SECURITIES  AND  EXCHANGE  COMMISSION
     WASHINGTON,  D.C.  20549
     FORM  10-K

[X]   ANNUAL  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE
      SECURITIES  EXCHANGE  ACT  OF  1934  [FEE  REQUIRED]

For  the  fiscal  year  ended  December  31,  2001.
     OR
[  ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE
       SECURITIES  EXCHANGE  ACT  OF  1934  [NO  FEE  REQUIRED]

For  the  transition  period  from  to
Commission  file  number  0-14697

                  HARLEYSVILLE  GROUP  INC.
          -----------------------------------------
     (Exact  name  of  registrant  as  specified  in  its  charter)

       Delaware                                51-0241172
--------------------                       -------------------
(State  or  other  jurisdiction  of         (I.R.S.  Employer
 incorporation  or  organization)          Identification  No.)

  355  Maple  Avenue,  Harleysville,  PA                19438-2297
-----------------------------------------               ----------
(Address  of  principal  executive  offices)            (Zip  Code)

Registrant's  telephone  number,  including  area  code:  (215)  256-5000

Securities  registered  pursuant  to  Section  12(b)  of  the  Act:  None

Securities  registered  pursuant  to  Section  12(g)  of  the  Act:

                Common  Stock,  $1  par  value
                ------------------------------
                    (Title  of  class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the Registrant was
required  to  file  such  reports)  and  (2)  has  been  subject  to such filing
requirements  for  the  past  90  days.  Yes   X.  No.
                                              ---
Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K  [X].

On  March  8, 2002, the aggregate market value (based on the closing sales price
on  that  date) of the voting stock held by non-affiliates of the Registrant was
$340,728,467.

Indicate the number of shares outstanding of each of the Registrant's classes of
common  stock,  as  of the latest practicable date:  29,564,841 shares of Common
Stock  outstanding  on  March  8,  2002.

                    DOCUMENTS  INCORPORATED  BY  REFERENCE:

1.  Portions of the Registrant's annual report to stockholders for the
    fiscal  year ended December 31, 2001 are incorporated by reference
    in Parts I, II and IV   of  this  report.

2.  Portions  of  the  Registrant's  proxy  statement  relating to the annual
    meeting  of stockholders to be held April 24, 2002 are incorporated by
    reference  in  Parts  I  and  III  of  this  report.

Page  1

<PAGE>


     HARLEYSVILLE  GROUP  INC.
     ANNUAL  REPORT  ON  FORM  10-K

     DECEMBER  31,  2001

           PART  I                                       PAGE
           -------                                       ----
ITEM  1.   BUSINESS                                         3

ITEM  2.   PROPERTIES                                      28

ITEM  3.   LEGAL  PROCEEDINGS                              28

ITEM  4.   SUBMISSION  OF  MATTERS  TO  A  VOTE
           OF SECURITY  HOLDERS                            29

           PART  II
           --------
ITEM  5.   MARKET  FOR  REGISTRANT'S  COMMON  STOCK
           AND  RELATED  STOCKHOLDER  MATTERS              32

ITEM  6.   SELECTED  FINANCIAL  DATA                       32

ITEM  7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS
           OF  FINANCIAL  CONDITION  AND  RESULTS
           OF  OPERATIONS                                  32

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES
           ABOUT  MARKET  RISK                             32

ITEM  8.   FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY
           DATA                                            32

ITEM  9.   CHANGES  IN  AND  DISAGREEMENTS  WITH
           ACCOUNTANTS  ON  ACCOUNTING  AND
           FINANCIAL  DISCLOSURE                           32

           PART  III
           ---------
ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF
           THE  REGISTRANT                                 33

ITEM  11.  EXECUTIVE  COMPENSATION                         33

ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN
           BENEFICIAL  OWNERS  AND  MANAGEMENT             33

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED
           TRANSACTIONS                                    33

           PART  IV
           --------
ITEM  14.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES
           AND  REPORTS  ON  FORM  8-K                     34

Page  2

<PAGE>


     PART  I

ITEM  1.  BUSINESS.
--------  ---------

(A)  GENERAL  DEVELOPMENT  OF  BUSINESS.

     Harleysville  Group  Inc.  (the  "Company") is an insurance holding company
headquartered  in  Pennsylvania  which engages, through its subsidiaries, in the
property  and  casualty insurance business on a regional basis.  As used herein,
"Harleysville  Group"  refers  to  Harleysville Group Inc. and its subsidiaries.
Harleysville  Mutual Insurance Company (the "Mutual Company") owns approximately
56%  of  the  issued  and  outstanding  common  stock  of  the  Company.

     Harleysville  Group and the Mutual Company operate together as a network of
regional  insurance  companies  that  underwrite  a  broad  line of personal and
commercial  coverages.  These  insurance coverages are marketed primarily in the
eastern  and  midwestern  United States through approximately 14,500 independent
insurance  agents  associated  with  approximately  1,900  insurance  agencies.
Regional  offices  are  maintained in Georgia, Indiana, Maryland, Massachusetts,
Michigan,  Minnesota,  New  Jersey,  New  York,  North  Carolina,  Pennsylvania,
Tennessee,  and  Virginia.  The  Company's  property  and  casualty  insurance
subsidiaries  are:  Harleysville-Atlantic  Insurance  Company  ("Atlantic"),
Harleysville  Insurance  Company  ("HIC,"  formerly  Minnesota Fire and Casualty
Company),  Harleysville  Insurance  Company  of New Jersey ("HNJ"), Harleysville
Insurance  Company  of  New  York  ("HIC  New  York," formerly New York Casualty
Insurance Company), Harleysville Insurance Company of Ohio ("HIC Ohio," formerly
Great Oaks Insurance Company), Harleysville Lake States Insurance Company ("Lake
States,"  formerly  Lake  States  Insurance  Company),  Harleysville  Preferred
Insurance  Company ("Preferred," formerly Huron Insurance Company), Harleysville
Worcester  Insurance Company ("Worcester," formerly Worcester Insurance Company)
and  Mid-America  Insurance  Company.

     The Company has followed a regional strategy.  Management believes that the
Company's  regional organization permits each regional operation to benefit from
economies  of  scale  provided  by  centralized  support while encouraging local
marketing  autonomy  and  managerial  entrepreneurship.  Services which directly
involve  the  insured  or  the  agent (i.e., underwriting, claims and marketing)
generally  are performed regionally in accordance with Company-wide standards to
promote  high  quality  service,  while  actuarial,  investment,  legal,  data
processing  and similar services are performed centrally.  The Company's network
of  regional insurance companies has expanded significantly in the last eighteen
years.  In  1983,  the  Company  acquired  Worcester,  a  property  and casualty

Page  3

<PAGE>


insurer which has conducted business in New England since 1823. In 1984, HNJ was
formed  by the Company and began underwriting property and casualty insurance in
New  Jersey.  In  1987,  the  Company acquired Atlantic, a property and casualty
insurer  which  has  conducted  business in the southeastern United States since
1905.  In  1991,  the  Company  acquired Mid-America (formerly named Connecticut
Union  Insurance  Company), which conducted business in Connecticut, and HIC New
York,  which  conducts  business  in  upstate  New  York.  In 1993,  the Company
acquired  Lake  States, which primarily conducts business in Michigan.  In 1994,
the  Company  formed  HIC  Ohio  which  began underwriting property and casualty
insurance  in Ohio.  In 1997, the Company acquired HIC, which primarily conducts
business  in  Minnesota  and  neighboring  states.

     The  Company's  property  and  casualty  subsidiaries  participate  in  an
intercompany  pooling  arrangement whereby these subsidiaries cede to the Mutual
Company  all  of their net premiums written and assume from the Mutual Company a
portion  of  the  pooled  business,  which  includes all of the Mutual Company's
property and casualty insurance business except for new and renewal Pennsylvania
personal  automobile  insurance insured after January 1, 1991 by a subsidiary of
the Mutual Company, Harleysville Pennland Insurance Company ("Pennland") and new
and  renewal  New  Jersey personal automobile insurance insured after January 1,
1992  by  another  subsidiary  of  the Mutual Company, Harleysville-Garden State
Insurance  Company  ("Garden  State").  Beginning  January 1, 1996, Harleysville
Group's  participation  in the pooling arrangement increased from 60% to 65% and
Pennland  became  a participant in the pooling arrangement. Beginning January 1,
1997,  Harleysville  Group's  participation in the pooling arrangement increased
from 65% to 70% and Lake States became a participant in the pooling arrangement.
Beginning  January  1,  1998,  Harleysville Group's participation in the pooling
arrangement  increased  from  70%  to  72%  and  HIC became a participant in the
pooling  arrangement.  See  "Business  -  Narrative  Description  of  Business -
Pooling  Arrangement."

     The  Company  is  a  Delaware  corporation formed in 1979 as a wholly-owned
subsidiary of the Mutual Company.  In May 1986, the Company completed an initial
public  offering  of  its  common  stock, reducing the percentage of outstanding
shares  owned  by  the  Mutual Company to approximately 70%.  In April 1992, the
Mutual  Company  completed  a  secondary  public  offering  of  a portion of the
Company's  common  stock  then  owned  by it, further reducing the percentage of
outstanding  shares  owned  by  the  Mutual  Company.  At December 31, 2001, the
Mutual  Company  owned  approximately  56%  of the Company's outstanding shares.

Page  4

<PAGE>


(B)  FINANCIAL  INFORMATION  ABOUT  SEGMENTS.

     Harleysville  Group  has three segments which consist of the personal lines
of  insurance,  the  commercial  lines of insurance and the investment function.
Financial  information about these segments is set forth in Note 15 of the Notes
to  Consolidated  Financial  Statements.


(C)  NARRATIVE  DESCRIPTION  OF  BUSINESS.

PROPERTY  AND  CASUALTY  UNDERWRITING

     Harleysville  Group and the Mutual Company together underwrite a broad line
of  personal  and  commercial  property  and  casualty  coverages,  including
automobile,  homeowners,  commercial  multi-peril and workers compensation.  The
Mutual  Company  and  the  Company's  insurance  subsidiaries  participate in an
intercompany  pooling  arrangement  under which such subsidiaries and the Mutual
Company  combine  their  property  and  casualty business.  Garden State has not
participated  in  the  pooling  arrangement.  On January 1, 1996, Pennland began
participation  in the pooling arrangement and Harleysville Group's participation
increased  to 65%. Beginning January 1, 1997, Harleysville Group's participation
in  the  pooling  arrangement increased from 65% to 70% and Lake States became a
participant  in  the  pooling  arrangement.   Beginning  January  1,  1998,
Harleysville Group's participation in the pooling arrangement increased from 70%
to  72%  and  HIC  became  a  participant  in  the  pooling  arrangement.

     Harleysville  Group  and  the  Mutual  Company  have a pooled rating of "A"
(excellent)  by  A.M.  Best  Company,  Inc. ("Best's") based upon 2000 statutory
results  and  operating  performance.  Best's  ratings  are  based  upon factors
relevant  to  policyholders  and  are  not  directed  toward  the  protection of
investors.  Management believes that the Best's rating is an important factor in
marketing  Harleysville  Group's  products  to  its  agents  and  customers.

     The  following  table  sets  forth  ratios  for  the Company's property and
casualty  subsidiaries,  prepared  in  accordance  with  accounting  principles
generally  accepted  in the United States of America ("GAAP") and with statutory
accounting  practices  ("SAP")  prescribed  or  permitted  by  state  insurance
authorities.  The statutory combined ratio is a standard measure of underwriting
profitability.  This  ratio  is  the sum of (i) the ratio of incurred losses and
loss settlement expenses to net earned premium ("loss ratio"); (ii) the ratio of
expenses  incurred  for  commissions,

Page  5

<PAGE>


premium  taxes,  administrative  and  other underwriting expenses to net written
premium  ("expense ratio"); and (iii) the ratio of dividends to policyholders to
net earned premium ("dividend ratio").  The GAAP combined ratio is calculated in
the  same manner except that it is based on GAAP amounts and the denominator for
each  component  is  net earned premium.  When the combined ratio is under 100%,
underwriting  results are generally considered profitable.  Conversely, when the
combined  ratio  is  over  100%,  underwriting  results are generally considered
unprofitable.  The  combined  ratio  does not reflect investment income, federal
income  taxes  or  other  non-operating income or expense.  Harleysville Group's
operating  income  is  a  function  of  both underwriting results and investment
income.

