YOUR VOTE IS VERY IMPORTANT

 

Whether or not you plan to attend the special meeting in person, please take the time to vote by completing and mailing the enclosed proxy card in the enclosed postage-paid envelope. If you attend the special meeting, you may still vote in person if you wish, even if you have previously returned your proxy card.

YOUR VOTE IS VERY IMPORTANT

 

Whether or not you plan to attend the special meeting in person, please take the time to vote by completing and mailing the enclosed proxy card in the enclosed postage-paid envelope. If you attend the special meeting, you may still vote in person if you wish, even if you have previously returned your proxy card.

 

This brief summary highlights selected information from this joint proxy statement-prospectus and does not contain all of the information that may be important to you. We urge you to carefully read this entire document and the other documents we refer to in this document. These will give you a more complete description of the transaction we are proposing. For more information about our two companies, see “Where You Can Find More Information.” We have included page references in this summary to direct you to other places in this joint proxy statement-prospectus where you can find a more complete description of the topics we have summarized.

 

This joint proxy statement-prospectus relates to the proposed merger of ProCentury with and into a subsidiary of Meadowbrook. Meadowbrook and ProCentury believe the proposed merger will provide each of its shareholders with substantial benefits and will further each of the companies’ strategic growth plans. The combination of the two companies creates a diversified platform and gives both companies the size and product depth to compete at a level greater than they could achieve as separate entities.

 

Meadowbrook Insurance Group, Inc.
26255 American Drive
Southfield, Michigan 48034-5178
(248) 358-1100

 

Meadowbrook, a Michigan corporation based in Southfield, Michigan, is a leader in the specialty program management market. Meadowbrook is a risk management organization, specializing in alternative risk management solutions for agents, professional/trade associations, and small to medium-sized insureds. Meadowbrook’s total gross written premium for 2007 was $346.5 million and total shareholders’ equity at December 31, 2007 was $301.9 million.

 

ProCentury Corporation
465 Cleveland Avenue
Westerville, Ohio 43082
Telephone: (614) 895-2000

 

ProCentury, an Ohio corporation, is a specialty property and casualty insurance holding company based in Columbus, Ohio. ProCentury writes specialty property and casualty insurance for small and mid-sized businesses through Century Surety Company and ProCentury Insurance Company, its operating insurance companies. Century Surety Company primarily writes excess and surplus lines insurance and markets its products through a select network of general agents. ProCentury’s total gross written premium for 2007 was $238.3 million and total shareholders’ equity at December 31, 2007 was $161.0 million.

 

Meadowbrook shareholders.  A special meeting of Meadowbrook shareholders will be held on July 14, 2008, at 2:00 p.m., local time, at Meadowbrook Insurance Group, 26255 American Drive, Southfield, Michigan 48034. At the special meeting, shareholders will be asked:

 

 

ProCentury shareholders.  A special meeting of ProCentury shareholders will be held on July 14, 2008, at 10:00 a.m., local time, at ProCentury Corporation, 465 Cleveland Avenue, Westerville, Ohio 43082. At the special meeting, shareholders will be asked:

 

 

 

Meadowbrook shareholders.  You may vote at the meeting of Meadowbrook’s shareholders if you owned Meadowbrook common stock at the close of business on May 19, 2008. You can cast one vote for each share of Meadowbrook common stock that you owned at that time. To adopt the merger agreement and approve the transactions it contemplates, the holders of a majority of the votes cast at Meadowbrook’s special meeting (assuming a quorum is present) must vote in favor of the merger.

 

You may vote your shares in person by attending the meeting or by mailing us your proxy if you are unable to or do not wish to attend. You can revoke your proxy at any time before Meadowbrook takes a vote at the meeting by submitting a written notice revoking the proxy or a later-dated proxy to the secretary of Meadowbrook, or by attending the meeting and voting in person.

 

ProCentury shareholders.  You may vote at the meeting of ProCentury’s shareholders if you owned ProCentury common shares at the close of business on May 19, 2008. You can cast one vote for each ProCentury common share that you owned at that time. To approve and adopt the merger agreement and approve the transactions it contemplates, the holders of a majority of the outstanding common shares of ProCentury as of the record date must vote in favor of the merger.

