Marine                       |  |      | 252,868   |      |   | 221,904   |  | 14.0 | %                 |  | 2.9   | %
|                             |  |      |           |      |   |           |  |      |                   |  |       |  
|Total direct written premium |  | $    | 8,809,158 |      | $ | 7,868,574 |  | 12.0 | %                 |  | 100.0 | %
|                             |  |      |           |      |   |           |  |      |                   |  |       |  



The increase in direct
written premium for the personal segment was primarily driven by the private passenger auto and homeowner product lines. New premium volume for the private passenger auto and homeowner product lines increased 33.9% and 7.6%, respectively, while the
in-force policy count increased 33.7% and 5.0%, respectively. The decrease in the commercial segments direct written premium reflects the Insurance Companys underwriting actions taken in 2004 to non-renew larger commercial exposures
deemed outside our target market, the continuing soft commercial market conditions and the run-off of a cancelled agents book of business that included some larger commercial accounts. New premium volume for the commercial segment was up
40.2%; however, this was offset by a decrease of 4.4% in the in-force policy count and a 13.5% decrease in renewal premiums due to items previously mentioned. The increase in direct written premium for the farm segment is a result of an in-force
policy count increase of 2.1% in the country estate and farmowner product lines, coupled with prior year rate increases of 6.3%. Direct written premium for the marine segment increased as a result of an increase in the in-force policy count.



Net written premium by major business segment for the three
months ended March 31 was as follows:



|                          |  |      |           |      |   |           |  |       |                   |  |       |  
|------------------------- |  | ---- | --------- | ---- | - | --------- |  | ----- | ----------------- |  | ----- | -
|                          |  | 2005 |           | 2004 |   | %Change   |  |       | 2005 %of Business | 
|Personal                  |  | $    | 4,419,274 |      | $ | 3,933,682 |  | 12.3  | %                 |  | 61.8  | %
|Commercial                |  |      | 1,662,092 |      |   | 1,946,510 |  | -14.6 | %                 |  | 23.2  | %
|Farm                      |  |      | 853,265   |      |   | 820,248   |  | 4.0   | %                 |  | 11.9  | %
|Marine                    |  |      | 219,703   |      |   | 201,087   |  | 9.3   | %                 |  | 3.1   | %
|                          |  |      |           |      |   |           |  |       |                   |  |       |  
|Total net written premium |  | $    | 7,154,334 |      | $ | 6,901,527 |  | 3.7   | %                 |  | 100.0 | %
|                          |  |      |           |      |   |           |  |       |                   |  |       |  



Net written premium
increased approximately $941,000 due to the overall increase in direct written premium offset by growth in ceded written premium under the Insurance Companys reinsurance agreements of approximately $688,000.



Net premium earned by major business segment for the three months ended March
31 was as follows:



|                         |  |      |           |      |   |           |  |       |                   |  |       |  
|------------------------ |  | ---- | --------- | ---- | - | --------- |  | ----- | ----------------- |  | ----- | -
|                         |  | 2005 |           | 2004 |   | %Change   |  |       | 2005 %of Business | 
|Personal                 |  | $    | 5,821,994 |      | $ | 3,054,208 |  | 90.6  | %                 |  | 63.9  | %
|Commercial               |  |      | 1,929,594 |      |   | 1,325,162 |  | 45.6  | %                 |  | 21.2  | %
|Farm                     |  |      | 1,007,827 |      |   | 541,989   |  | 85.9  | %                 |  | 11.1  | %
|Marine                   |  |      | 351,263   |      |   | 165,789   |  | 111.9 | %                 |  | 3.9   | %
|                         |  |      |           |      |   |           |  |       |                   |  |       |  
|Total net premium earned |  | $    | 9,110,678 |      | $ | 5,087,148 |  | 79.1  | %                 |  | 100.0 | %
|                         |  |      |           |      |   |           |  |       |                   |  |       |  



Net premium earned
increased $957,000 as a result of overall volume growth coupled with an increase of $3,507,000 due to the decline in earned premium ceded to the reinsurer under the quota share reinsurance contract which was placed into runoff on January 1, 2004.
The increase was offset by higher ceded premium earned of $441,000 under the Insurance Companys excess of loss and catastrophe reinsurance agreements.