Page  6

<PAGE>


                        HARLEYSVILLE GROUP BUSINESS ONLY
<TABLE>
<CAPTION>



                                   YEAR ENDED DECEMBER 31,
                                  ------------------------
                                   2001     2000     1999
                                  ------   ------   ------
<S>                               <C>      <C>      <C>
GAAP combined ratio               104.7%   106.2%   108.3%
                                  =====    =====    =====
Statutory operating ratios:
   Loss ratio                      71.2%    71.7%    73.9%
   Expense and dividend ratios     33.0%    34.4%    33.9%
                                  -----    -----    -----
   Statutory combined ratio       104.2%   106.1%   107.8%
                                  =====     ====    =====
</TABLE>

     The following table sets forth the net written premiums and combined ratios
by line of insurance, prepared in accordance with statutory accounting practices
prescribed  or  permitted by state insurance authorities, for Harleysville Group
for  the  periods  indicated:
<TABLE>
<CAPTION>



                             HARLEYSVILLE GROUP BUSINESS ONLY
                                 YEAR ENDED DECEMBER 31,
                            ---------------------------------
                               2001        2000       1999
                            ----------   --------   --------
                                  (dollars in thousands)
<S>                           <C>        <C>        <C>
NET PREMIUMS WRITTEN
--------------------
  Commercial:
   Automobile                 $171,106   $142,589   $144,095
   Workers compensation        117,583    108,473    114,235
   Commercial multi-peril      183,216    159,679    155,667
   Other commercial             43,955     35,978     34,549
                              --------   --------   --------
     Total commercial          515,860    446,719    448,546
                              --------   --------   --------
  Personal:
   Automobile                  151,270    168,116    185,477
   Homeowners                   70,679     75,551     78,755
   Other personal                9,778     11,086     11,561
                              --------   --------   --------
     Total personal            231,727    254,753    275,793
                               -------   --------   --------
      Total Harleysville
       Group Business         $747,587   $701,472   $724,339
                              ========   ========   ========

COMBINED RATIOS
---------------
  Commercial:
   Automobile                     96.6%     106.9%     116.4%
   Workers compensation          105.7%     102.2%      88.2%
   Commercial multi-peril        100.2%     105.8%     118.0%
   Other commercial               95.5%      95.2%     110.9%
     Total commercial            100.0%     104.5%     109.2%
  Personal:
   Automobile                    112.8%     106.0%      99.4%
   Homeowners                    117.8%     117.4%     121.4%
   Other personal                 85.2%      91.2%      96.3%
     Total personal              113.1%     108.7%     105.6%
      Total Harleysville
       Group Business            104.2%     106.1%     107.8%
</TABLE>

Page  7

<PAGE>


POOLING  ARRANGEMENT

     The  Company's  property  and  casualty  subsidiaries  participate  in  an
intercompany  pooling arrangement with the Mutual Company. The underwriting pool
is  intended  to produce a more uniform and stable underwriting result from year
to  year  for  all companies in the pool than they would experience individually
and  to reduce the risk of loss of any of the pool participants by spreading the
risk  among all the participants.  Each company participating in the pool has at
its  disposal  the  capacity  of  the  entire pool, rather than being limited to
policy  exposures  of a size commensurate with its own capital and surplus.  The
additional  capacity  exists  because such policy exposures are spread among all
the  pool participants which each have their own capital and surplus. Regulation
is  applied  to  the  individual  companies  rather  than  to  the  pool.

     Pursuant  to  the  terms  of the pooling agreement with the Mutual Company,
each  of  the  Company's  subsidiary  participants  cedes  premiums,  losses and
expenses on all of its business to the Mutual Company which, in turn, retrocedes
to such subsidiaries a specified portion of premiums, losses and expenses of the
Mutual  Company  and  such  subsidiaries.  Under  the  terms of the intercompany
pooling  agreement  which  became  effective  January 1, 1986, Preferred and HNJ
ceded  to the Mutual Company all of their insurance business written on or after
January  1,  1986.  All  of the Mutual Company's property and casualty insurance
business  written  or in force on or after January 1, 1986, was also included in
the pooled business.  The pooling agreement provides, however, that Harleysville
Group  is  not  liable  for  any losses occurring prior to January 1, 1986.  The
pooling agreement does not legally discharge Harleysville Group from its primary
liability  for  the  full  amount  of the policies ceded.  However, it makes the
Mutual Company liable to Harleysville Group to the extent of the business ceded.

     The  following  table  sets  forth  a  chronology  of the changes that have
occurred  in the pooling agreement since it became effective on January 1, 1986.

Page  8

<PAGE>
<TABLE>
<CAPTION>


          CHRONOLOGY OF CHANGES IN POOLING AGREEMENT

                   HARLEYSVILLE    MUTUAL
                   GROUP           COMPANY
     DATE          PERCENTAGE      PERCENTAGE            EVENT
--------------     -------------   ----------    ---------------------
<S>                   <C>            <C>       <C>
January 1, 1986       30%            70%       Current pooling agreement began
                                               with Preferred and HNJ as
                                               participants with the Mutual
                                               Company.

July 1, 1987          35%          65%         Atlantic acquired and included
                                               in the pool.

January 1, 1989       50%          50%         Worcester included in the pool.

January 1, 1991       60%          40%         HIC New York and Mid-America
                                               acquired and included in the pool
                                               and the Mutual Company formed
                                               Pennland (not a pool participant)
                                               to write Pennsylvania personal
                                               automobile business.

January 1, 1996       65%          35%         Pennland included in the pool.

January 1, 1997       70%          30%         Lake States included in the pool.

January 1, 1998       72%          28%         HIC included in the pool.
</TABLE>


     Effective  as  of  January  1,  1992,  Garden  State began insuring new and
renewal New Jersey personal automobile insurance policies that had been included
in  the  pooling  arrangement.  Garden State is not a participant in the pooling
arrangement.

     When  pool participation percentages increased as described above, cash and
investments  equal  to  the  net  increase  in liabilities assumed less a ceding
commission  related  to the net increase in the liability for unearned premiums,
was transferred from the Mutual Company to Harleysville Group.  See Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of Operations.

     All  premiums,  losses,  loss  settlement  expenses  and other underwriting
expenses  are prorated among the parties to the pooling arrangement on the basis
of  their participation in the pool.  The method of establishing reserves is set
forth  under  "Business  -  Reserves."  The  pooling agreement may be amended or
terminated  by  agreement of the parties.  Termination may occur only at the end
of  a calendar year.  The Company and the Mutual Company maintain a coordinating
committee  which  reviews  and  evaluates  the  pooling arrangements between the
Company  and  the  Mutual  Company.  See  "Business-Relationship with the Mutual
Company."  In  evaluating pool participation changes, the coordinating committee
considers  current and proposed acquisitions, the relative capital positions and
revenue

Page  9

<PAGE>


contributions  of  the  pool  participants,  and growth prospects and ability to
access  capital  markets  to  support  that  growth. Harleysville Group does not
intend  to  terminate  its  participation  in  the  pooling  agreement.

     The following table sets forth the net premiums written and combined ratios
by  line  of  insurance  for  the  total  pooled  business  after elimination of
management  fees,  prepared  in  accordance  with statutory accounting practices
prescribed  or  permitted  by  state  insurance  authorities,  for  the  periods
indicated.
<TABLE>
<CAPTION>


                                      TOTAL POOLED BUSINESS
                                     YEAR ENDED DECEMBER 31,
                              ------------------------------------
                                 2001         2000         1999
                              ----------    --------    ----------
                                       (dollars in thousands)
NET PREMIUMS WRITTEN
--------------------
<S>                           <C>           <C>         <C>
  Commercial:
   Automobile                 $  238,262    $198,579    $  200,678
   Workers compensation           63,310     150,657       158,660
   Commercial multi-peril        259,082     225,960       220,410
   Other                          62,324      51,154        49,177
                              ----------    --------    ----------
     Total commercial            722,978     626,350       628,925
                              ----------    --------    ----------

  Personal:
   Automobile                    210,834     234,347       258,463
   Homeowners                    100,685     107,632       112,203
   Other                          13,588      15,406        16,066
                              ----------    --------    ----------
     Total personal              325,107     357,385       386,732
                              ----------    --------    ----------

      Total pooled
       business               $1,048,085    $983,735    $1,015,657
                              ==========    ========    ==========

COMBINED RATIOS (1)
------------------
  Commercial:
   Automobile                       96.7%      107.3%        116.4%
   Workers compensation            105.5%      102.8%         88.5%
   Commercial multi-peril           99.1%      104.6%        117.7%
   Other                            94.4%       93.3%        108.6%
     Total commercial               99.5%      104.2%        109.1%

  Personal:
   Automobile                      113.2%      106.2%         99.3%
   Homeowners                      121.9%      117.4%        120.6%
   Other                            85.3%       91.2%         96.2%
     Total personal                114.7%      108.9%        105.4%

      Total pooled business        104.4%      105.9%        107.7%
</TABLE>


----------------

(1)  See  the  definition  of  combined  ratio  in "Business-Property
     and Casualty Underwriting".

Page  10

<PAGE>


     The  combined ratio for the total pooled business differs from Harleysville
Group's  combined  ratio  primarily  because  of  the  effect  of  the aggregate
catastrophe reinsurance agreement with the Mutual Company.  See Note 2(a) of the
Notes  to  Consolidated  Financial  Statements  and  Business-Reinsurance.

     RESERVES.  Loss reserves are estimates at a given point in time of what the
insurer expects to pay to claimants for claims occurring on or before such point
in  time,  including  claims  which  have  not yet been reported to the insurer.
These  are  estimates,  and  it can be expected that the ultimate liability will
exceed  or  be  less  than  such  estimates.  During the loss settlement period,
additional  facts regarding individual claims may become known, and consequently
it  often  becomes  necessary  to  refine and adjust the estimates of liability.

     Harleysville  Group  maintains  reserves for the eventual payment of losses
and  loss  settlement  expenses  with  respect  to  both reported and unreported
claims.  Loss  settlement  expense  reserves  are intended to cover the ultimate
costs  of  settling  all  claims,  including  investigation and litigation costs
relating  to  such  claims.  The  amount of loss reserves for reported claims is
based  primarily upon a case-by-case evaluation of the type of risk involved and
knowledge  of  the circumstances surrounding each claim and the insurance policy
provisions  relating  to  the  type  of  loss.  The amounts of loss reserves for
unreported  claims  and  loss  settlement expense reserves are determined on the
basis  of  historical  information  by  line of insurance as adjusted to current
conditions.  Inflation  is  implicitly  provided  for  in the reserving function
through  analysis  of costs, trends and reviews of historical reserving results.
Reserves  are  closely monitored and are recomputed periodically by Harleysville
Group  and  the  Mutual  Company  using new information on reported claims and a
variety  of  statistical techniques.  With the exception of reserves relating to
some  workers  compensation  long-term  disability  cases, loss reserves are not
discounted.