 

You may vote your shares in person by attending the meeting or by mailing us your proxy if you are unable to or do not wish to attend. You can revoke your proxy at any time before ProCentury takes a vote at the meeting by sending notice of revocation to ProCentury in writing, sending a new proxy with a later date or giving notice to ProCentury of your revocation at the special meeting. It is important to note that your presence at the special meeting, without any further action on your part, will not revoke your previously granted proxy.

 

Each of Meadowbrook and ProCentury is asking its shareholders to grant full authority for their respective special meetings to be adjourned or postponed, if necessary or appropriate to permit solicitation of additional proxies to approve the transactions proposed by this joint proxy statement-prospectus.

 

For ProCentury shareholders, under Ohio law, if the merger agreement is approved and adopted by ProCentury’s shareholders, any ProCentury shareholder that objects to the merger agreement may be entitled to seek relief as a dissenting shareholder under Section 1701.85 of the Ohio Revised Code. To perfect dissenters’ rights, a record holder must:

 

 

Neither ProCentury nor Meadowbrook will notify shareholders of the expiration of this ten-day period. ProCentury shares held by any person who desires to dissent but fails to perfect or who effectively withdraws or loses the right to dissent as of the effective time of the merger under Section 1701.85 of the Ohio Revised Code will be converted into, as of the effective time, the right to receive the merger consideration, without interest. A copy of Section 1701.85 of the Ohio Revised Code is attached as Appendix C to this document.

 

Meadowbrook shareholders do not have the right to dissent under the Michigan Business Corporation Act.

 

Meadowbrook shareholders.  Meadowbrook’s board of directors believes that the merger agreement and the merger are fair to you and in your best interests, and unanimously recommends that you vote “FOR” the approval and adoption of the merger agreement and approval of the transactions it contemplates and “FOR” the adjournment of postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.

 

ProCentury shareholders.  ProCentury’s board of directors believes that the merger agreement and the merger are fair to you and in your best interests, and unanimously recommends that you vote “FOR” the approval and adoption of the merger agreement and approval of the transactions it contemplates and “FOR” the adjournment of postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.

 

Meadowbrook shareholders.  On the record date, Meadowbrook’s directors, executive officers and their affiliates owned approximately 2,991,605 shares, or 8.1% of the outstanding shares of Meadowbrook common stock. Even if all of these individuals vote for the merger, because they own only approximately 8.1% of the outstanding shares of Meadowbrook common stock, there is no assurance that the merger agreement will be approved and adopted.

 

ProCentury shareholders.  On the record date, ProCentury’s directors, executive officers and their affiliates owned 1,712,146, or approximately 12.8% of the outstanding ProCentury common shares. Even if all of these individuals vote for the merger, because they own only approximately 12.8% of the outstanding ProCentury common shares, there is no assurance that the merger agreement will be approved and adopted.

 

We have attached a copy of the merger agreement, as amended, to this document as Appendix A. Please read the merger agreement. It is the legal document that governs the merger.

 

We propose a combination in which ProCentury will merge with and into a subsidiary of Meadowbrook, with the subsidiary being the surviving entity in the merger, but adopting the name “ProCentury Corporation.” We expect to complete the merger in the third quarter of 2008, although delays could occur.

 

Under the terms of the merger agreement, at the effective time of the merger, shareholders of ProCentury will be entitled to receive, for each ProCentury common share, either $20.00 in cash or Meadowbrook common stock having a value of $20.00, subject to adjustment as described below. As long as 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 we complete the merger is between $8.00 and $10.50, the exchange ratio will vary such that the stock consideration equals $20.00 per share based on the 30-day average price. Above or below this range for Meadowbrook’s stock price, the exchange ratio will be fixed as if the 30-day volume-weighted average sales price preceding the election date equaled $10.50 or $8.00, as applicable. Specifically, if the 30-day volume-weighted average sales price is equal to or above $10.50, the exchange ratio will be fixed at 1.9048, and if the 30-day volume-weighted average sales price is equal to or below $8.00, the exchange ratio will be fixed at 2.5000. As a result, ProCentury’s shareholders receiving Meadowbrook common stock may receive more or less than $20.00 per share in Meadowbrook common stock for their shares. The volume weighted average sales price of Meadowbrook’s common stock for the 30-day trading period ending on May 23, 2008 was $7.44. Based on this price, the Meadowbrook common stock received in exchange for a ProCentury common share would have a value of $18.60. Each ProCentury shareholder will have the option to elect to receive $20.00 in cash or Meadowbrook stock for each ProCentury common share, subject to proration so that the total cash consideration will equal 45% and the value of the Meadowbrook common stock will equal 55% of the total consideration paid. Fractional shares will not be issued in the merger. Instead of fractional shares, ProCentury shareholders will receive cash in an amount determined as described in this joint proxy statement-prospectus.

