Forward-Looking Statements

This quarterly report may provide information including certain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements regarding the intent, belief, or current expectations of management, including, but not limited to, those statements that use the words "believes," "expects," "anticipates," "estimates," or similar expressions. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and results could differ materially from those indicated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: the frequency and severity of claims; uncertainties inherent in reserve estimates; catastrophic events; a change in the demand for, pricing of, availability or collectability of reinsurance; increased rate pressure on premiums; ability to obtain rate increases in current market conditions; investment rate of return; changes in and adherence to insurance regulation; actions taken by regulators, rating agencies or lenders; attainment of certain processing efficiencies; changing rates of inflation; general economic conditions and other risks identified in our reports and registration statements filed with the Securities and Exchange Commission. We are not under any obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements whether as a result of new information, future events or otherwise.

Business Overview

We are a publicly traded specialty insurance underwriter and insurance administration services company, which serves the needs of underserved market segments that value service and specialized knowledge. We market and underwrite specialty property and casualty insurance products on both an admitted and non-admitted basis through a broad and diverse network of independent retail, wholesale program administrators and general agents. We primarily focus on niche or specialty program business and risk management solutions for agents, professional and trade associations, pools, trusts, and small to medium-sized insureds. These solutions include specialty program underwriting; excess and surplus lines insurance products; alternative risk transfer solutions; agency operations; and insurance administration services. Program business refers to an aggregation of individually underwritten risks that have some unique characteristic and are distributed through a select group of general agencies, retail agencies and program administrators. We define our business segments as specialty insurance operations and agency operations.

Our programs are diversified geographically, by class and line of business, type of insured and distribution. Within the workers' compensation line of business, we have a regional focus in New England, Florida, and Nevada. Within the commercial auto and commercial multiple peril line of business, we have a regional focus in the Southeast and California. Within the general liability line of business we have a focus in Texas. Our fee-for-service business is managed on a regional basis with an emphasis in the Midwest, New England, and southeastern regions, as well as the self-insured market in Nevada. Our corporate strategy emphasizes a regional focus and diverse sources of revenue between underwritten premiums, service fee revenue, and commissions. This allows us to leverage fixed costs over a larger revenue base and take advantage of new opportunities.

On July 31, 2008, the merger of Meadowbrook Insurance Group, Inc. and ProCentury Corporation ("ProCentury") was completed ("Merger"). Under the terms of the merger agreement, ProCentury shareholders were entitled to receive, for each ProCentury common share, either $20.00 in cash or Meadowbrook common stock based on a 2.5000 exchange ratio, subject to adjustment as described within the merger agreement. In accordance with the merger agreement, the stock price used in determining the final cash and share consideration portion of the purchase price was based on the volume-weighted average sales price of a share of Meadowbrook common stock for the 30-day trading period ending on the sixth trading day before the completion of the Merger, or $5.7326. Based upon the proration, the total purchase price was $227.2 million, of which $99.1 million consisted of cash,

$122.7 million in newly issued common stock, and approximately $5.4 million in transaction related costs. The total number of common shares issued for purposes of the stock portion of the purchase price was 21.1 million shares.

ProCentury is a specialty insurance company, which primarily underwrites general liability, commercial property, environmental, garage keepers, commercial multi-peril, commercial auto, surety, and marine insurance primarily in the excess and surplus lines, or "non-admitted," market through a select group of general agents. The excess and surplus lines market provides insurance coverage for customers with hard-to-place risks that standard or admitted insurers typically choose not to insure.