Page  11

<PAGE>


     The following table sets forth a reconciliation of beginning and ending net
reserves  for unpaid losses and loss settlement expenses for the years indicated
for  the  total  pooled  business  on  a  statutory  basis.
<TABLE>
<CAPTION>


                                     TOTAL POOLED BUSINESS
                                     YEAR ENDED DECEMBER 31,
                             --------------------------------------
                                2001          2000          1999
                             ----------    ----------    ----------
                                         (in thousands)
<S>                           <C>           <C>           <C>
Reserves for losses
  and loss settlement
  expenses, beginning
  of the year                 $1,136,848    $1,181,066    $1,172,664
                              ----------    ----------    ----------

Incurred losses and loss
  settlement expenses:
   Provision for insured
     events of the current
     year                        756,289       759,471       816,931
   Decrease in provision
     for insured events of
     prior years                 (22,444)      (65,319)      (82,024)
                              ----------     ---------    ----------

       Total incurred
         losses and loss
         settlement expenses     733,845       694,152       734,907
                              ----------    ----------    ----------

Payments:
   Losses and loss
     settlement expenses
     attributable to
     insured events of
     the current year            327,615       346,846       367,979
   Losses and loss
     settlement expenses
     attributable to
     insured events of
     prior years                 395,561       391,524       358,526
                              ----------    ----------    ----------

       Total payments            723,176       738,370       726,505
                              ----------    ----------    ----------

Reserves for losses and
  loss settlement expenses,
  end of the year             $1,147,517    $1,136,848    $1,181,066
                              ==========    ==========    ==========
</TABLE>


Page  12

<PAGE>


     The  following  table sets forth the development of net reserves for unpaid
losses  and  loss  settlement  expenses  from  1991  through 2001 for the pooled
business  of the Mutual Company and Harleysville Group.  "Reserve for losses and
loss  settlement  expenses" sets forth the estimated liability for unpaid losses
and  loss settlement expenses recorded at the balance sheet date for each of the
indicated  years.  This  liability represents the estimated amount of losses and
loss  settlement  expenses for claims arising in the current and all prior years
that  are  unpaid  at  the balance sheet date, including losses incurred but not
reported.

     The  "Reserves  reestimated"  portion  of  the  table shows the reestimated
amount  of  the  previously  recorded  liability  based  on  experience  of each
succeeding  year.  The  estimate  is increased or decreased as payments are made
and  more  information  becomes  known  about  the  severity of remaining unpaid
claims.  For  example,  the  1991 liability has developed a redundancy after ten
years,  in  that reestimated losses and loss settlement expenses are expected to
be  lower  than  the  initial  estimated liability established in 1991 of $743.0
million  by  $14.3  million,  or  1.9%.

     The  "Cumulative  amount  of  reserves paid" portion of the table shows the
cumulative  losses and loss settlement expense payments made in succeeding years
for  losses  incurred  prior  to  the balance sheet date.  For example, the 1991
column indicates that as of December 31, 2001, payments of $664.1 million of the
currently reestimated ultimate liability for losses and loss settlement expenses
had  been  made.

     The  "Redundancy"  portion  of the table shows the cumulative redundancy at
December  31,  2001  of  the  reserve  estimate  shown  on  the  top line of the
corresponding  column.  A redundancy in reserves means that reserves established
in  prior  years  exceeded  actual  losses  and loss settlement expenses or were
reevaluated  at  less  than  the  original  reserved  amount.

     The  following  table  includes  all  2001 pool participants as if they had
participated  in  the  pooling  arrangement  in  all  years indicated except for
acquired  pool  participant  companies,  which  are  included from their date of
acquisition.  Under  the terms of the pooling arrangement, Harleysville Group is
not  responsible for losses on the pooled business occurring prior to January 1,
1986.

Page  13

<PAGE>

<TABLE>
<CAPTION>

                                                       TOTAL  POOLED  BUSINESS

                                                      YEAR  ENDED  DECEMBER  31,
            1991     1992      1993      1994      1995      1996        1997        1998        1999        2000        2001
                                                           (dollars  in  thousands)


<S>        <C>       <C>       <C>       <C>       <C>       <C>         <C>         <C>         <C>         <C>         <C>
Reserve for
 losses and
 loss
 settlement
 expenses  $742,989  $784,514  $825,028  $855,305  $900,336  $1,033,376  $1,124,910  $1,172,664  $1,181,066  $1,136,848  $1,147,517
Reserves
  reestimated:
One year
  later     739,030   781,746   819,494   837,255   856,493     995,656   1,068,687   1,090,640   1,115,747   1,114,404
Two years
  later     738,557   778,064   802,213   817,330   820,894     961,228   1,005,208   1,042,183   1,097,544
Three years
  later     737,408   774,420   800,129   800,365   799,191     918,006     972,318   1,027,968
Four years
  later     736,458   776,687   792,901   790,234   768,704     894,015     961,721
Five years
  later     742,878   770,420   786,731   768,815   748,667     887,697
Six years
  later     741,032   767,777   771,015   753,928   743,859
Seven years
  later     741,941   756,912   759,080   750,226
Eight years
  later     733,082   749,287   755,744
Nine years
  later     730,214   746,889
Ten years
  later     728,677

Cumulative
 amount of
 reserves paid:
One year
  later     236,833   244,210   255,078   246,935   273,744     328,691     338,377     358,526     391,524     395,561
Two years
  later     383,358   402,394   403,601   406,944   448,497     523,307     540,522     562,908     609,016
Three years
  later     485,045   503,309   511,281   525,840   566,804     656,234     674,740     695,315
Four years
  later     550,456   572,656   587,900   599,336   643,451     741,013     756,502
Five years
  later     594,452   616,940   629,908   645,271   690,301     790,902
Six years
  later     619,780   639,186   657,570   677,668   720,664
Seven years
  later     633,771   656,913   677,123   698,652
Eight years
  later     645,576   671,091   691,518
Nine years
  later     655,869   682,514
Ten years
  later     664,067

Redundancy   14,312    37,625    69,284   105,079   156,477     145,679     163,189     144,696     83,522     22,444
Redundancy
  expressed
  as a percent
  of year end
  reserves      1.9%      4.8%      8.4%     12.3%     17.4%       14.1%       14.5%       12.3%       7.1%       2.0%
Cumulative
  redundancy
  excluding
  pre-1986
  reserve
  develop-
  ment(1)    40,306    60,743    91,375   125,509   173,366     157,823     170,422     149,442     86,736     23,271

</TABLE>

(1)  Excludes years not included in pooling arrangement with Harleysville Group.

Page  14

<PAGE>


     Harleysville  Group's reserves primarily are derived from those established
for  the total pooled business.  The terms of the pooling agreement provide that
Harleysville  Group  is  responsible only for pooled losses incurred on or after
the  effective  date,  January  1,  1986.  The  GAAP  loss reserve experience of
Harleysville  Group,  as  reflected in its financial statements, is shown in the
following  table  which  sets forth a reconciliation of beginning and ending net
reserves  for unpaid losses and loss settlement expenses for the years indicated
for  the  business  of  Harleysville  Group  only.

                               HARLEYSVILLE  GROUP  BUSINESS  ONLY
<TABLE>
<CAPTION>


                                     YEAR ENDED DECEMBER 31,
                               ----------------------------------
                                  2001        2000        1999
                               ---------    --------    ---------
(in thousands)
<S>                             <C>         <C>         <C>
Reserves for losses and
  loss settlement expenses,
  beginning of the year         $792,584    $823,914    $813,519
                                --------    --------    --------

Incurred losses and loss
  settlement expenses:
   Provision for insured
    events of the current
    year                         537,172     541,738     582,534
   Decrease in provision
    for insured events of
    prior years                  (17,350)    (48,937)    (59,532)
                                --------    --------    --------

       Total incurred losses
        and loss settlement
        expenses                 519,822     492,801     523,002
                                --------    --------    --------

Payments:
  Losses and loss settlement
   expenses attributable to
   insured events of the
   current year                  229,435     244,978     259,635
  Losses and loss settlement
   expenses attributable to
   insured events of prior
   years                         282,110     279,153     252,972
                                --------    --------    --------

       Total payments            511,545     524,131     512,607
                                --------    --------    --------

Reserves for losses and loss
  settlement expenses, end
  of the year                   $800,861    $792,584    $823,914
                                ========    ========    ========
</TABLE>



     See  page  17  for  reconciliation  of  net  reserves  to  gross  reserves.

Page  15

<PAGE>


     Harleysville  Group  recognized  a  decrease  in  the provision for insured
events  of prior years (favorable development) of $17.4, $48.9 and $59.5 million
in  2001,  2000  and  1999,  respectively.  The  favorable  development for 2001
primarily  relates  to lower-than-expected loss adjusting expenses and, for 2000
and  1999,  lower-than-expected  claim  severity in the workers compensation and
automobile  lines of business.  The 2001 and 2000 favorable development includes
$14.8  million  and $20.2 million of reductions in loss adjustment expenses.  In
both  years,  such reductions are related to benefits from initiatives to reduce
costs  of  adjusting  claims  and  to  the  favorable  development  on  losses.

     The  following  table sets forth the development of net reserves for unpaid
losses  and  loss  settlement  expenses  for  Harleysville Group.  The effect of
changes  to the pooling agreement participation is reflected in this table.  For
example,  the  January  1,  1996  increase  in  Harleysville  Group's  pooling
participation from 60% to 65% is reflected in the first line of the 1996 column.
Amounts  of  assets  equal  to  increases  in net liabilities was transferred to
Harleysville  Group  from the Mutual Company in conjunction with each respective
pooling  change.  The  amount  of the assets transferred has been netted against
and  has  reduced  the  cumulative  amounts  paid for years prior to the pooling
changes.  For  example,  the  1995  column of the "Cumulative amount of reserves
paid"  portion  of the table reflects the assets transferred in conjunction with
the 1996 increase in the pooling percentage from 60% to 65% as a decrease netted
in the "one year later" line.  The cumulative amounts paid are reflected in this
manner  to maintain comparability.  This is because when Harleysville Group pays
claims subsequent to the date of a pool participation increase, the amounts paid
are greater, however, the prior year's reserve amounts are reflective of a lower
pool participation percentage.  By reflecting pooling participation increases in
this  manner,  loss  development  is  not  obscured.  Loss  development reflects
Harleysville  Group's  share of the total pooled business loss development since
January  1,  1986  when  Harleysville  Group  began  participation,  plus  loss
development  of  any  subsidiary  not  participating  in  the pooling agreement.

     Loss  development information for the total pooled business is presented on
pages  12  to  14  to provide greater analysis of underlying claims development.

Page  16

<PAGE>


                                 HARLEYSVILLE  GROUP  BUSINESS
<TABLE>
<CAPTION>



                                                     YEAR ENDED DECEMBER 31,

                1991      1992      1993      1994      1995      1996      1997      1998      1999      2000      2001
                                                          (dollars in thousands)
<S>             <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Reserve for
 losses
 and loss
 settlement
 expenses       $406,619  $437,883  $499,272  $535,452  $576,653  $718,700  $793,563  $813,519  $823,914  $792,584  $800,861
Reserves
 reestimated:
One year
  later          405,749   438,135   496,057   524,565   541,654   688,972   750,956   753,987   774,977   775,234
Two years
  later          404,849   435,005   483,635   507,090   513,555   662,393   704,157   717,324   761,234
Three years
  later          403,240   430,728   477,164   491,919   496,138   630,170   678,757   706,491
Four years
  later          400,579   429,125   468,804   482,834   473,084   611,179   670,534
Five years
  later          401,675   421,408   462,571   466,309   456,940   606,037
Six years
  later          397,275   417,715   450,152   453,934   452,885
Seven years
  later          396,139   408,789   439,842   450,675
Eight years
  later          388,657   401,582   436,846
Nine years
  later          384,874   399,261
Ten years
  later          383,173

Cumulative
 amount
 of reserves
 paid:
One year
  later          135,067   144,465   161,557   164,849   105,774   200,907   228,622   252,972   279,153   282,110
Two years
  later          219,233   234,991   254,840   219,225   204,030   330,158   371,624   397,685   433,901
Three years
  later          276,451   292,381   290,667   283,816   281,546   423,337   465,897   491,274
Four years
  later          312,539   314,848   329,830   330,705   334,204   482,016   523,050
Five years
  later          328,682   335,411   355,338   361,250   365,574   516,221
Six years
  later          338,515   347,731   372,727   382,214   385,720
Seven years
 later           345,511   357,966   384,443   395,607
Eight years
 later           351,482   365,812   393,092
Nine years
 later           356,531   372,321
Ten years
 later           360,718

Redundancy        23,446    38,622    62,426    84,777   123,768   112,663   123,029   107,028    62,680    17,350

Redundancy
 expressed
 as a percent
 of year end
 reserves            5.8%      8.8%     12.5%     15.8%     21.5%     15.7%     15.5%     13.2%      7.6%      2.2%

Gross
 reserve                  $486,608  $560,811  $603,088  $645,941  $796,820  $868,393  $893,420  $901,352  $864,843  $879,056
Ceded
 reserve                    48,725    61,539    67,636    69,288    78,120    74,830    79,901    77,438    72,259    78,195
                          --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
Net
 reserve                  $437,883  $499,272  $535,452  $576,653  $718,700  $793,563  $813,519  $823,914  $792,584  $800,861
                          ========  ========  ========  ========  ========  ========  ========  ========  ========  ========

Gross
  re-estimated            $453,548  $507,564  $520,157  $523,133  $681,995  $745,456  $778,626  $843,444  $870,609
Ceded
  re-estimated              54,287    70,718    69,482    70,248    75,958    74,922    72,135    82,210    95,375
                          --------  --------  --------  --------  --------  --------  --------  --------  --------
Net
  re-estimated            $399,261  $436,846  $450,675  $452,885  $606,037  $670,534  $706,491  $761,234  $775,234
                          ========  ========  ========  ========  ========  ========  ========  ========  ========
</TABLE>

Note:  The amount of cash and investments received equal to the increase in
       liabilities for unpaid losses and loss settlement expenses was
       $55,350,000, $93,966,000, $28,318,000, and $12, 392,000 for the
       changes in pool participation in 1991, 1996, 1997, and 1998,
        respectively.