Each share of Meadowbrook common stock will include all rights that are attached to or inherent in the then-outstanding shares of Meadowbrook common stock, including preferred share purchase rights. See “Effect of the Merger on Rights of Shareholders.”

 

The number of shares of Meadowbrook common stock ProCentury shareholders will receive in the merger is subject to adjustments for reorganizations, recapitalizations, stock dividends and similar events that occur before the merger is completed. None of those adjustments would alter the value of the exchange ratio.

 

You will need to surrender your ProCentury common share certificates to receive new certificates representing common stock of Meadowbrook. However, this will not be necessary until you receive written instructions, which will occur shortly after the time of the merger.

 

Meadowbrook will not issue any fractional shares. Instead, ProCentury shareholders will receive cash in lieu of any fractional shares of common stock of Meadowbrook owed to them in exchange for their ProCentury common shares. The amount of cash for any fractional shares will be based on Meadowbrook’s 30-day volume-weighted average sales price preceding the election date.

 

Shortly after the effective date of the merger, ProCentury shareholders will receive a letter and instructions on how to surrender their certificates representing ProCentury common shares in exchange for certificates representing Meadowbrook common stock. You must carefully review and complete these materials and return them as instructed along with your ProCentury common share certificates. Please do not send any share certificates to Meadowbrook or ProCentury until you receive these instructions.

 

Effect of the Merger on ProCentury Options (page 67)

 

In the merger, outstanding options to purchase ProCentury common shares will become fully vested and option holders can either exercise such options and, in connection with the closing, elect to receive the form of merger consideration described above for the ProCentury shares acquired on exercise or agree to have their options cancelled in exchange for a per share cash payment equal to the difference between $20.00 and the exercise price of their options.

 

The number of shares of Meadowbrook common stock that will be owned by ProCentury shareholders as a result of the merger will be determined based on the exchange ratio. The exact exchange ratio will be determined by dividing $20.00 by 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 we complete the merger. If, however, such volume weighted average price is above $10.50 or below $8.00, the exchange ratio will be fixed at 1.9048 or 2.5000, respectively. See “The Merger Agreement — Merger Consideration.” Except where otherwise noted, for purposes of this joint proxy statement-prospectus, we have assumed that Meadowbrook’s 30-day volume-weighted average sales price preceding the election date will be 7.44, which is the volume-weighted average sales price of a share of Meadowbrook common stock for the 30-day trading period ending on May 23, 2008, the most recent practicable date prior to the printing of this joint proxy statement-prospectus. Using this price, the exchange ratio would be 2.5000. Based on this exchange ratio and assumed market price for the Meadowbrook common stock, upon completion of the merger, Meadowbrook would issue approximately 19,054,032 shares of its common stock to ProCentury shareholders. Based on these numbers, after the merger, on a fully-diluted basis, existing Meadowbrook shareholders would own approximately 66%, and former ProCentury shareholders would own approximately 34%, of the outstanding shares of common stock of Meadowbrook.

 

The merger will become effective when certificates of merger with respect to the merger have been accepted for filing by the office of the Secretary of State of Ohio and the Michigan Department of Labor & Economic Growth, Bureau of Commercial Services, Corporation Division. If our shareholders approve and adopt the merger at

their special meetings, and all required regulatory approvals are obtained, we anticipate that the merger will be completed in the third quarter of 2008, although delays could occur.