---

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



|                                               |  |      |            |   |      |   |            |          |  |       |  
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -------- |  | ----- | -
|                                               |  | 2005 |            |   | 2004 |   |            | % Change | 
|Gross investment income                        |  | $    | 479,863    |   |      | $ | 340,019    |          |  | 41.1  | %
|Less: Investment expenses                      |  |      | (105,396   | ) |      |   | (170,891   | )        |  | -38.3 | %
|                                               |  |      |            |   |      |   |            |          |  |       |  
|Net investment income                          |  | $    | 374,467    |   |      | $ | 169,128    |          |  | 121.4 | %
|                                               |  |      |            |   |      |   |            |          |  |       |  
|Average invested assets (amortized cost basis) |  | $    | 45,596,389 |   |      | $ | 34,090,470 |          |  | 33.8  | %
|                                               |  |      |            |   |      |   |            |          |  |       |  
|Rate of return on average invested assets      |  |      | 3.3        | % |      |   | 2.0        | %        |  |       |  
|                                               |  |      |            |   |      |   |            |          |  |       |  



Gross investment
income increased during the three months ended March 31, 2005 as a result of a higher invested asset balance coupled with an increase in pretax yields. Investment expenses decreased due to lower internal costs related to the management of the fixed
maturity portfolio as a result of increased utilization of the Companys outside investment management consultant. Furthermore, during the three months ended March 31, 2004 the Company incurred approximately $31,000 related to a letter of
credit associated with the quota share reinsurance agreement. These fees were not incurred during the same period in 2005. The average invested asset balance (amortized cost basis), including cash and cash equivalents, increased $5.1 million as a
result of the net cash proceeds received in October 2004 from the Companys stock offering coupled with approximately $6.9 million of cash provided by operations subsequent to March 31, 2004.



Loss and Loss Adjustment Expenses (LAE). The Insurance
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:



|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -------- |  | - | --------- | - |  | ----- | -
|                                |  | 2005 |           |   | 2004 |   |           | $ Change |  |   | % Change  |  
|Loss and LAE:                   |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Personal                        |  | $    | 3,792,771 |   |      | $ | 2,421,244 |          |  | $ | 1,371,527 |   |  | 56.6  | %
|Commercial                      |  |      | 1,371,811 |   |      |   | 1,321,386 |          |  |   | 50,425    |   |  | 3.8   | %
|Farm                            |  |      | 419,415   |   |      |   | 212,634   |          |  |   | 206,781   |   |  | 97.2  | %
|Marine                          |  |      | 224,996   |   |      |   | (37,988   | )        |  |   | 262,984   |   |  | 692.3 | %
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|                                |  | $    | 5,808,993 |   |      | $ | 3,917,276 |          |  | $ | 1,891,717 |   |  | 48.3  | %
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Incurred Claim Count:           |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Personal                        |  |      | 1,177     |   |      |   | 1,082     |          |  |   | 95        |   |  | 8.8   | %
|Commercial                      |  |      | 176       |   |      |   | 220       |          |  |   | (44       | ) |  | -20.0 | %
|Farm                            |  |      | 74        |   |      |   | 98        |          |  |   | (24       | ) |  | -24.5 | %
|Marine                          |  |      | 19        |   |      |   | 28        |          |  |   | (9        | ) |  | 32.1  | %
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|                                |  |      | 1,446     |   |      |   | 1,428     |          |  |   | 18        |   |  | 1.3   | %
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Average Loss and LAE per Claim: |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Personal                        |  | $    | 3,222     |   |      | $ | 2,238     |          |  | $ | 985       |   |  | 44.0  | %
|Commercial                      |  |      | 7,794     |   |      |   | 6,006     |          |  |   | 1,788     |   |  | 29.8  | %
|Farm                            |  |      | 5,668     |   |      |   | 2,170     |          |  |   | 3,498     |   |  | 161.2 | %
|Marine                          |  |      | 11,842    |   |      |   | (1,357    | )        |  |   | 13,199    |   |  | 972.8 | %
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|                                |  | $    | 4,017     |   |      | $ | 2,743     |          |  | $ | 1,274     |   |  | 46.4  | %
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Loss and LAE Ratio:             |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|Personal                        |  |      | 65.1      | % |      |   | 79.3      | %        |  |   |           |   |  |       |  
|Commercial                      |  |      | 71.1      | % |      |   | 99.7      | %        |  |   |           |   |  |       |  
|Farm                            |  |      | 41.6      | % |      |   | 39.2      | %        |  |   |           |   |  |       |  
|Marine                          |  |      | 64.1      | % |      |   | -22.9     | %        |  |   |           |   |  |       |  
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  
|                                |  |      | 63.8      | % |      |   | 77.0      | %        |  |   |           |   |  |       |  
|                                |  |      |           |   |      |   |           |          |  |   |           |   |  |       |  





---

The increase in loss and LAE of $1,892,000 is due primarily to the impact of the runoff of the quota
share reinsurance agreement, an increase in the 2005 excess of loss reinsurance retention level and an increase in claim severity. During the three months ended March 31, 2004 the Company ceded approximately $1,049,000 of incurred loss and LAE to
the quota share reinsurer while there was no loss and LAE ceded during the same period in 2005. As a result of increasing the excess of loss retention from $125,000 in 2004 to $150,000 in 2005, net loss and LAE increased approximately $255,000
during the three months ended March 31, 2005.