Page  17

<PAGE>


     REINSURANCE.  Harleysville Group follows the customary industry practice of
reinsuring  a portion of its exposures and paying to the reinsurers a portion of
the premiums received on all policies.  Insurance is ceded principally to reduce
the  net  liability  on  individual  risks  and  to protect against catastrophic
losses.  Reinsurance  does  not  legally  discharge  an insurer from its primary
liability  for  the  full  amount  of  the  policies,  although it does make the
assuming reinsurer liable to the insurer to the extent of the reinsurance ceded.
Therefore,  a  ceding  company  is  subject  to  credit risk with respect to its
reinsurers.

     The  reinsurance  described  below  is  maintained  for  the  Company's
subsidiaries  and  the  Mutual  Company  and  its  wholly-owned  subsidiaries.
Reinsurance premiums and recoveries are allocated to participants in the pooling
agreement  according  to  pooling  percentages.

     Reinsurance  for  property  and  auto  physical  damage losses is currently
maintained  under  a  per  risk  excess  of  loss  treaty  affording recovery to
$4,250,000  ($9,250,000  effective  October  1,  2001),  above  a  retention  of
$750,000.  Harleysville  Group's  2001  pooling  share of such recovery would be
$3,060,000 ($6,660,000 effective October 1, 2001) above a retention of $540,000.
Effective  January  1,  2002, the coverage on this treaty was changed to provide
for  recovery  of  $8,500,000 in excess a retention of $1,500,000.  Harleysville
Group's  2002  pooling share of a recovery would be $6,120,000 above a retention
of  $1,080,000.  In  addition, the Company's subsidiaries and the Mutual Company
and  its wholly-owned subsidiaries are reinsured under a catastrophe reinsurance
treaty  effective for one year from July 1, 2001 which provides coverage ranging
from  85.5% to 95% of up to $137 million in excess of a retention of $30 million
for  any  given  catastrophe.  Harleysville  Group's  2001 pooling share of this
coverage  would  range  from  85.5%  to  95% of up to $99 million in excess of a
retention  of $21.6 million for any given catastrophe.  Pursuant to the terms of
the  treaty,  the  maximum  recovery  would  be $124 million for any catastrophe
involving  an  insured loss equal to or greater than $167 million.  Harleysville
Group's  pooling  share  of  this  maximum recovery would be $89 million for any
catastrophe  involving  an  insured loss of $120 million or greater.  The treaty
includes  reinstatement  provisions  providing  for  coverage  for  a  second
catastrophe  and  requiring  payment  of an additional premium in the event of a
first  catastrophe  occurring.  Harleysville  Group  has  not  purchased  funded
catastrophe  covers.

     Casualty  reinsurance  (including  liability  and  workers compensation) is
currently  maintained  under  an  excess  of  loss  treaty affording recovery to
$18,750,000  above  a  retention  of  $1,250,000  for  each  loss  occurrence.
Harleysville  Group's  2001

Page  18

<PAGE>


pooling  share  of  such  recovery  would  be  $13,500,000  above a retention of
$900,000.  Effective  January  1,  2002,  the  retention  on  this  program  was
increased  to  $2,000,000.  In  addition,  a  new layer of coverage was obtained
affording recovery to 90% of $20,000,000 in excess of $20,000,000.  Harleysville
Group's  2002  pooling  share  of  a recovery would be up to $25,920,000 above a
retention  of  $1,440,000.  In  addition,  there  is  reinsurance  to  protect
Harleysville  Group from large workers compensation losses in 2001. For umbrella
liability coverages, reinsurance protection up to $14,000,000 is provided over a
retention  of  $1,000,000. Harleysville Group's 2001 pooling share would provide
for  recovery  of  $10,080,000  over  a  retention  of  $720,000.

     Harleysville  Group  has  a  reinsurance  agreement with the Mutual Company
whereby the Mutual Company reinsures accumulated catastrophe losses in a quarter
up  to  $14,400,000 in excess of $3,600,000 in return for a reinsurance premium.
The  agreement  excludes  catastrophe  losses  resulting  from  earthquakes  or
hurricanes.

     The  terms  and  charges  for reinsurance coverage are typically negotiated
annually.  The  reinsurance market is subject to conditions which are similar to
those  in the direct property and casualty insurance market, and there can be no
assurance  that  reinsurance  will remain available to Harleysville Group to the
same  extent  and  at  the  same  cost  currently  maintained.

     Harleysville  Group  considers numerous factors in choosing reinsurers, the
most important of which are the financial stability and credit worthiness of the
reinsurer.  Harleysville  Group  has not experienced any material collectibility
problems  for  its  reinsurance  recoverables.

     COMPETITION.  The  property  and  casualty  insurance  industry  is  highly
competitive  on  the  basis  of  both  price  and  service.  There  are numerous
companies competing for this business in the geographic areas where Harleysville
Group  operates,  many  of  which are substantially larger and have considerably
greater  financial  resources than Harleysville Group.  In addition, because the
insurance  products  of  Harleysville  Group and the Mutual Company are marketed
exclusively through independent insurance agencies, most of which represent more
than  one  company,  Harleysville  Group  faces  competition within each agency.

Page  19

<PAGE>


INVESTMENTS

     An  important element of the financial results of Harleysville Group is the
return on invested assets.  An investment objective of  Harleysville Group is to
maintain  a widely diversified fixed maturities portfolio structured to maximize
after-tax  investment income while minimizing credit risk through investments in
high quality instruments.  An objective also is to provide adequate funds to pay
claims  without  forced sales of investments. Harleysville Group has invested in
equity  securities  with the objective of capital appreciation.  At December 31,
2001, approximately 100% of the fixed maturity investment portfolio was rated at
investment  grade.  The  investment portfolio did not contain any real estate or
mortgage  loans.

     Harleysville  Group  has adopted and follows an investment philosophy which
precludes  the  purchase  of  non-investment  grade  fixed  income  securities.
However,  due  to uncertainties in the economic environment, it is possible that
the  quality  of  investments held in Harleysville Group's portfolio may change.

Page  20

<PAGE>


     The  following  table  shows  the composition of Harleysville Group's fixed
maturity  investment  portfolio  at  amortized  cost,  excluding  short-term
investments,  by  rating  as  of  December  31,  2001:

<TABLE>
<CAPTION>



                                             DECEMBER 31, 2001
                                          -----------------------
                                            AMOUNT       PERCENT
                                          ----------     --------

                                              (dollars in thousands)
RATING(1)
---------

<S>                                       <C>              <C>
U.S. Treasury and U.S. agency bonds(2)    $  234,276       16.8%
Aaa                                          430,499       30.9
Aa                                           426,913       30.6
A                                            260,186       18.6
Baa                                           43,672        3.1
                                          ----------      -----

      Total                               $1,395,546      100.0%
                                          ==========      =====
</TABLE>

--------------

(1)  Ratings  assigned  by  Moody's  Investors  Services,  Inc.
(2)  Includes  GNMA  pass-through  obligations  and  collateralized  mortgage
     obligations.

     Harleysville  Group  invests  in  both taxable and tax-exempt securities as
part  of  its  strategy  to  maximize after-tax income. Such strategy considers,
among other factors, the impact of the alternative minimum tax. Tax-exempt bonds
made  up  approximately  40%,  45%  and 46% of the total investment portfolio at
December  31,  2001,  2000  and  1999,  respectively.

     The  following  table  shows  the  composition  of  Harleysville  Group's
investment  portfolio  at  carrying  value, excluding short-term investments, by
type  of  security  as  of  December  31,  2001:

<TABLE>
<CAPTION>



                                   DECEMBER 31, 2001
                               ------------------------
                                 AMOUNT        PERCENT
                               ----------      --------
                                 (dollars in thousands)
<S>                             <C>            <C>
Fixed maturities:
  U.S. Treasury obligations     $    39,816      2.5%
  U.S. agency obligations            33,237      2.1
  Mortgage-backed securities        168,169     10.7
  Obligations of states and
    political subdivisions          623,405     39.6
  Corporate securities              559,136     35.5
                                -----------    -----

      Total fixed maturities      1,423,763     90.4
                                 ----------    -----

Equity securities                   150,686      9.6
                                 ----------    -----

       Total                     $1,574,449    100.0%
                                 ==========    =====
</TABLE>


Page  21

<PAGE>


     Investment  results  of  Harleysville  Group's  fixed  maturity  investment
portfolio  for  each of the three years ended December 31, 2001 are shown in the
following  table:
<TABLE>
<CAPTION>



                               YEAR ENDED DECEMBER 31,
                         ------------------------------------
                            2001         2000        1999
                         ----------   ---------   -----------
                               (dollars in thousands)
<S>                      <C>          <C>          <C>
  Invested assets(1)     $1,379,551   $1,361,310   $1,356,853
  Investment income(2)   $   83,191   $   83,958   $   83,457
  Average yield                 6.0%         6.2%         6.2%
</TABLE>

--------------

(1) Average of the aggregate invested amounts at amortized cost at the beginning
    and  end  of  the  period.

(2)  Investment income does not include investment expenses, realized investment
     gains  or  losses  or  provision  for  income  taxes.

     The following table indicates the composition of Harleysville Group's fixed
maturity  investment  portfolio  at  carrying  value,  excluding  short-term
investments,  by  time  to  maturity  as  of  December  31,  2001:
<TABLE>
<CAPTION>



                                   DECEMBER 31, 2001
                                -----------------------
                                   AMOUNT      PERCENT
                                -----------    --------
                                 (dollars in thousands)
           DUE IN(1)
          ----------
<S>                              <C>            <C>
1 year or less                   $   76,572       5.4%
Over 1 year through 5 years         410,824      28.8
Over 5 years through 10 years       664,271      46.7
Over 10 years                       103,927       7.3
                                 ----------     -----
                                  1,255,594      88.2

Mortgage-backed securities          168,169      11.8
                                 ----------     -----

     Total                       $1,423,763     100.0%
                                 ==========     =====
</TABLE>
--------------

(1)       Based  on stated maturity dates with no prepayment assumptions. Actual
maturities  may  differ  because  borrowers may have the right to call or prepay
obligations  with  or  without  call  or  prepayment  penalties.

Page  22

<PAGE>


     The  average  expected life of Harleysville Group's investment portfolio as
of  December  31,  2001  was  approximately  5.3  years.


REGULATION

     Insurance companies are subject to supervision and regulation in the states
in  which  they  transact  business.  Such  supervision and regulation relate to
numerous  aspects  of  an  insurance company's business and financial condition.
The  primary  purpose  of  such  supervision and regulation is the protection of
policyholders.  The extent of such regulation varies, but generally derives from
state  statutes  which  delegate  regulatory,  supervisory  and  administrative
authority  to  state  insurance  departments.  Accordingly, the authority of the
state  insurance departments includes the establishment of standards of solvency
which  must  be  met and maintained by insurers, the licensing to do business of
insurers and agents, the nature of and limitations on investments, premium rates
for property and casualty insurance, the provisions which insurers must make for
current losses and future liabilities, the deposit of securities for the benefit
of  policyholders  and the approval of policy forms.  Such insurance departments
also  conduct  periodic  examinations  of the affairs of insurance companies and
require  the  filing  of  annual  and  other  reports  relating to the financial
condition  of  insurance  companies.