 

We cannot assure you that we can obtain the necessary shareholder and regulatory approvals or that the other conditions to completion of the merger can or will be satisfied.

 

For federal income tax purposes, the exchange of ProCentury common shares for shares of Meadowbrook common stock will not cause the holders of ProCentury common shares to recognize any gain or loss. Holders of ProCentury common shares, however, will recognize income, gain or loss in connection with any cash received in the merger.

 

Tax matters can be complicated, and the tax consequences of the merger to you will depend on your particular tax situation. We urge you to consult your tax advisor to determine the tax consequences of the merger to you.

 

Each of our boards of directors believes that the proposed merger will provide its shareholders with substantial benefits and will advance each company’s strategic growth plans. The combination of the two companies creates a diversified platform and gives both companies the size and product depth to compete at a level greater than they could achieve as separate entities. The boards also believe there are significant revenue opportunities, as well as cost savings potential.

 

You can find a more detailed discussion of the background of the merger and Meadowbrook’s and ProCentury’s reasons for the merger in this document under “Description of Transaction — Background of the Merger,” “— Meadowbrook’s Reasons for the Merger and Board Recommendation” and “— ProCentury’s Reasons for the Merger and Board Recommendation.”

 

The discussion of our reasons for the merger includes forward-looking statements about possible or assumed future results of our operations and the performance of the combined company after the merger. For a discussion of factors that could affect these future results, see “A Warning About Forward-Looking Statements.”

 

ProCentury has received written opinions from Friedman, Billings, Ramsey and Co., Inc. (“FBR”) to the effect that, subject to the terms, conditions and qualifications set forth therein, as of February 20, 2008, the date of the merger agreement, and as of May 6, 2008, the date of the merger agreement amendment, the aggregate merger consideration to be received by holders of ProCentury common shares pursuant to the merger agreement is fair, from a financial point of view, to such holders. You can find a more detailed discussion of the opinions and summary of the analyses of FBR under “Description of Transaction — Fairness Opinion of ProCentury’s Financial Advisor.” We have attached these fairness opinions to this document as Appendices B-1 and B-2. You should read these opinions and the summary completely to understand the procedures followed, matters considered and limitations on the reviews undertaken by FBR in providing its opinions.

 

The merger agreement restricts ProCentury’s ability to solicit or encourage alternative acquisition proposals from third parties. Notwithstanding these restrictions, under certain limited circumstances, ProCentury’s board of directors may respond to an unsolicited bona fide written proposal that ProCentury’s board of directors determines in good faith would or could result in a transaction that is more favorable to ProCentury’s shareholders from a financial point of view than the merger.

 

The completion of the merger depends on a number of conditions being met. Subject to exceptions described in the merger agreement, these include:

 

 

 

 

A party to the merger agreement could choose to complete the merger even though a condition to its obligation has not been satisfied, as long as the law allows it to do so. We cannot be certain when or if the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

The parties can mutually agree at any time to terminate the merger agreement without completing the merger. Also, either party can decide, without the consent of the other, to terminate the merger agreement if the merger has not been completed by September 30, 2008 (which may be extended until December 31, 2008 in order to obtain governmental approvals), unless the failure to complete the merger by that time is due to a violation of the merger agreement by the party that wants to terminate the merger agreement.

 

In addition, either Meadowbrook or ProCentury can terminate the merger agreement if the conditions to its respective obligation to complete the merger have not been satisfied. ProCentury can terminate the merger agreement if its board of directors determines a competing takeover proposal from a third party is superior to the merger (provided certain notice requirements have been satisfied).

 

ProCentury may be required to pay a termination fee of $9.5 million to Meadowbrook if the merger agreement is terminated due to certain circumstances outlined in the merger agreement. For a discussion of these conditions and fees, see “The Merger Agreement — Termination and Termination Fees.”

 

Meadowbrook and ProCentury may jointly amend the merger agreement and either party may waive its right to require the other party to adhere to any term or condition of the merger agreement. However, after ProCentury’s shareholders approve the merger, there may not be any amendment to the merger agreement (unless approved by ProCentury’s shareholders) if the amendment would reduce the amount or change the form of consideration to be paid to ProCentury shareholders.