Critical Accounting Policies

In certain circumstances, we are required to make estimates and assumptions that affect amounts reported in our consolidated financial statements and related footnotes. We evaluate these estimates and assumptions on an on-going basis based on a variety of factors. There can be no assurance, however, that actual results will not be materially different than our estimates and assumptions, and that reported results of operation will not be affected by accounting adjustments needed to reflect changes in these estimates and assumptions. The accounting estimates and related risks described in our Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission on March 16, 2009, are those that we consider to be our critical accounting estimates. For the three months and nine months ended September 30, 2009, there have been no material changes in regard to any of our critical accounting estimates.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

Our results through 2009 include the positive impact from continued selective growth, coupled with our adherence to strict corporate underwriting guidelines, as well as a focus on current accident year price adequacy, and the benefits derived from leveraging of fixed costs. Our generally accepted accounting principles ("GAAP") combined ratio improved 2.1 percentage points to 91.9% for the nine months ended September 30, 2009, from 94.0% in 2008. Net operating income, excluding amortization, increased 42.0% to $44.3 million, compared to $31.2 million in 2008.

Our 2009 year to date results included a pre-tax $3.3 million impairment charge on our investment portfolio, which is down from $7.6 million in 2008. In September 2008, at the height of the economy's financial crisis, we experienced losses primarily in preferred stock investments in Fannie Mae, Freddie Mac, Lehman Brothers, and GMAC. Our exposure to unrealized losses and other than temporarily impaired securities decreased during 2009, as the financial markets began to stabilize and improve. The 2009 impairments primarily consisted of asset-backed securities with rising default rates, declining prepayment speeds, and increasing loss severity of collateral value. In addition, this impairment charge also included a few corporate securities where the issuer experienced deteriorating business conditions and results, which put pressure on securities valuations and, to a lesser extent, further deterioration in preferred stock securities. Included in our investment portfolio in 2009 is a provision for gross unrealized appreciation of $65.1 million, or a $1.14 book value per share, compared to a provision for gross unrealized depreciation of ($26.0) million in 2008, or a ($0.35) book value per share. Our conservative investment philosophy, which focuses on a high quality, short duration investments with both diversification in specific securities, as well as investment sectors, has minimized our asset risk in relation to our GAAP equity.

Gross written premium increased $186.6 million, or 58.5%, to $505.9 million, compared to $319.3 million in 2008. Included in this increase was $134.2 million in gross written premiums related to our Century Surety Company ("Century") operations. In addition, this increase includes $31.6 million in gross written premiums related to our new relationship with a general agency that specializes in non-contractors workers' compensation in California, as well as new programs which include a general agency that focuses on the food services industry and a general agent who focuses on heterogeneous workers' compensation in the Southeast region of the United States. The remaining increase was primarily the result of growth in new business from programs implemented in 2008 and 2009. We anticipate further growth during the remainder of the year as the annualized premiums of these programs continue to be realized. The anticipated growth for the balance of the year is emanating from workers' compensation initiatives underway in the Southeast, Midwest and Western states, a full year benefit of our new and expanded transportation program, as well as rate increases in select states and programs. In addition, we continue to

experience selective growth within existing programs consistent with our corporate underwriting guidelines and our controls over price adequacy. While the level of rate decreases has slowed, we have seen a continued competitive market. Along with the recession, there has been downward pressure on revenue growth, but a decrease in frequency of losses has helped to support underwriting profitability.

With 2009 as our first full year of operations after the merger with ProCentury, we continue to see opportunities emerge as we use Meadowbrook's admitted market capabilities to expand our footprint with Century's wholesale agents in areas including marine, garage, and workers' compensation, and as we roll out surplus lines products through an existing Meadowbrook agent in markets not previously serviced by ProCentury, and as we continue to leverage costs by creating economies of scale for purchasing reinsurance and managing the "back office" operations. By utilizing the capabilities of our combined company, we have also begun underwriting environmental related risks. Century's environmental expertise has now been combined with the existing workers' compensation and automobile liability platform to provide an integrated program for environmental risks. The standard surety operation for Century is now being marketed as Star Surety to take advantage of the higher treasury listing and broader licensing and filing capabilities of Star. The combined platform has expanded agent relationships and rounded out agency relationship needs, which should grow both our programs and products.

On June 24, 2009, we announced the affirmation of A.M. Best Company's financial strength rating of "A-" (Excellent) for our Insurance Company Subsidiaries.