     All  of  the  states  in which Harleysville Group and the Mutual Company do
business  have  guaranty  fund  laws under which insurers doing business in such
states  can  be  assessed  up to 2% of annual premiums written by the insurer in
that  state  in  order  to  fund policyholder liabilities of insolvent insurance
companies.  Under  these  laws  in general, an insurer is subject to assessment,
depending  upon  its  market share of a given line of business, to assist in the
payment  of  policyholder  and  third  party  claims against insolvent insurers.

     State  laws  also  require Harleysville Group to participate in involuntary
insurance  programs  for  automobile  insurance,  as  well as other property and
casualty  lines, in states in which Harleysville Group operates.  These programs
include  joint  underwriting  associations,  assigned risk plans, fair access to
insurance  requirements  ("FAIR")  plans,  reinsurance facilities and wind storm
plans.  These  state  laws  generally  require  all  companies  that write lines
covered  by  these  programs  to  provide  coverage  (either directly or through
reinsurance)  for  insureds who cannot obtain insurance in the voluntary market.
The  legislation creating these programs usually allocates a pro rata portion of
risks  attributable  to  such  insureds  to  each  company  on  the  basis

Page  23

<PAGE>


of  direct  written  premiums  or  the number of automobiles insured. Generally,
state  law  requires  participation  in  such  programs  as a condition to doing
business.  The  loss  ratio  on  insurance  written  under  involuntary programs
generally  has  been  greater  than the loss ratio on insurance in the voluntary
market.

     State  insurance  holding  company  acts regulate insurance holding company
systems.  Each  insurance  company  in the holding company system is required to
register  with  the  insurance  supervisory  agency of its state of domicile and
furnish certain information concerning transactions between companies within the
holding  company system that may materially affect the operations, management or
financial  condition  of the insurer within the system, including the payment of
dividends  from  the  insurance  subsidiaries  to  the  Company.

     Insurance  holding  company  acts  require that all transactions within the
holding  company system affecting the Mutual Company and the Company's insurance
subsidiaries  must  be  fair  and equitable. Further, approval of the applicable
insurance  commissioner  is  required  prior to the consummation of transactions
affecting  the  control  of  an  insurer.

     The  property  and  casualty  insurance  industry  has  been  subject  to
significant  public  scrutiny  and  comment  primarily due to concerns regarding
solvency  issues,  rising  insurance  costs,  and  the  industry's  methods  of
operations.  Accordingly,  regulations  and legislation may be proposed to bring
the  insurance  industry  under  federal control; to strengthen state oversight,
particularly  in  the  field of solvency and investments; to further restrict an
insurer's  ability  to  underwrite  and price risks; and to impose new taxes and
assessments.  It  is  not  possible  to predict whether, in what form or in what
jurisdictions  any of these proposals might be adopted or the effect, if any, on
Harleysville  Group.

     The  Company's  insurance  subsidiaries  generally  are  restricted  by the
insurance  laws  of  their  respective  states  of  domicile as to the amount of
dividends  they  may  pay  to  the  Company  without  the  prior approval of the
respective  state  regulatory  authorities. Generally, the maximum dividend that
may  be paid by an insurance subsidiary during any year without prior regulatory
approval  is  limited  to  a  stated  percentage  of that subsidiary's statutory
surplus  as of a certain date, or adjusted net income of the subsidiary, for the
preceding  year.   Applying  the  current regulatory restrictions as of December
31,  2001,  $54.0  million  would  be available for distribution to Harleysville
Group  Inc.  without  prior  approval  during  2002.  The  Company's  insurance
subsidiaries  paid  dividends  of  $10.0  million  (another  $12.0  million  is
receivable  from  the  subsidiaries)  in  2001,  $20.0 million in 2000 and $15.0
million  in  1999  to  Harleysville  Group  Inc.

Page  24

<PAGE>


     The  National  Association  of  Insurance  Commissioners (NAIC) has adopted
risk-based capital (RBC) standards that require insurance companies to calculate
and  report  statutory  capital  and  surplus needs based on a formula measuring
underwriting,  investment  and  other  business  risks inherent in an individual
company's  operations.  These  RBC standards have not affected the operations of
Harleysville  Group  since  each  of  the  Company's  insurance subsidiaries has
statutory  capital  and  surplus  in  excess  of  RBC  requirements.

     The  NAIC  has  adopted the Codification of Statutory Accounting Principles
which  were  effective  January 1, 2001. The codified principles are intended to
provide  a  basis  of  accounting  recognized  and adhered to in the absence of,
conflict with, or silence of, state statutes and regulations.  The impact of the
codified  principles on the January 1, 2001 statutory capital and surplus of the
Company's  insurance  subsidiaries  ranged from a decrease of $0.4 million to an
increase  of $6.4 million and was an increase of $21.0 million on a consolidated
basis.

Page  25

<PAGE>


     Harleysville  Group  is  required  to  file  financial  statements  for its
subsidiaries,  prepared  by  using  statutory  accounting  practices, with state
regulatory  authorities.  SAP  differs from GAAP primarily in the recognition of
revenue  and  expense.  The  adjustments  necessary  to reconcile net income and
shareholders'  equity  determined  by  using SAP to net income and shareholders'
equity  determined  in  accordance  with  GAAP  are  as  follows:

<TABLE>
<CAPTION>



                        NET INCOME                   SHAREHOLDERS' EQUITY
                   YEAR ENDED DECEMBER 31,               DECEMBER 31,
                 ----------------------------       ---------------------
                   2001       2000      1999          2001       2000
                 -------    -------   -------       --------   --------
                                         (in thousands)
<S>              <C>        <C>       <C>           <C>        <C>
SAP amounts      $41,095    $48,412   $38,710       $538,878   $515,679
Adjustments:
  Deferred
   policy
   acquisition
   costs           1,317      1,218     4,557         86,076     84,759
  Deferred
   income
   taxes           3,626      1,608     2,652          6,093     21,593
  Unrealized
   investment
   gains                                              26,857     23,635
  Other, net      (2,443)    (2,109)   (6,255)         3,526     (3,911)
Holding
  company(1)        (102)      (437)      249        (71,132)   (75,174)
                 -------    -------   -------       --------   --------

GAAP amounts     $43,493    $48,692   $39,913       $590,298   $566,581
                 =======    =======   =======       ========   ========
</TABLE>


(1)  Represents  the GAAP income and equity amounts for Harleysville Group Inc.,
     excluding  the  earnings  of  and  investment  in  subsidiaries.


RELATIONSHIP  WITH  THE  MUTUAL  COMPANY

     Harleysville Group's operations are interrelated with the operations of the
Mutual  Company  due  to  the pooling arrangement and other factors.  The Mutual
Company  owns  approximately  56%  of the issued and outstanding common stock of
Harleysville  Group  Inc.  Harleysville  Group  employees  provide  a variety of
services  to  the Mutual Company and its wholly-owned subsidiaries.  The cost of
facilities  and  employees required to conduct the business of both companies is
charged  on  a  cost-allocated  basis.  Harleysville  Group  also  manages  the
operations of the Mutual Company and its wholly-owned subsidiaries pursuant to a
management  agreement  which  commenced January 1, 1993 under which Harleysville
Group  receives

Page  26

<PAGE>


a  management  fee.  Harleysville Group also manages the operations of Berkshire
Mutual  Insurance  Company,  a  small  property  and casualty insurance company,
pursuant  to  a management services agreement.  Harleysville Group received $7.3
million,  $7.4  million, and $7.3 million for the years ended December 31, 2001,
2000  and  1999,  respectively,  for  all  such  management  services.

     All  of  the Company's officers are officers of the Mutual Company, and six
of  the  Company's  eight  directors  are  directors  of  the Mutual Company.  A
coordinating  committee  exists to review and evaluate the pooling agreement and
is  responsible  for matters involving actual or potential conflicts of interest
between  the  two  companies.  The  decisions  of the coordinating committee are
binding  on the two companies.  No intercompany transaction can be authorized by
the  coordinating  committee  unless  at  least  two  of  three of the Company's
committee  members  conclude  that  such  transaction  is  fair and equitable to
Harleysville  Group.  The  coordinating  committee  consists of six non-employee
directors,  three from Harleysville Group Inc. and three from the Mutual Company
all  of  whom are not members of both Boards and one, a non-voting Chairman, who
is  a  member  of  both  Boards.  For  information concerning the members of the
coordinating committee, see "Board and Committee Meetings" section on pages 9 to
11  of  the  Company's  proxy  statement  relating  to the annual meeting of the
shareholders  to  be  held  April 24, 2002 which is incorporated by reference in
this  Form  10-K  Report.

     The  Mutual  Company  leases  the  home office from Harleysville Group with
which  it  shares  most of the facility.  Rental income under the lease was $3.5
million  for 2001, $3.4 million for 2000 and $2.8 million for 1999. Harleysville
Group  believes  that  the  lease  terms are no less favorable to it than if the
property  were  leased  to  a  non-affiliate.

     In  connection  with  the  acquisition of Mid-America and HIC New York, the
Company  borrowed approximately $18.5 million from the Mutual Company.  See Note
8 of the Notes to Consolidated Financial Statements.  For additional information
with respect to transactions with the Mutual Company, see Note 2 of the Notes to
Consolidated  Financial  Statements.


EMPLOYEES

     All  employees  are  paid  by Harleysville Group Inc. and, accordingly, are
considered  to  be employees of Harleysville Group Inc. As of December 31, 2001,
there  were  2,450  employees.  They provide a variety of services to the Mutual
Company  and its wholly-owned subsidiaries.  See "Business-Relationship with the
Mutual Company" and Note 2(c) of the Notes to Consolidated Financial Statements.

Page  27

<PAGE>


ITEM  2.  PROPERTIES.
--------  -----------

     The  buildings  which  house the headquarters of Harleysville Group and the
Mutual  Company  are  leased  by  the  Mutual  Company  from  a  subsidiary  of
Harleysville  Group.  See  "Business-Relationship with the Mutual Company."  The
Mutual Company charges Harleysville Group for an appropriate portion of the rent
under  an  intercompany  allocation  agreement.  The  buildings  containing  the
headquarters  of  Harleysville  Group  and the Mutual Company have approximately
220,000  square  feet  of  office  space.  Harleysville  Group also rents office
facilities  in  certain  of  the  states  in  which  it  does  business.

ITEM  3.  LEGAL  PROCEEDINGS.
--------  -------------------

     On  December  31,  2001,  Mutual received a written request for arbitration
from  GE  Reinsurance  Corporation  (GE  Re)  of a reinsurance agreement between
Mutual  and  GE  Re relating to certain automobile insurance policies written in
California  through  a  managing  general  agent  beginning in 1999.  The notice
indicates  that  GE  Re  intends  to  seek  rescission  of  the  agreement  and
reimbursement  for  its  losses.  Harleysville  Group's  share  of  underwriting
losses,  assumed  under the pooling agreement, that have been ceded to GE Re was
$33,220,000  from  inception  through  December  31,  2001.  GE  Re's claims are
apparently  based on alleged non-disclosures by Mutual at the time the agreement
was  entered  into  in  1999.  GE  Re terminated payments under the agreement in
January  2002.

     On  January 8, 2002, Mutual gave written notice of its election pursuant to
the  agreement  to  have  GE  Re's  claims  heard  in the U.S. District Court in
Philadelphia  and,  on  January  11,  2002, Mutual filed an action for breach of
contract  against GE Re in the U.S. District Court in Philadelphia.  GE Re filed
motions to compel arbitration and to dismiss Mutual's complaint and such motions
were  denied  by  the  court.

     Since  2000,  only  renewal business as required by law has been written by
Mutual through the managing general agent. Harleysville Group's pooling share of
the  written  premium  ceded  by  Mutual  under  the  agreement was $13,897,000,
$22,389,000  and $24,502,000 in 2001, 2000 and 1999, respectively, and is likely
to  decline  further  in  2002.