 

We cannot complete the merger unless we obtain the prior approval from the Ohio Department of Insurance, Texas Department of Insurance, and Department of Insurance, Securities and Banking for the District of Columbia.

 

All filings necessary to obtain such approvals were filed with the appropriate state insurance departments early in the second quarter of 2008. Meadowbrook anticipates that the required approvals will be received in the third quarter of 2008.

 

The executive officers of Meadowbrook will remain the same as they were prior to the merger. The board of directors of Meadowbrook will be comprised of all of Meadowbrook’s current directors, plus two persons from ProCentury’s current board of directors who have yet to be selected.

 

Some of ProCentury’s directors and officers have interests in the merger that differ from, or are in addition to, the interests of ProCentury shareholders generally.

 

The members of our boards of directors knew about these additional interests and considered them when they approved the merger agreement and the transactions it contemplates.

 

The merger will be accounted for as a “purchase transaction” in accordance with accounting principles generally accepted in the United States.

 

Each of Meadowbrook and ProCentury will pay its own expenses in connection with the merger, including printing fees and fees and expenses of its own financial or other consultants, accountants and counsel. However, Meadowbrook has agreed to pay the fees for all filings with the Securities and Exchange Commission (the “SEC”), registration and any fees payable to any governmental entity in connection with the merger, and Meadowbrook and ProCentury have each agreed to pay one-half of all filing fees under the Hart-Scott-Rodino Act.

 

Meadowbrook is incorporated in and governed by Michigan law. ProCentury is incorporated in and governed by Ohio law. Upon our completion of the merger, the rights of ProCentury shareholders who receive Meadowbrook common stock will be governed by Meadowbrook’s articles of incorporation and bylaws and Michigan law. There are material differences between the rights of the shareholders of Meadowbrook and ProCentury, which we describe in this document under “Effect of the Merger on Rights of Shareholders.”

 

Shares of Meadowbrook common stock are traded on the New York Stock Exchange under the symbol “MIG.” On February 20, 2008, the last trading day before we announced the merger, the last reported trading price of Meadowbrook common stock was $9.16 per share. On May 23, 2008, the most recent practicable date prior to the printing of this document, the last reported trading price of Meadowbrook common stock was $6.78 per share. We can make no prediction or guarantee at what price Meadowbrook common stock will trade after the completion of the merger.

 

ProCentury common shares are traded on the Nasdaq Global Select Market under the symbol “PROS.” On February 20, 2008, the last trading day before we announced the merger, the last reported trading price of the ProCentury common shares was $15.38 per share. On May 23, 2008, the most recent practicable date prior to the printing of this document, the last reported trading price of ProCentury common shares was $17.25 per share.

 

The following table presents comparative historical per share data of Meadowbrook and ProCentury and unaudited pro forma per share data that reflect the combination of Meadowbrook and ProCentury using the purchase method of accounting.

 

In order to calculate the pro forma per share data for ProCentury, we have assumed an exchange ratio of 2.24, which was calculated by assuming a Meadowbrook stock price of $8.92, which was the closing stock price of Meadowbrook common stock on the trading day immediately before the trading day on which Meadowbrook and ProCentury announced their merger agreement. The equivalent pro forma combined amounts for ProCentury were therefore calculated by multiplying the pro forma combined amounts for Meadowbrook by 2.24. However, as explained in this joint proxy statement-prospectus, the exchange ratio may vary as the market price of Meadowbrook’s common stock fluctuates. The exact exchange ratio will be determined by dividing $20.00 by 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 we complete the merger. If such volume-weighted average price is above $10.50 or below $8.00, the exchange ratio will be fixed at 1.9048 or 2.5000, respectively. The volume-weighted average sales price of Meadowbrook’s common stock for the 30-day trading period ending on May 23, 2008 was $7.44. Using this price, the exchange ratio would be 2.5000. The information listed below also assumes that the aggregate amount of stock consideration to be paid in the merger will be equal to 55% of the total consideration paid by Meadowbrook.

 

We expect that we will incur merger and integration charges as a result of combining our companies. We also anticipate that the merger will provide the combined company with financial benefits that include reduced operating expenses and the opportunity to earn more revenue. The pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect these expenses or benefits and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have actually been had our companies been combined as of the dates or for the periods presented.