Results of Operations

Net income for the nine months ended September 30, 2009, increased 83.9%, or $16.5 million to $36.2 million, or $0.63 per dilutive share, compared to net income of $19.7 million, or $0.48 per dilutive share, for the comparable period of 2008. Net operating income, a non-GAAP measure, increased $13.4 million, or 50.5%, to $39.9 million, or $0.69 per dilutive share, compared to net operating income of $26.5 million, or $0.65 per dilutive share for the comparable period in 2008, with lower weighted average shares outstanding. Total diluted weighted average shares outstanding for the nine months ended September 30, 2009 were 57,531,391, compared to 40,657,894 for the comparable period in 2008. This increase in the weighted average shares is primarily the result of the equity issued in connection with the ProCentury merger.

Net income for the nine months ended September 30, 2009, was negatively impacted by after-tax realized losses of $3.8 million, or $0.06 per diluted share, as a result of the other than temporary impairments primarily related to certain asset-backed securities, corporate bonds, and preferred stocks, compared to after-tax realized losses of $6.9 million, or $0.17 per diluted share in 2008. Net investment income increased 51.9% to $37.5 million, primarily related to the increase in invested assets as a result of the ProCentury merger. Overall, we continue to see favorable prior accident year reserve development, as well as selective growth consistent with our corporate underwriting guidelines and our controls over price adequacy. In addition, net income for the nine months ended September 30, 2009, was impacted by the after-tax impact of $3.7 million due to storm related losses and a single fire loss. Net income for the nine months ended September 30, 2008, included after tax catastrophe losses of $5.4 million related to Hurricanes Gustav and Ike. The favorable improvement within net income absent the realized losses and catastrophe losses, was slightly offset by lower net commission and fee revenue.

Revenues for the nine months ended September 30, 2009, increased $158.3 million, or 53.0%, to $456.8 million, from $298.5 million for the comparable period in 2008. This increase reflects a $146.3 million increase in net earned premiums, of which $113.5 million related to our Century operations. Excluding the net earned premiums related to our Century operations, the increase of $32.8 million was primarily the result of overall growth within our existing programs and new business we implemented in 2008 and 2009. Our overall net commission and fees were down 13.5%, or $4.6 million, as further explained below.

In addition, the revenues reflect a $12.8 million increase in investment income, which primarily reflects the increase in invested assets as a result of the ProCentury merger, as well as continued positive cash flow from operations.

Specialty Insurance Operations

The following table sets forth the revenues and results from operations for
specialty insurance operations (in thousands):


                                                 For the Nine Months
                                                 Ended September 30,
                                                  2009          2008

              Revenue:
              Net earned premiums              $  393,577     $ 247,296
              Management fees                      15,241        17,178
              Claims fees                           5,774         6,789
              Loss control fees                     1,502         1,602
              Reinsurance placement                   488           571
              Investment income                    37,124        24,177
              Net realized losses                  (3,692 )      (7,467 )

              Total revenue                    $  450,014     $ 290,146

              Pre-tax income
              Specialty insurance operations   $   68,787     $  40,386

Revenues from specialty insurance operations increased $159.9 million, or 55.1%, to $450.0 million for the nine months ended September 30, 2009 from $290.1 million for the comparable period in 2008.

Net earned premiums increased $146.3 million, or 59.2%, to $393.6 million for the nine months ended September 30, 2009, from $247.3 million in the comparable period in 2008. This increase was primarily the result of $113.5 million in net earned premiums related to our Century operations. The remaining increase of $32.8 million was primarily the result of growth within our existing programs and the new business we implemented in 2008 and 2009.

Management fees decreased $2.0 million, or 11.3%, to $15.2 million for the nine months ended September 30, 2009, from $17.2 million for the comparable period in 2008. This decrease primarily relates to two programs we previously managed where the client is now performing their own policy administration services. This decrease is also due to an overall decrease in fees within our specialty program manager subsidiary, primarily as a result of competitive pricing pressures. In addition, this decrease was the result of a decrease in fees in our New England-based self-insured programs, caused by a decrease in premium volume from competition and poor economic conditions.