Page  28

<PAGE>


     Both  Mutual  and  the  Company believe GE Re's claims to be wholly without
merit  and  are  litigating  the  matter  vigorously. While the Company does not
expect  this  matter  to materially affect its financial condition or results of
operations,  there  can  be  no  assurance  of  any  particular  outcome.

     Harleysville  Group  is  a  party to numerous other lawsuits arising in the
ordinary  course of its insurance business. Harleysville Group believes that the
resolution  of  these  lawsuits  will  not have a material adverse effect on its
financial  condition.

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

     No  matter  was  submitted  during  the fourth quarter of 2001 to a vote of
holders  of  the  Company's  Common  Stock.

Page  29

<PAGE>


EXECUTIVE  OFFICERS  OF  THE  COMPANY

     All  of  the  persons  listed  below are executive officers of Harleysville
Group  Inc. or its affiliates.  There are no family relationships between any of
the Company's executive officers and directors, and there are no arrangements or
understandings  between  any  of these officers and any other person pursuant to
which  the  officer  was  selected  as  an  officer.


  Name                       Age       Position
------------------------     ---     -------------------------------

Walter  R.  Bateman,  II      54      Chairman  of  the  Board,  President,
                                      Chief  Executive  Officer  and
                                      Director

Mark  R.  Cummins             45      Executive  Vice  President,  Chief
                                      Investment  Officer  and  Treasurer

M.  Lee  Patkus               50      Executive  Vice  President

Douglas  A.  Gaudet           48      Executive  Vice  President

Roger  A.  Brown              53      Senior  Vice  President,  Secretary
                                      and  General  Counsel

Bruce  J.  Magee              47      Senior  Vice  President  and
                                      Chief  Financial  Officer

E.  Wayne  Ratz               56      Senior  Vice  President  and  Chief
                                      Information  Officer

Catherine  B.  Strauss        54      Senior  Vice  President

Robert  G.  Whitlock  Jr.     45      Senior  Vice  President  and  Chief
                                      Actuary

Roger  J.  Beekley            59      Vice  President  and  Controller


     Walter  R. Bateman, II has been Chairman of the Board since August 1998 and
has  been  Chief Executive Officer since January 1, 1994.  He has been President
and  Director  of  Harleysville  Group  Inc.  and the Mutual Company since 1992.

Page  30

<PAGE>


     Mark  R.  Cummins is Executive Vice President, Chief Investment Officer and
Treasurer  of  Harleysville  Group  Inc. and the Mutual Company, and has been in
charge  of  the  investment  and  treasury  function  since  1992.

     M.  Lee Patkus has been Executive Vice President in charge of the field and
subsidiary  operations  of  Harleysville Group Inc. and the Mutual Company since
November 1999.  From 1994 to 1999 he worked for St. Paul Insurance Companies and
its  predecessor, USF&G, and was in charge of various regional operations.  Most
recently  he  was  Regional  President  of  the  Southeast  Commercial  Region.

     Douglas A. Gaudet has been Executive Vice President in charge of claims and
underwriting  since  November  2000.  From  May  1999  to  November  2000 he was
Managing Director/Chief Underwriting Officer for Crum and Forster.  From 1991 to
1999  he  was  employed by Zurich Group, most recently as President, Service and
Technology  for  Zurich  Commercial.

     Roger  A.  Brown  has  been  Senior  Vice  President, Secretary and General
Counsel  of  Harleysville  Group Inc. and the Mutual Company since 1995.  He was
Assistant  General  Counsel  from  1986  until  assuming  his  present position.

     Bruce  J.  Magee has been Senior Vice President and Chief Financial Officer
of  Harleysville  Group Inc. and the Mutual Company since January 1, 1994.  From
1986  to  1993  he  was Vice President and Controller of Harleysville Group Inc.

     E.  Wayne Ratz has been Senior Vice President and Chief Information Officer
of  Harleysville  Group  Inc.  and  the  Mutual  Company  since  February  1997.

     Catherine  B.  Strauss  has been Senior Vice President since April 1998 and
has  been  in  charge  of  human  resources  since  1996.

     Robert G. Whitlock, Jr. has been Senior Vice President and Chief Actuary of
Harleysville Group Inc. and the Mutual Company since February 1995.  He was Vice
President  and Actuary before assuming his present position and was in charge of
various  actuarial  functions  since  1991.

     Roger  J.  Beekley  has  been Vice President and Controller of Harleysville
Group  Inc.  since  January  1, 1994 and is Vice President and Controller of the
Mutual  Company,  a  position  he  has  held  since  1982.

Page  31

<PAGE>

     PART  II

ITEM  5.  MARKET  FOR  THE  REGISTRANT'S  COMMON  STOCK  AND RELATED STOCKHOLDER
-------   ----------------------------------------------------------------------
MATTERS.
-------
     The  "Market  for Common Stock and Related Security Holder Matters" section
from the Company's annual report to stockholders for the year ended December 31,
2001,  which  is  included  as  Exhibit  (13)(E)  to  this  Form 10-K Report, is
incorporated  herein  by  reference.

ITEM  6.  SELECTED  FINANCIAL  DATA.
-------   -------------------------
     The  "Selected  Consolidated  Financial  Data"  section  from the Company's
annual  report  to  stockholders  for the year ended December 31, 2001, which is
included  as Exhibit (13)(A) to this Form 10-K Report, is incorporated herein by
reference.

ITEM  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------   -----------------------------------------------------------
AND RESULTS OF  OPERATIONS.
---------------------------
     The  "Management's  Discussion  and  Analysis  of Results of Operations and
Financial  Condition"  section  from the Company's annual report to stockholders
for  the  year  ended December 31, 2001, which is included as Exhibit (13)(B) to
this  Form  10-K  Report,  is  incorporated  herein  by  reference.

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.
--------   ----------------------------------------------------------------
     The  "Quantitative  and  Qualitative Disclosures About Market Risk" section
from the Company's annual report to stockholders for the year ended December 31,
2001,  which  is  included  as  Exhibit  (13)(C)  to  this  Form 10-K Report, is
incorporated  herein  by  reference.

ITEM  8.  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA.
-------   -----------------------------------------------
     The  consolidated  financial statements from the Company's annual report to
stockholders  for the year ended December 31, 2001, which is included as Exhibit
(13)(D)  to  this  Form  10-K  Report,  are  incorporated  herein  by reference.

ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
-------   ----------------------------------------------------------------------
FINANCIAL  DISCLOSURE.
---------------------
     None.

Page  32

<PAGE>


     PART  III

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.
--------   --------------------------------------------------------
     The  "Election  of Directors" section, which provides information regarding
the  Company's  directors,  on  pages  7  and  8  and  the "Section 16 Reporting
Compliance"  section on page 28 of the Company's proxy statement relating to the
annual  meeting  of  stockholders  to  be  held April 24, 2002, are incorporated
herein  by  reference.

     The information concerning executive officers called for by Item 10 of Form
10-K  is  set  forth  in  Part  I  of  this  Annual  Report  on  Form  10-K.

ITEM  11.  EXECUTIVE  COMPENSATION.
--------   -----------------------
     The  information  set  forth  on  pages  21  to 26 and the "Compensation of
Directors"  section on pages 11 and 12 of the Company's proxy statement relating
to  the  annual  meeting  of  stockholders  to  be  held  April  24,  2002,  are
incorporated  herein  by  reference.

ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND MANAGEMENT.
--------   --------------------------------------------------------------------
     The "Ownership of Common Stock" section on pages 13 and 14 of the Company's
proxy  statement relating to the annual meeting of stockholders to be held April
24,  2002,  is  incorporated  herein  by  reference.

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.
-------    --------------------------------------------------
     The  "Transactions  with Harleysville Mutual" section on pages 27 and 28 of
the  Company's proxy statement relating to the annual meeting of stockholders to
be  held  April  24,  2002,  is  incorporated  herein  by  reference.

Page  33

<PAGE>


                                     PART IV

ITEM  14.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS ON FORM 8-K.
--------   ---------------------------------------------------------------------
(a)  (1)   The following consolidated financial statements are filed as a
            part of  this  report:

  Consolidated  Financial  Statements                          Page
                                                               -----
    Consolidated  Balance  Sheets  as  of
      December  31,  2001  and  2000                            24*
    Consolidated  Statements  of  Income  for
      Each  of  the  Years  in  the  Three-year
      Period  Ended  December  31,  2001                        25*
    Consolidated  Statements  of  Shareholders'
      Equity  for  Each  of  the  Years  in  the  Three-
      year  Period  Ended  December  31,  2001                  26*
    Consolidated  Statements  of  Cash  Flows
      for  Each  of  the  Years  in  the  Three-year
      Period  Ended  December  31,  2001                        27*
    Notes  to  Consolidated  Financial  Statements              28*
  Independent  Auditors'  Report                                39*

    (2)  The  following  consolidated  financial  statement
         schedules  for  the  years  2001,  2000  and  1999
         are  submitted  herewith:

    Financial  Statement  Schedules
    Schedule  I.     Summary  of  Investments  -  Other
                    Than  Investments  in  Related
                    Parties                                     43
    Schedule  II.    Condensed  Financial  Information
                    of  Parent  Company                         44
    Schedule  III.   Supplementary  Insurance
                    Information                                 47
    Schedule  IV.    Reinsurance                                48
    Schedule  VI.    Supplemental  Insurance  Information
                    Concerning  Property  and  Casualty
                    Subsidiaries                                49
    Independent  Auditors'  Consent  and  Report  on  Schedules
      (filed  as  Exhibit  23)

     All  other  schedules  are  omitted  because they are not applicable or the
required  information  is included in the financial statements or notes thereto.
-------------------
     *Refers  to  the  respective  page of Harleysville Group Inc.'s 2001 Annual
Report  to  Stockholders.  The Consolidated Financial Statements and Independent
Auditors' Report, which are included as Exhibit (13)(D), are incorporated herein
by  reference.  With  the  exception  of  the  portions  of  such  Annual Report
specifically  incorporated  by  reference  in this Item and Items 5, 6, 7 and 8,
such  Annual  Report  shall  not  be  deemed  filed as part of this Form 10-K or
otherwise  subject  to  the liabilities of Section 18 of the Securities Exchange
Act  of  1934.

Page  34

<PAGE>


     (3)     Exhibits

 EXHIBIT
   NO.                 DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------
 (  3)(A) Amended  and  restated  Certificate  of  Incor-
          poration  of  Registrant  -  incorporated  herein
          by  reference  to  Exhibit  (4)(A)  to  the
          Registrant's  Form  S-8  Registration  Statement
          No.  333-03127  filed  May  3,  1996.

 (  3)(B) Amended  and  Restated  By-laws  of  Registrant  -
          incorporated  herein  by  reference  to  Exhibit
          4(B)  to  the  Post-Effective  Amendment  No.  12  of
          Registrant's  Form  S-3  Registration  Statement
          No.  33-90810  filed  October  10,  1995.

 (  4)    Indenture  between  the  Registrant  and
          CoreStates  Bank,  N.A.,  dated  as  of  November
          15,  1993  -  incorporated  herein  by  reference  to
          Exhibit  (4)  to  the  Registrant's  Annual  Report
          on  Form  10-K  for  the  year  ended  December  31,
          1993.

*(10)(A)  Standard  Deferred  Compensation  Plan  for
          Directors  of  Harleysville  Mutual  Insurance
          Company  and  Harleysville  Group  Inc.  Amended
          and  Restated  November  17,  1999  -  incorporated
          herein  by  reference  to  Exhibit  10(A)  to  the
          Registrant's  Annual  Report  on  Form  10-K  for
          the  year  ended  December  31,  1999.

*(10)(B)  Harleysville  Insurance  Companies  Director
          Deferred Compensation Plan Approved by the
          Board of Directors November 25,  1987  -
          incorporated  herein  by  reference  to  Exhibit
          10(B)  to  the  Registrant's  Form  S-3
          Registration  Statement  No.  33-28948  filed  May
          25,  1989.