 

Meadowbrook

 

ProCentury

 

 

 

Meadowbrook common stock is traded on the New York Stock Exchange under the symbol “MIG.” On February 20, 2008, the last trading day before public announcement of the execution of the merger agreement, and May 23, 2008, the most recent practicable date prior to the printing of this document, the market prices of Meadowbrook common stock and the equivalent price per share of Meadowbrook common stock giving effect to the merger, were as follows:

 

 

The “Equivalent Price Per Share of Meadowbrook Common Stock” at February 20, 2008 in the above table represents the product achieved when the closing sales price of a share of Meadowbrook common stock on that date ($9.16) is multiplied by the exchange ratio of 2.24, which is the number of shares of Meadowbrook common stock that a ProCentury shareholder would receive for a ProCentury common share assuming the 30-day volume weighted average sales price of a share of Meadowbrook common stock is $8.92 (the closing price of Meadowbrook common stock on the trading day immediately before the trading day on which Meadowbrook and ProCentury announced their merger agreement). The “Equivalent Price Per Share of Meadowbrook Common Stock” at May 23, 2008 in the above table represents the product achieved when the closing sales price of a share of Meadowbrook common stock on that date ($6.78) is multiplied by the exchange ratio of 2.5000, which is the number of shares of Meadowbrook common stock that a ProCentury shareholder would receive for a ProCentury common share assuming the 30-day volume weighted average sales price of a share of Meadowbrook common stock is $7.44 (the volume-weighted average sales price of Meadowbrook common stock for the 30-day trading period ending on May 23, 2008). The merger agreement provides that the actual exchange ratio will be set based on the 30-day volume weighted average sales price of a share of Meadowbrook common stock as of the sixth trading day prior to closing, unless such price is less than $8.00, in which case the exchange ratio will be 2.5000, or if such price is more than $10.50, the exchange ratio will be 1.9048. The “Equivalent Price Per Share of Meadowbrook Common Stock” is also subject to the assumption that the aggregate amount of stock consideration to be paid in the merger will be equal to 55% of the total consideration paid by Meadowbrook.

 

The market price of Meadowbrook common stock will fluctuate between the date of this document and the date on which the merger is completed and after the merger. Because the market price of Meadowbrook common

stock is subject to fluctuations, the exchange ratio may change. In addition, the value of the shares of Meadowbrook common stock that ProCentury shareholders will receive in the merger may increase or decrease after the merger.

 

By voting to approve and adopt the merger agreement and approve the transactions it contemplates, ProCentury shareholders will be choosing to invest in the combined Meadowbrook/ProCentury, because they may receive Meadowbrook common stock in exchange for their ProCentury common shares. An investment in Meadowbrook common stock involves significant risk. In addition to the other information included in this joint proxy statement-prospectus, including the matters addressed in “A Warning About Forward-Looking Statements” beginning on page 37, ProCentury shareholders should carefully consider the matters described below in “Risk Factors” beginning on page 27 when determining whether to vote for approval and adoption of the merger agreement and approve the transactions it contemplates.

 

Meadowbrook.  Meadowbrook’s common stock is traded on the New York Stock Exchange under the symbol “MIG.” The following table sets forth, for the calendar quarter indicated, the high and low market prices per share of Meadowbrook common stock as reported on the New York Stock Exchange and the dividends per share of Meadowbrook common stock:

 

 

The timing and amount of future dividends on shares of Meadowbrook common stock will depend upon earnings, cash requirements, the financial condition of Meadowbrook and its subsidiaries, applicable government regulations and other factors deemed relevant by Meadowbrook’s board of directors.

 

ProCentury.  ProCentury’s common shares are traded on the Nasdaq Global Select Market under the symbol “PROS.” The following table sets forth, for the calendar quarter indicated, the high and low market prices per ProCentury common share as reported on the Nasdaq Global Select Market and the dividends per ProCentury common share:

 

 

The timing and amount of future dividends on ProCentury common shares will depend upon earnings, cash requirements, the financial condition of ProCentury and its subsidiaries, applicable government regulations and other factors deemed relevant by ProCentury’s board of directors.