Claim fees decreased $1.0 million, or 15.0%, to $5.8 million for the nine months ended September 30, 2009, from $6.8 million for the comparable period in 2008. This decrease is primarily the result of lower premium volumes related to self-insured programs, which is the basis for the fee revenue.

Net investment income increased $12.9 million, or 53.5%, to $37.1 million in 2009, from $24.2 million in 2008. This increase is primarily the result of $12.3 million in net investment income related to ProCentury. Overall, invested assets increased due to the inclusion of ProCentury's invested assets from the Merger of approximately $425.1 million at July 31, 2008, coupled with the investing from positive cash flows from operations. The positive cash flows from operations were primarily due to favorable underwriting results. The average investment yield for September 30, 2009 was 4.40%, compared to 3.86% in 2008. The current pre-tax book yield was 4.56%. The current after-tax book yield was 3.44%, compared to 3.40% in 2008. The duration of the investment portfolio is 4.5 years at September 30, 2009, compared to 4.5 years at September 30, 2008.

Specialty insurance operations generated pre-tax income of $68.8 million for the nine months ended September 30, 2009, compared to pre-tax income of $40.4 million for the comparable period in 2008. This increase in pre-tax income demonstrates a continued improvement in underwriting results including favorable reserve development on prior accident years, selective growth in premium, adherence to our strict underwriting guidelines, and our overall leveraging of fixed costs. In addition, this improvement was also attributable to an increase in net investment income. Partially offsetting these improvements were the previously mentioned other

than temporary impairments we recognized to date this year. The GAAP combined ratio was 91.9% for the nine months ended September 30, 2009, compared to 94.0% for the same period in 2008.

Net loss and loss adjustment expenses ("LAE") increased $78.7 million, or 54.2%, to $223.8 million for the nine months ended September 30, 2009, from $145.1 million for the same period in 2008. Our loss and LAE ratio decreased 2.5 percentage points to 60.7% for the nine months ended September 30, 2009, from 63.2% for the same period in 2008. This ratio is the unconsolidated net loss and LAE in relation to net earned premiums. The loss and LAE ratio of 60.7% includes pre-tax favorable development of $20.9 million, or 5.3 percentage points, compared to pre-tax favorable development of $11.3 million, or 4.6 percentage points in 2008. The increase in our favorable development in comparison to 2008 was primarily the result of an increase in favorable development within our general liability, commercial auto liability, professional liability, and workers' compensation lines of business due to lower frequency and severity and better than expected incurred and paid claims results. In addition, we revised our estimated claims handling costs through a comprehensive actual costs study, which increased favorable development within our unallocated loss adjustment expense reserve. As previously indicated, our results in 2009 also include after-tax losses of $3.7 million due to storm related losses and a single fire loss in the current accident year. Our results in 2008 included after-tax catastrophe losses of $5.4 million related to Hurricanes Gustav and Ike. Additional discussion of our reserve activity is described below within the Other Items - Reserves section.

Our expense ratio was 31.2% for the nine months ended September 30, 2009, compared to 30.8% for the same period in 2008. This ratio is the unconsolidated policy acquisition and other underwriting expenses in relation to net earned premiums. This increase reflects the reduction in ceding commission, primarily related to a reduction in risk-sharing partner participation and a reduction in the ceding commission rate within one particular line of business on a specific program. In addition, the overall proportion of risk sharing programs in relation to our overall book of business has decreased as a result of the ProCentury merger, offset by lower insurance related assessments. As a surplus lines carrier, Century is not subject to premium taxes on its non-admitted business. Our overall leveraging of fixed costs is somewhat offset by the higher level of internal costs associated with Century's business, which includes nine months of internal costs for 2009 and only two months in 2008.

Agency Operations

The following table sets forth the revenues and results from operations from our
agency operations (in thousands):


                                             For the Nine Months Ended
                                                   September 30,
                                              2009               2008

              Net commission              $     6,996        $     8,640
              Pre-tax (loss) income(1)    $      (563 )      $     1,328

(1) Our agency operations include an allocation of corporate overhead, which includes expenses associated with accounting, information services, legal, and other corporate services. The corporate overhead allocation excludes those expenses specific to the holding company. For the nine months ended September 30, 2009 and 2008, the allocation of corporate overhead to the agency operations segment was $2.4 million and $2.1 million, respectively.