Despite the
increase in loss and LAE, the Companys loss and LAE ratio decreased to 63.8% during the three months ended March 31, 2005 compared to 77.0% for the same period in 2004 as a result of the quota share runoff. As noted above the Companys
net earned premium increased $3,507,000 due to the decline in earned premium ceded under the quota share agreement. While at the same time loss and LAE increased only $1,049,000 due to the decline in ceded loss and LAE under the quota share
agreement. On a comparative basis if the Company had not ceded the aforementioned earned premium and loss and LAE under the quota share agreement for the quarter ended March 31, 2004 the Companys loss and LAE ratio for that period would have
been 57.8%. The loss and LAE ratio, excluding the quota share impact for the quarter ended March 31, 2004 of 57.8% increased to 63.8% for the quarter ended March 31, 2005 as a result of the increased excess of loss retention level and increased
claim severity. For the personal and commercial segments the decline in the loss ratio is due to higher net earned premiums; however, the decline was somewhat offset by an increase in loss and LAE as a result of increased claim severity. The change
in the loss and LAE ratio for the marine segment, the Companys smallest and therefore most volatile segment in terms of its loss ratio, is due primarily to the fact that the Company had net recoverable losses and LAE during the three months
ended March 31, 2004 due to salvage and subrogation recoveries.



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



|                                                         |  |      |           |   |      |   |           |          |  |       |  
|-------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -------- |  | ----- | -
|                                                         |  | 2005 |           |   | 2004 |   |           | % Change | 
|Amortization of deferred policy acquisition costs        |  | $    | 1,497,797 |   |      | $ | 259,098   |          |  | 478.1 | %
|Other underwriting expenses                              |  |      | 1,507,366 |   |      |   | 1,366,245 |          |  | 10.3  | %
|                                                         |  |      |           |   |      |   |           |          |  |       |  
|Total policy acquisition and other underwriting expenses |  | $    | 3,005,163 |   |      | $ | 1,625,343 |          |  | 84.9  | %
|                                                         |  |      |           |   |      |   |           |          |  |       |  
|Net earned premium                                       |  | $    | 9,110,678 |   |      | $ | 5,087,148 |          |  | 79.1  | %
|                                                         |  |      |           |   |      |   |           |          |  |       |  
|Expense ratio                                            |  |      | 33.0      | % |      |   | 31.9      | %        |  |       |  
|                                                         |  |      |           |   |      |   |           |          |  |       |  



Amortization of
deferred policy acquisition costs increased during the period in 2005 as compared to the same period in 2004 as a result of the reduction in the quota share reinsurance ceding commission income component of deferred policy acquisition costs. The
increase in other underwriting expenses is driven primarily by increased premium volume. Other underwriting expenses remained relatively flat despite the significant increase in net earned premiums because they are not significantly affected by the
impact of the quota share runoff on net earned premiums The expense ratio, defined as the ratio of policy acquisition and other underwriting expenses to net earned premium, increased due to the increase in amortization of deferred policy acquisition
costs.



Interest Expense. Interest expense
decreased from $141,000 to $78,000 for the three month period ended March 31, 2004 and 2005, respectively. The decrease is due to the decline in the outstanding balance of surplus notes during the two periods as well as the decline in the quota
share funds withheld account balance. The quota share reinsurance contract was structured on a funds withheld basis and requires the Insurance Company to accrue interest at an annual rate of 2.5%.



Income Tax Expense. During the three months ended March 31,
2005 the Company has recorded income tax expense of approximately $237,000 resulting in an effective tax rate of 33.4%. The difference between the effective tax rate and the statutory tax rate of 34% is due to non-taxable investment income and
non-deductible expenses. No income tax provision was recorded during the quarter ended March 31, 2004 due to the loss generated by the Company for the quarter and the fact that management has recorded a 100% valuation allowance against the
Companys net deferred tax asset.