 

 

The following tables present selected consolidated financial data as of and for each of the years in the five year period ended December 31, 2007 and as of and for the three months ended March 31, 2008 and 2007, for each of Meadowbrook and ProCentury. The information for Meadowbrook is based on the historical financial information that is contained in reports Meadowbrook has previously filed with the Securities and Exchange Commission, or the SEC, which can be found in its Annual Report on Form 10-K for the year ended December 31, 2007 and its Quarterly Report on Form 10-Q for the three months ended March 31 2008. The information for ProCentury is based on the historical financial information that is contained in reports ProCentury has previously filed with the SEC, which can be found in its Annual Report on Form 10-K for the year ended December 31, 2007 and its Quarterly Report on Form 10-Q for the three months ended March 31 2008. See “Where You Can Find More Information” on page 91.

 

You should read the following tables in conjunction with the consolidated financial statements contained in the Annual Reports and the condensed consolidated financial statements contained in the Quarterly Reports described above.

 

Historical results do not necessarily indicate the results that you can expect for any future period.

 

MEADOWBROOK SELECTED HISTORICAL FINANCIAL DATA

 

 

 

 

Unconsolidated GAAP data — Ratio Calculation Table:

 

 

Management uses the GAAP combined ratio and its components to assess and benchmark underwriting performance.

 

The GAAP combined ratio is the sum of the GAAP loss and loss adjustment expense ratio and the GAAP expense ratio. The GAAP loss and loss adjustment expense ratio is the unconsolidated net loss and loss adjustment expense in relation to net earned premiums. The GAAP expense ratio is the unconsolidated policy acquisition and other underwriting expenses in relation to net earned premiums.

 

PROCENTURY SELECTED HISTORICAL FINANCIAL DATA

 

 

 

 

The preliminary Unaudited Pro Forma Condensed Consolidated Balance Sheet at March 31, 2008 combines the historical consolidated balance sheets of Meadowbrook and ProCentury, giving effect to the merger as if it had been consummated on March 31, 2008. The preliminary Unaudited Pro Forma Condensed Consolidated Income Statements for the year ended December 31, 2007 and for the three months ended March 31, 2008 combine the historical

consolidated statements of income of Meadowbrook and ProCentury giving effect to the merger as if it had occurred on January 1, 2007. The preliminary unaudited pro forma condensed consolidated financial statements reflect an exchange ratio of 2.24. However, as explained in this joint proxy statement-prospectus, the exchange ratio may vary as the market price of Meadowbrook common stock fluctuates. The exact exchange ratio will be determined by dividing $20.00 by 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 we complete the merger. If such volume-weighted average price is above $10.50 or below $8.00, the exchange ratio will be fixed at 1.9048 or 2.5000, respectively. The volume-weighted average sales price of Meadowbrook’s common stock for the 30-day trading period ending on May 23, 2008 was $7.44. Using this price, the exchange ratio would be 2.5000. We have adjusted the historical consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, and (3) with respect to the statements of income, expected to have a continuing impact on the combined results. You should read this information in conjunction with the following:

 

 

The preliminary unaudited pro forma condensed consolidated financial statements have been prepared for informational purposes only. The preliminary unaudited pro forma adjustments represent management’s estimates based on information available at this time. The preliminary unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the financial position or results of operations actually would have been had the merger been completed at the dates indicated. In addition, the preliminary unaudited pro forma condensed consolidated financial statements do not purport to project the future financial position or operating results of the combined company. The preliminary unaudited pro forma condensed consolidated financial statements do not give consideration to the impact of possible revenue enhancements, expense efficiencies, synergies or asset dispositions that may result from the merger.

 

The preliminary unaudited pro forma condensed consolidated financial statements have been prepared using the purchase method of accounting with Meadowbrook treated as the accounting acquirer. Accordingly, Meadowbrook’s cost to acquire ProCentury has been allocated to the acquired assets, liabilities and commitments based upon their estimated fair values at the date indicated. The allocation of the purchase price is preliminary and is dependent upon certain valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the final purchase accounting adjustments may be materially different from the preliminary unaudited pro forma adjustments presented herein.

Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2008