Revenue from agency operations, which consists primarily of agency commission revenue, was $7.0 million for the nine months ended September 30, 2009, compared to $8.6 million for the comparable period in 2008. This decrease primarily reflects regional competition, poor economic conditions, and a softer insurance market within our mid to larger Michigan accounts and isolated competitive pricing pressure in the California automobile market. In addition, this decrease is partially attributable to a $300,000 reduction in an agency commission accrual.

Agency operations generated a pre-tax loss, after the allocation of corporate overhead, of ($563,000) for the nine months ended September 30, 2009, compared to pre-tax income of $1.3 million for the comparable period in 2008. The decrease in the pre-tax income is primarily attributable to the decrease in agency commission revenue mentioned above.

Other Items

Reserves

At September 30, 2009, our best estimate for the ultimate liability for loss and LAE reserves, net of reinsurance recoverables, was $660.5 million. We established a reasonable range of reserves of approximately $606.0 million to $696.8 million. This range was established primarily by considering the various indications derived from standard actuarial techniques and other appropriate reserve considerations. The following table sets forth this range by line of business (in thousands):

                                                  Minimum       Maximum
                                                  Reserve       Reserve      Selected
   Line of Business                                Range         Range       Reserves

   Workers' Compensation(1)                      $ 180,680     $ 200,054     $ 192,704
   Commercial Multiple Peril/General Liability     292,867       350,878       327,380
   Commercial Automobile                            96,656       106,938       102,860
   Other                                            35,790        38,943        37,593

   Total Net Reserves                            $ 605,993     $ 696,813     $ 660,537

(1) Includes Residual Markets

Reserves are reviewed by our internal actuaries for adequacy on a quarterly basis. When reviewing reserves, we analyze historical data and estimate the impact of numerous factors such as (1) per claim information; (2) industry and our historical loss experience; (3) legislative enactments, judicial decisions, legal developments in the imposition of damages, and changes in political attitudes; and (4) trends in general economic conditions, including the effects of inflation. This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events. There is no precise method for subsequently evaluating the impact of any specific factor on the adequacy of reserves, because the eventual deficiency or redundancy is affected by multiple factors.

The key assumptions used in our selection of ultimate reserves included the underlying actuarial methodologies, a review of current pricing and underwriting initiatives, an evaluation of reinsurance costs and retention levels, and a detailed claims analysis with an emphasis on how aggressive claims handling may be impacting the paid and incurred loss data trends embedded in the traditional actuarial methods. With respect to the ultimate estimates for losses and LAE, the key assumptions remained consistent for the nine months ended September 30, 2009 and the year ended December 31, 2008.

For the nine months ended September 30, 2009, we reported a decrease in net ultimate loss estimates for accident years 2008 and prior of $20.9 million, or 3.3% of $625.3 million of net loss and LAE reserves at December 31, 2008. The decrease in net ultimate loss estimates reflected revisions in the estimated reserves as a result of actual claims activity in calendar year 2009 that differed from the projected activity. There were no significant changes in the key assumptions utilized in the analysis and calculations of our reserves during 2008 and

for the nine months ended September 30, 2009. The major components of this change in ultimate loss estimates are as follows (in thousands):

                                        Reserves at                 Incurred Losses                            Paid Losses                   Reserves at
                                       December 31,       Current        Prior         Total       Current        Prior         Total       September 30,
Line of Business                           2008            Year          Years       Incurred        Year         Years         Paid             2009

Workers' Compensation                  $     147,813     $  71,535     $  (6,347 )   $  65,188     $  9,924     $  32,557     $  42,481     $      170,520
Residual Markets                              23,984         4,632        (2,596 )       2,036        1,972         1,864         3,836             22,184
. . .