Liquidity and Capital Resources



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





---

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



Cash flow used in operations was $658,000 and $28,000
for the three months ended March 31, 2005 and 2004, respectively, an increase of $630,000. During the three months ended March 31, 2005 as compared to the same period in 2004 net premiums collected increased $76,000, net loss and LAE payments
increased $2,143,000 while policy acquisition and other underwriting expenses paid increased $296,000. During the three months ended March 31, 2005, net cash used under the quota share funds withheld account was $207,000 while during the same period
in 2004 net cash used was $1,510,000, a decrease of $1,303,000. Other cash provided by operations increased $430,000 during the three months ended March 31, 2005 compared to the same period in 2004.



Cash flow used in investing activities decreased $3,378,000 during the three
months ended March 31, 2005 compared to 2004. Cash used in investing activities was higher during the three months ended March 31, 2004 due to a higher cash balance at the beginning of that period which was invested into both fixed maturity and
equity securities during the period.



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



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





---

The cost or amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of
investments at March 31, 2005 and December 31, 2004 are as follows:



|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|------------------------------------------------------------------------------------- |  | -------------------- | ---------- | -------------------- | - | --------------------- |  | ------------------- | ------- |  | - | ----------
|                                                                                      |  | March 31, 2005      
|                                                                                      |  | Cost orAmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Fixed maturities:                                                                     |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 4,054,477  |                      | $ | 637                   |  | $                   | 93,949  |  | $ | 3,961,165 
|States and political subdivisions                                                     |  |                      | 2,547,520  |                      |   |                      |  |                     | 72,216  |  |   | 2,475,304 
|Corporate securities                                                                  |  |                      | 19,178,538 |                      |   | 91,988                |  |                     | 402,892 |  |   | 18,867,634
|Mortgage-backed securities                                                            |  |                      | 11,859,843 |                      |   | 15,783                |  |                     | 159,868 |  |   | 11,715,758
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 37,640,378 |                      |   | 108,408               |  |                     | 728,925 |  |   | 37,019,861
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Preferred stocks                                                                      |  |                      | 426,200    |                      |   |                      |  |                     |        |  |   | 426,200   
|Common stocks                                                                         |  |                      | 6,103,398  |                      |   | 372,409               |  |                     | 39,030  |  |   | 6,436,777 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 6,529,598  |                      |   | 372,409               |  |                     | 39,030  |  |   | 6,862,977 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Total                                                                                 |  | $                    | 44,169,976 |                      | $ | 480,817               |  | $                   | 767,955 |  | $ | 43,882,838
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      | 
|                                                                                      |  | December 31, 2004   
|                                                                                      |  | Cost orAmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Fixed maturities:                                                                     |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                    | 4,467,011  |                      | $ | 11,248                |  | $                   | 61,148  |  | $ | 4,417,111 
|States and political subdivisions                                                     |  |                      | 244,126    |                      |   |                      |  |                     | 2,002   |  |   | 242,124   
|Corporate securities                                                                  |  |                      | 20,952,374 |                      |   | 247,820               |  |                     | 105,795 |  |   | 21,094,399
|Mortgage-backed securities                                                            |  |                      | 11,449,913 |                      |   | 55,832                |  |                     | 53,685  |  |   | 11,452,060
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 37,113,424 |                      |   | 314,900               |  |                     | 222,630 |  |   | 37,205,694
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Preferred stocks                                                                      |  |                      | 498,800    |                      |   | 6,800                 |  |                     |        |  |   | 505,600   
|Common stocks                                                                         |  |                      | 4,086,743  |                      |   | 496,260               |  |                     | 16,845  |  |   | 4,566,158 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|                                                                                      |  |                      | 4,585,543  |                      |   | 503,060               |  |                     | 16,845  |  |   | 5,071,758 
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           
|Total                                                                                 |  | $                    | 41,698,967 |                      | $ | 817,960               |  | $                   | 239,475 |  | $ | 42,277,452
|                                                                                      |  |                      |            |                      |   |                       |  |                     |         |  |   |           



At March 31, 2005,
corporate securities accounted for 51% of our fixed maturity portfolio, mortgage backed securities were 31%, U. S. government and government agency bonds were 11% and states and political subdivisions were 7%. At March 31, 2005, our equity portfolio
had a concentration in the U.S. industrial and miscellaneous sector of 78%, 12% was in the energy sector and 10% was in the financial and insurance services sector.