*(10)(C)  Harleysville  Group  Inc.  Non-qualified  Deferred
          Compensation  Plan  Amended  and  Restated
          November  17,  1999  -  incorporated  herein
          by  reference  to  Exhibit  10(C)  to  the  Registrant's
          Annual  Report  on  Form  10-K  for  the  year  ended
          December  31,  1999.

*(10)(D)  Pension  Plan  of  Harleysville  Group  Inc.  and
          Associated  Employers  dated  December  1,  1994
          and  amendment  dated  February  6,  1995  -
          incorporated  herein  by  reference  to  Exhibit
          10(D)  to  the  Registrant's  Annual  Report  on
          Form  10-K  for  the  year  ended  December  31,
          1994.

Page  35

<PAGE>

 EXHIBIT
   NO.                 DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

*(10)(E)  Harleysville  Mutual  Insurance  Company/
          Harleysville  Group Inc. Senior  Management
          Incentive Compensation Plan As Amended and
          Restated November 17, 1999 - incorporated
          herein by reference to Exhibit 10(E) to the
          Registrant's Annual  Report  on  Form  10-K  for
          the  year  ended  December  31,  1999.

 (10)(F)  Proportional  Reinsurance Agreement effective
          as of January 1, 1986 among  Harleysville
          Mutual  Insurance  Company,  Huron  Insurance
          Company  and Harleysville  Insurance  Company of
          New Jersey -incorporated herein by reference
          to Exhibit 10(N) to the Registrant's Form S-1
          Registration Statement No. 33-4885 declared
          effective  May  23,  1986.

*(10)(G)  Equity  Incentive  Plan  of  Registrant,  as
          amended - incorporated herein  by reference to
          Exhibit (4)(C) to the Registrant's Form S-8
          Registration Statement  No.  333-25817  filed
          April  25,  1997.

 (10)(H)  Tax Allocation Agreement dated December 24,
          1986 among Harleysville Insurance  Company  of
          New Jersey, Huron Insurance Company, Worcester
          Insurance Company,  McAlear  Associates,  Inc.
          and the Registrant - incorporated herein by
          reference  to  Exhibit  10(Q) to the Registrant's
          Annual Report on Form 10-K for the  year  ended
          December  31,  1986.

 (10)(I)  Amended  and  Restated  Financial Tax Sharing
          Agreement dated March 20,  1995  among  Huron
          Insurance Company, Harleysville Insurance
          Company of New Jersey,  Worcester  Insurance
          Company, Harleysville-Atlantic Insurance
          Company,  New  York Casualty Insurance Company,
          Connecticut Union Insurance Company, Great
          Oaks  Insurance  Company,  Lakes  States  Insurance
          Company and the Registrant - incorporated
          herein  by reference to Exhibit (10)(L) to the
          Registrant's Annual Report  on  Form  10-K  for
          the  year  ended  December  31,  1994.

Page  36

<PAGE>


 EXHIBIT
   NO.               DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

 (10)(J)  Amendment,  effective July 1, 1987, to the
          Proportional Reinsurance Agreement effective
          January 1, 1986 among Harleysville Mutual
          Insurance Company, Huron  Insurance  Company,
          Harleysville  Insurance  Company  of  New Jersey
          and Atlantic Insurance Company of Savannah -
          incorporated herein by reference to the
          Registrant's  Form  8-K  Report  dated  July  1,
          1987.

 (10)(K)  Amendment,  effective  January  1,  1989,  to  the
          Proportional Reinsurance  Agreement  effective
          January  1,  1986  among  Harleysville Mutual
          Insurance  Company,  Huron  Insurance Company,
          Harleysville Insurance Company of New  Jersey,
          Atlantic  Insurance  Company  of  Savannah and
          Worcester Insurance Company  - incorporated
          herein by reference to Exhibit 10(U) to the
          Registrant's Annual  Report  on  Form  10-K  for
          the  year  ended  December  31,  1988.

 (10)(L)  Amendment,  effective  January  1,  1991,  to  the
          Proportional Reinsurance  Agreement  effective
          January  1,  1986  among  Harleysville Mutual
          Insurance  Company,  Huron  Insurance Company,
          Harleysville Insurance Company of New Jersey,
          Atlantic Insurance Company of Savannah,
          Worcester Insurance Company, Phoenix  General
          Insurance  Company  and  New York Casualty
          Insurance Company - incorporated  herein  by
          reference to Exhibit (10)(O) to the
          Registrant's Annual Report  on  Form  10-K  for
          the  year  ended  December  31,  1990.

 (10)(M)  Amendments,  effective  January  1, 1995
          and 1993, respectively, to the  Proportional
          Reinsurance  Agreement  effective  January  1,
          1986  among Harleysville  Mutual  Insurance
          Company,  Huron Insurance Company, Harleysville
          Insurance  Company  of  New  Jersey,  Harleysville-
          Atlantic  Insurance  Company, Worcester
          Insurance  Company,  Connecticut  Union Insurance
          Company, New York Casualty  Insurance  Company
          and  Great  Oaks  Insurance Company -
          incorporated herein by reference to Exhibit
          (10)(P) to the Registrant's Annual Report on
          Form 10-K  for  the  year  ended  December  31,
          1994.

Page  37

<PAGE>

 EXHIBIT
   NO.                 DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

(10)(N)   Amendment, effective January 1, 1996 to the
          Proportional Reinsurance Agreement effective
          January 1, 1986 among Harleysville Mutual
          Insurance Company, Huron  Insurance  Company,
          Harleysville  Insurance  Company  of  New  Jersey,
          Harleysville-Atlantic  Insurance  Company,
          Worcester  Insurance  Company, Connecticut  Union
          Insurance Company, New York Casualty Insurance
          Company, Great Oaks  Insurance  Company and
          Pennland Insurance Company - incorporated
          herein by reference  to Exhibit (10)(O) to the
          Registrant's Annual Report on Form 10-K for
          the  year  ended  December  31,  1995.

 (10)(O)   Amendment,  effective  January  1,  1997  to  the
           Proportional Reinsurance  Agreement  effective
           January  1,  1986  among  Harleysville Mutual
           Insurance  Company,  Huron  Insurance Company,
           Harleysville Insurance Company of New  Jersey,
           Harleysville-Atlantic  Insurance  Company,
           Worcester  Insurance Company,  Mid-America
           Insurance  Company,  New York Casualty Insurance
           Company, Great  Oaks  Insurance  Company,
           Pennland  Insurance  Company  and  Lake States
           Insurance  Company  - incorporated herein by
           reference to Exhibit (10)(P) to the
           Registrant's  Annual  Report  on Form 10-K for
           the year ended December 31, 1996.

 (10)(P)   Amendment,  effective  January  1,  1998  to  the
           Proportional Reinsurance  Agreement  effective
           January  1,  1986  among  Harleysville Mutual
           Insurance  Company,  Huron  Insurance Company,
           Harleysville Insurance Company of New  Jersey,
           Harleysville-Atlantic  Insurance  Company,
           Worcester  Insurance Company,  Mid-America
           Insurance  Company,  New York Casualty Insurance
           Company, Great  Oaks Insurance Company,
           Pennland Insurance Company, Lake States
           Insurance Company  and  Minnesota  Fire  and
           Casualty  Company  -  incorporated herein by
           reference  to Exhibit (10)(Q) to the
           Registrant's Annual Report on Form 10-K for
           the  year  ended  December  31,  1997.

Page  38

<PAGE>


 EXHIBIT
   NO.                  DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

*(10)(Q)   Long-Term Incentive Plan for senior officers
           of Harleysville Mutual Insurance  Company  and
           Registrant - incorporated herein by reference
           to Exhibit 10(V) to the Registrant's Annual
           Report on Form 10-K for the year ended
           December 31,  1988.

 (10)(R)   Lease and amendment effective January 1, 2000
           between Harleysville, Ltd.  and  Harleysville
           Mutual  Insurance  Company  -  incorporated  herein
           by reference  to  Exhibit  10(R) to the
           Registrant's Annual Report on Form 10-K for
           the  year  ended  December  31,  1999.

*(10)(S)   1995  Directors' Stock Option Program of
           Registrant  - incorporated herein by reference
           to Exhibit (10)(S) to the Registrant's Annual
           Report on Form 10-K  for  the  year  ended
           December  31,  1993.

*(10)(T)   Harleysville  Group  Inc. Year 2000 Directors'
           Stock Option Program of  Registrant  -
           incorporated  herein  by  reference  to Exhibit
           (4)(C) to the Registrant's  Form  S-8
           Registration  Statement No. 333-85941, filed
           August 26, 1999.

 (10)(U)   Loan  Agreement  dated  as  of  March  19,  1998
           by  and  between Harleysville Group Inc. and
           Harleysville Mutual Insurance Company -
           incorporated herein by reference to Exhibit
           (10)(V) to the Registrant's Annual Report on
           Form 10-K  for  the  year  ended  December  31,
           1997.

(10)(V)    Form  of  Management  Agreements  dated  January  1,
           1994  between Harleysville  Group  Inc.  and
           Harleysville  Mutual  Insurance  Company,
           Harleysville-Garden  State  Insurance  Company,
           Mainland  Insurance  Company, Pennland  Insurance
           Company, Berkshire Mutual Insurance Company
           and Harleysville Life  Insurance Company -
           incorporated herein by reference to Exhibit
           (10)(U) to the  Registrant's  Annual Statement
           on Form 10-K for the year ended December 31,
1993.

Page  39

<PAGE>


 EXHIBIT
   NO.                 DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

 (10)(W)   Form  of Salary Allocation Agreements dated
           January 1, 1993 between Harleysville  Group
           Inc.  and  Harleysville  Mutual  Insurance
           Company, Harleysville-Garden  State  Insurance
           Company,  Mainland  Insurance  Company, Pennland
           Insurance Company, Berkshire Mutual Insurance
           Company and Harleysville Life  Insurance
           Company - incorporated herein by reference to
           Exhibit (10)(U) to the  Registrant's  Annual
           Report  on  Form 10-K for the year ended
           December 31,
1992.

 (10)(X)   Equipment  and  Supplies Allocation Agreement
           dated January 1, 1993 between  Harleysville
           Mutual  Insurance  Company  and Harleysville
           Group Inc. - incorporated  herein  by reference
           to Exhibit (10)(V) to the Registrant's Annual
           Report  on  Form  10-K  for  the  year  ended
           December  31,  1992.

*(10)(Y)   Form  of Change of Control Employment
           Agreements dated July 1, 1999  -  incorporated
           herein by reference to Exhibit 10(Z) to the
           Registrant's Annual Report  on  Form  10-K  for
           the  year  ended  December  31,  1999.

*(10)(Z)   1992 Incentive Stock Option Plan for Employees
           Amended and Restated August  26,  1992  -
           incorporated herein by reference to Exhibit
           (10)(W) to the Registrant's  Annual  Report  on
           Form 10-K for the year ended December 31,
           1992.

*(10)(AA)  Harleysville  Group  Inc. Supplemental Retirement
           Plan Amended and Restated  November 17, 1999 -
           incorporated herein by reference to Exhibit
           10(AB) to  the  Registrant's Annual Report on
           Form 10-K for the year ended December 31, 1999.

*(10)(AB)  1996  Directors'  Stock Purchase Plan of
           Registrant - incorporated herein  by reference
           to Exhibit (4)(C) to the Registrant's Form S-8
           Registration Statement  No.  333-03127  filed  May
           3,  1996.

Page  40

<PAGE>

EXHIBIT
   NO.                 DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

*(10)(AC)  Directors Equity Award Program of Registrant -
           incorporated herein by  reference  to  Exhibit
           (4)(C)  to  the  Registrant's  Form S-8
           Registration Statement  No.  333-09701  filed
           August  7,  1996.

*(10)(AD)  Excess  Stock Purchase Plan of Registrant -
           incorporated herein by reference to Exhibit
           4.3 to the Registrant's Form S-8 Registration
           Statement No. 333-37212  filed  May  17,  2000.

*(10)(AE)  Long  Term  Incentive  Plan of Registrant -
           incorporated herein by reference to Exhibit
           4.3 to the Registrant's Form S-8 Registration
           Statement No. 333-37386  filed  May  19,  2000.