All securities are listed as available for sale. We evaluate securities for impairment on a regular basis and specifically
determine on an individual security basis whether or not the decline in value is other than temporary. Equity securities with unrealized losses at March 31, 2005 were generally determined to have temporary declines in value due to geopolitical
reasons or a reaction to their particular industry rather than fundamental reasons. Fixed maturity securities with unrealized losses at March 31, 2005 were also determined to have temporary declines in value due to the increase in interest during
the period as opposed to fundamental changes in the credit quality of the issuers of the securities. We believe it is more likely than not that those securities will appreciate in value.





---

The following table summarizes the length of time securities with unrealized losses at March 31, 2005
have been in an unrealized loss position:



|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|------------------------------------------------------------------------------------- |  | ------------------- | ---------- | --------------------- | - | ------------------- |  | --------------------- | --------- | ------------------- | - | --------------------- |  | - | ---------- |  | - | -------
|                                                                                      |  | Less than 12 Months |            | 12 Months or More     |   | Total              
|                                                                                      |  | EstimatedFair Value |            | GrossUnrealizedLosses |   | EstimatedFair Value |  | GrossUnrealizedLosses |           | EstimatedFair Value |   | GrossUnrealizedLosses
|Fixed maturities:                                                                     |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                   | 2,745,764  |                       | $ | 57,883              |  | $                     | 701,349   |                     | $ | 36,066                |  | $ | 3,447,113  |  | $ | 93,949 
|States and political subdivisions                                                     |  |                     | 2,475,304  |                       |   | 72,216              |  |                       |          |                     |   |                      |  |   | 2,475,304  |  |   | 72,216 
|Corporate securities                                                                  |  |                     | 14,081,574 |                       |   | 362,024             |  |                       | 849,747   |                     |   | 40,868                |  |   | 14,931,321 |  |   | 402,892
|Mortgage-backed securities                                                            |  |                     | 8,352,521  |                       |   | 107,690             |  |                       | 1,801,946 |                     |   | 52,178                |  |   | 10,154,467 |  |   | 159,868
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|                                                                                      |  |                     | 27,655,163 |                       |   | 599,813             |  |                       | 3,353,042 |                     |   | 129,112               |  |   | 31,008,205 |  |   | 728,925
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|Preferred stocks                                                                      |  |                     |           |                       |   |                    |  |                       |          |                     |   |                      |  |   |           |  |   |       
|Common stocks                                                                         |  |                     | 2,705,348  |                       |   | 39,030              |  |                       |          |                     |   |                      |  |   | 2,705,348  |  |   | 39,030 
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|                                                                                      |  |                     | 2,705,348  |                       |   | 39,030              |  |                       |          |                     |   |                      |  |   | 2,705,348  |  |   | 39,030 
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        
|Total                                                                                 |  | $                   | 30,360,511 |                       | $ | 638,843             |  | $                     | 3,353,042 |                     | $ | 129,112               |  | $ | 33,713,553 |  | $ | 767,955
|                                                                                      |  |                     |            |                       |   |                     |  |                       |           |                     |   |                       |  |   |            |  |   |        



Changes in Interest Rates



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



Effects of Inflation



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



Contractual Obligations and Commitments



There were no material changes outside the ordinary course of our business
in our contractual obligations during the three months ended March 31, 2005.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



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



Interest Rate Risk.
Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Our exposure to interest rate changes primarily results from our significant holdings of fixed rate investments. Fluctuations in interest
rates have a direct impact on the market valuation of these securities. Therefore, an adverse change in market prices of these securities would result in losses reflected in the balance sheet. As a result of rising interest rates during the three
months ended March 31, 2005 the fair value of our fixed maturity portfolio decreased approximately $713,000 from the fair value at December 31, 2004.





---

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



|               |  |                |        |                |   |        |  
|-------------- |  | -------------- | ------ | -------------- | - | ------ | -
|Change in Rate |  | PortfolioValue |        | Change inValue |  
|               |  | (In thousands) |       
|2%             |  | $              | 33,095 |                | $ | (3,925 | )
|1%             |  |                | 35,038 |                |   | (1,982 | )
|0              |  |                | 37,020 |                |   |       |  
|-1%            |  |                | 39,002 |                |   | 1,982  |  
|-2%            |  |                | 40,945 |                |   | 3,925  |  



Credit
Risk. The quality of our fixed maturity portfolio is generally good. At March 31, 2005, all of our fixed maturity securities were rated by Moodys as investment grade with an average credit quality rating of AA and an average duration
of 5.3 years.



Equity Risk. Equity price
risk is the risk that we will incur economic losses due to adverse changes in equity prices. Our exposure to changes in equity prices primarily results from our holdings of common stocks, mutual funds and other equities. Our portfolio of equity
securities is carried on the balance sheet at fair value. Therefore, an adverse change in market prices of these securities would result in losses.



ITEM 4. CONTROLS AND PROCEDURES.



The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Companys reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and
communicated to the Companys management, including its Chief Executive Officer and Treasurer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in
evaluating the cost benefit relationship of possible controls and procedures.



As required by Securities and Exchange Commission Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys
Chief Executive Officer and the Companys Treasurer, 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 Treasurer concluded that the Companys disclosure controls and procedures were effective at the reasonable assurance level.



PART IIOTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS.



None



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



We do not intend to pay dividends in the foreseeable future and cannot assure our shareholders that dividends will be paid in the future. The Holding
Companys principal source of cash available for payment of dividends is dividends from the Insurance Company. The payment of dividends by the Insurance Company is subject to limitations imposed by the Michigan Insurance Code. The Insurance
Company may not pay an extraordinary dividend unless it notifies the Insurance Commissioner and she does not disapprove the payment. An extraordinary dividend includes any dividend which, when taken together with other dividends paid within the
preceding 12 months, exceeds the greater of 10% of the Insurance Companys statutory policyholders surplus as of December 31 of the immediately preceding year or its statutory net income, excluding realized capital gains, for the 12-month
period ending December 31 of the immediately preceding year. During the year ended December 31, 2005, the Insurance Company can pay a non-extraordinary dividend of up to $2,027,000 without prior approval from the Insurance Commissioner. In order to
pay any dividends, the Insurance Company must be in a position to satisfy the requirement that the company continue to be safe, reliable and entitled to public confidence. Also, in the absence of approval of the Insurance Commissioner, dividends may
only be paid from statutory earned surplus. Also, dividends may not exceed the amount of the Insurance Companys statutory capital stock account in any one-year unless it meets certain other requirements.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES.



None



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



None





---

ITEM 5. OTHER INFORMATION.



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



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



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



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



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



|       |  |                                                                                                                                                                                                                                                                                          
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER |  | TITLE                                                                                                                                                                                                                                                                                    
|3.1    |  | Articles of Incorporation of Fremont Michigan InsuraCorp, Inc. (Incorporated by reference to Exhibit 3.1 to Registration Statement No. 333-112414 on Form S-1).                                                                                                                          
|       | 
|3.2    |  | Bylaws of Fremont Michigan InsuraCorp, Inc. (Incorporated by reference to Exhibit 3.2 to Registration Statement No. 333-112414 on Form S-1).                                                                                                                                             
|       | 
|4.1    |  | See Articles of Incorporation, filed as Exhibit 3.1                                                                                                                                                                                                                                      
|       | 
|4.2    |  | Shareholder Rights Agreement dated November 1, 2004 by and between the Company and Registrar and Transfer Company, as Rights Agent (Incorporated by reference to Exhibit 4.2 to the
Companys Form 8-K filed with the Securities and Exchange Commission on November 3, 2004).           
|       | 
|4.3    |  | Certificate of Adoption of Resolution Designating and Prescribing Rights, Preferences and Limitations of Junior Participating Preferred Stock (Incorporated by reference to Exhibit 4.3 to the
Companys Form 8-K filed with the Securities and Exchange Commission on November 3, 2004).
|       | 
|31.1   |  | Certification of President and Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                              
|       | 
|31.2   |  | Certification of Vice President and Treasurer under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                       
|       | 
|32.1   |  | Certification pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                                        



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



In a report on Form 8-K dated and filed on March 24, 2005,
the Company reported, under Item 2.02 Results of Operations and Financial Condition, a press release, dated March 24, 2005, announcing and commenting on its results of operations for the quarter and year ended December 31, 2004.







---

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, 2005 |  | By:                               |  | /s/ Richard E. Dunning                   
|                   |  |                                   |  | Richard E. Dunning                       
|                   |  |                                   |  | President and Chief Executive Officer    
|                   |  |                                  
|Date: May 16, 2005 |  | By:                               |  | /s/ Marvin R. Deur                       
|                   |  |                                   |  | Marvin R. Deur                           
|                   |  |                                   |  | Vice President and Treasurer             
|                   |  |                                   |  | (principal financial officer)            
|                   |  |                                  
|Date: May 16, 2005 |  | By:                               |  | /s/ Kevin G. Kaastra                     
|                   |  |                                   |  | Kevin G. Kaastra                         
|                   |  |                                   |  | Controller (principal accounting officer)