 (13)(A)   Selected Consolidated Financial Data from the
           Company's 2001 annual report  to  stockholders.

 (13)(B)   Management's  Discussion  and Analysis of
           Results of Operations and Financial  Condition
           from  the  Company's  2001  annual report to
           stockholders.

 (13)(C)   Quantitative and Qualitative Disclosures About
           Market Risk from the Company's  2001  annual
           report  to  stockholders.

 (13)(D)   Consolidated  financial  statements  from the
           Company's 2001 annual report  to  stockholders.

 (13)(E)   Market  for  Common  Stock and Related Security
           Holder Matters from the  Company's  2001  annual
           report  to  stockholders.

Page  41

<PAGE>

EXHIBIT
   NO.                 DESCRIPTION  OF  EXHIBITS
------     ------------------------------------------------

 (21)      Subsidiaries  of  Registrant.

 (23)      Independent  Auditors'  Consent  and  Report  on
           Schedules.

 (99)      Form  11-K Annual Report for the Harleysville
           Group Inc. Employee Stock  Purchase  Plan  for
           the  year  ended  December  31,  2001.

----------------

*  A  management  contract,  compensatory  plan  or  arrangement  required to be
separately  identified  by  reason  of  the  provision  of  Item  14(a)(3).

(b)  Reports  on  Form  8-K


     A Form 8-K dated January 8, 2002 was filed disclosing a dispute involving a
reinsurance  agreement  with  GE  Reinsurance  Corporation.

Page  42

<PAGE>
<TABLE>
<CAPTION>



                                      HARLEYSVILLE GROUP

                             SCHEDULE I - SUMMARY OF INVESTMENTS -
                           OTHER THAN INVESTMENTS IN RELATED PARTIES

                                       DECEMBER 31, 2001
                                        (in thousands)

                                                       AMOUNT
                                                       AT WHICH
                                                       SHOWN IN
                                                       THE BALANCE
    TYPE OF INVESTMENT        COST          VALUE      SHEET
------------------------   ----------    ----------    -----------

Fixed maturities:
<S>                        <C>           <C>           <C>
  United States
   government and
   government agencies
   and authorities         $   69,953    $   73,325    $   73,053

  States, municipalities
   and political
   subdivisions               611,659       634,539       623,405

  Mortgage-backed
   securities                 164,443       168,169       168,169

  All other corporate
   bonds                      549,491       567,819       559,136
                          -----------    ----------    ----------

   Total fixed
    maturities             1,395,546     1,443,852     1,423,763
                          ----------    ----------    ----------

Equity securities:

  Common stocks:
   Banks, trust and
    insurance companies       18,657        24,418        24,418
   Industrial,
    miscellaneous and
    all other                 92,146       126,268       126,268
                          ----------    ----------    ----------

   Total equities            110,803       150,686       150,686
                          ----------    ----------    ----------

Short-term
  investments                 36,695                      36,695
                          ----------                  ----------

     Total investments    $1,543,044                  $1,611,144
                          ==========                  ==========
</TABLE>


Page  43

<PAGE>
<TABLE>
<CAPTION>



                        HARLEYSVILLE GROUP INC.

       SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

                        CONDENSED BALANCE SHEETS
                  (in thousands, except share data)

                                                     DECEMBER 31,
                                              -----------------------
                                                2001          2000
                                              --------      ---------
ASSETS
<S>                                           <C>           <C>
Short-term investments                        $  6,377      $  6,343
Fixed maturities:
  Available for sale, at fair
   value (cost $52 and $10)                         53            10
Investments in common
  stock of subsidiaries
  (equity method)                              661,430       641,755
Accrued investment income                           16            35
Due from affiliate                               3,636         7,454
Dividends receivable from
  subsidiaries                                  12,000        10,000
Other assets                                    14,521        11,031
                                              --------      --------

  Total assets                                $698,033      $676,628
                                              ========      ========

       LIABILITIES AND SHAREHOLDERS' EQUITY

Debt                                          $ 93,500      $ 93,500
Accounts payable and
  accrued expenses                              12,564        12,480
Federal income taxes payable                     1,671         4,067
                                              --------      --------

  Total liabilities                            107,735       110,047
                                              --------      --------

Shareholders' equity:
  Preferred stock, $1 par value;
   authorized 1,000,000 shares,
   none issued
  Common stock, $1 par value;
   authorized 80,000,000 shares;
   issued 2001, 30,444,678 and
   2000, 30,001,852 shares; outstanding
   2001, 29,444,678 and 2000,
   29,001,852 shares                            30,445        30,002
  Additional paid-in capital                   140,065       131,537
  Accumulated other
   comprehensive income                         44,265        56,010
  Retained earnings                            391,088       364,597
  Treasury stock, at cost,
   1,000,000 shares                            (15,565)      (15,565)
                                              --------     ---------

  Total shareholders' equity                   590,298       566,581
                                              --------      --------

  Total liabilities and
   shareholders' equity                       $698,033      $676,628
                                              ========      ========
</TABLE>

Page  44

<PAGE>

<TABLE>
<CAPTION>



                     HARLEYSVILLE GROUP INC.

 SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

                CONDENSED STATEMENTS OF INCOME
                       (in thousands)

                                        YEAR ENDED DECEMBER 31,
                                    ------------------------------
                                      2001       2000       1999
                                    --------   --------   --------
<S>                                 <C>        <C>        <C>
Revenues                            $ 7,782    $ 7,631    $ 7,565
Expenses:
  Interest                            6,102      6,468      6,274
  Expenses other than interest        1,828      1,823      1,688
                                    -------    -------    -------

                                       (148)      (660)     (397)
Income tax benefit                      (46)      (223)     (646)
                                    -------    -------    -------

Income (loss) before equity in
  income of subsidiaries               (102)      (437)       249

Equity in income of subsidiaries     43,595     49,129     39,664
                                    -------    -------    -------

Net income                          $43,493    $48,692    $39,913
                                    =======    =======    =======
</TABLE>

Page  45

<PAGE>
<TABLE>
<CAPTION>



                        HARLEYSVILLE GROUP INC.

    SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

                   CONDENSED STATEMENTS OF CASH FLOWS
                            (in thousands)

                                                YEAR ENDED DECEMBER 31,
                                          ----------------------------------
                                            2001         2000        1999
                                          --------     --------     --------
<S>                                       <C>          <C>          <C>
Cash flows from operating
 activities:
  Net income                              $ 43,493     $ 48,692     $ 39,913
  Adjustments to reconcile
   net income to net cash
   used by operating activities:
    Equity in undistributed
     earnings of subsidiaries              (43,595)     (49,129)     (39,664)
    (Increase) decrease in
      accrued investment income                 19          (16)          20
    Increase (decrease) in
      accrued income taxes                  (2,396)       3,209       (2,143)
    Other, net                               1,723       (3,984)       3,805
                                          --------     --------     --------
      Net cash provided (used)
       by operating activities                (756)      (1,228)       1,931
                                          --------     --------     --------

Cash flows from investing activities:
  Purchases of fixed maturity
   investments                                 (52)
  Maturities of fixed maturity
    investments                                 10
  Net sales (purchases) or
    maturities of short-term
    investments                                (34)      (4,646)       3,665
                                          --------     --------     --------
      Net cash provided (used)
       by investing activities                 (76)      (4,646)       3,665
                                          --------     --------     --------

Cash flows from financing activities:
  Issuance of common stock                    7,807       6,419        5,425
  Dividends from subsidiaries                10,027      20,030       15,015
  Dividends paid                            (17,002)    (15,864)     (15,182)
  Purchase of treasury stock                 -           (4,711)     (10,854)
                                          --------     --------     --------
      Net cash provided (used)
        by financing activities                832        5,874       (5,596)
                                          --------     --------     --------

  Change in cash                              -            -            -

    Cash at beginning of year                 -            -            -
                                          --------     --------     --------

    Cash at end of year                   $   -        $   -        $   -
                                          ========     ========     ========
</TABLE>


Page  46

<PAGE>

<TABLE>
<CAPTION>



HARLEYSVILLE GROUP

SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(in thousands)

                                    LIABILITY
                                    FOR UNPAID                                                AMORTIZATION
                      DEFERRED      LOSSES AND                                    LOSSES      OF DEFERRED
                      POLICY        LOSS                             NET          AND LOSS    POLICY        OTHER
                      ACQUISITION   SETTLEMENT  UNEARNED   EARNED    INVESTMENT   SETTLEMENT  ACQUISITION   UNDERWRITING  PREMIUMS
                      COSTS         EXPENSES    PREMIUMS   PREMIUMS  INCOME       EXPENSES    COSTS         EXPENSES      WRITTEN
<S>                   <C>           <C>         <C>        <C>       <C>          <C>         <C>           <C>           <C>
Year ended
 December 31,
  2001
  Commercial
   lines                            $651,088    $238,050   $493,362               $330,943                                $515,860
  Personal
   lines                             149,773     115,591    236,527                188,879                                 231,727
  GAAP
   adjustments(1)                     78,195      20,096
                                    --------    --------   --------               --------                                --------
    Total             $86,076       $879,056    $373,737   $729,889               $519,822    $180,283      $64,267       $747,587
                      =======       ========    ========   ========               ========    ========      =======       ========
    Net
     investment
     income                                                          $85,518
                                                                     =======

Year ended
 December 31,
  2000
  Commercial
   lines                            $635,184    $215,553   $437,873               $302,590                                $446,719
  Personal
    lines                            157,400     120,392    250,457                191,084                                 254,753
  GAAP
    adjustments(1)                    72,259      18,153                              (873)
                                    --------    --------   --------               --------                                --------
    Total             $84,759       $864,843    $354,098   $688,330               $492,801    $177,217      $60,916       $701,472
                      =======       ========    ========   ========               ========    ========      =======       ========
    Net
     investment
     income                                                          $86,791
                                                                     =======

Year ended
 December 31,
  1999
  Commercial
   lines                            $665,391    $206,707   $438,111               $323,372                                $448,546
  Personal
   lines                             158,523     116,096    269,089                199,630                                 275,793
  GAAP
   adjustments(1)                     77,438      28,907
                                    --------    --------   --------               --------                                --------
   Total              $83,541       $901,352    $351,710   $707,200               $523,002    $182,337      $60,226       $724,339
                      =======       ========    ========   ========               ========    ========      =======       ========
    Net
     investment
     income                                                          $85,894
                                                                     =======
</TABLE>


(1)  GAAP  adjustments are not determined separately for commercial and personal
     lines.

    See  Note  15  of  the  Notes  to  Consolidated  Financial  Statements.


Page  47

<PAGE>

<TABLE>
<CAPTION>



                                  HARLEYSVILLE GROUP

                              SCHEDULE IV - REINSURANCE

                     YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                    (in thousands)

                                             ASSUMED               PERCENTAGE
                                  CEDED        FROM                 OF AMOUNT
                    GROSS       TO OTHER      OTHER        NET      ASSUMED
                    AMOUNT      COMPANIES   COMPANIES    AMOUNT     TO NET
                    --------    ---------   --------    --------   ----------
<S>                 <C>         <C>         <C>         <C>        <C>
Year ended
 December 31, 2001
 Property and
 casualty
 premiums           $658,166    $694,643    $766,366    $729,889    105.0%
                    ========    ========    ========    ========    ======
Year ended
 December 31, 2000
 Property and
 casualty
 premiums           $647,300    $679,770    $720,800    $688,330    104.7%
                    ========    ========    ========    ========    =====

Year ended
 December 31, 1999
 Property and
 casualty
 premiums           $638,604    $670,669    $739,265    $707,200    104.5%
                    ========    ========    ========    ========    =====
</TABLE>


Note:     The  amounts  ceded  and  assumed  include  the  amounts  ceded  and
          assumed  under  the  terms  of  the  pooling  arrangement.

Page  48

<PAGE>


     HARLEYSVILLE  GROUP

     SCHEDULE  VI  -  SUPPLEMENTAL  INSURANCE  INFORMATION  CONCERNING
     PROPERTY  AND  CASUALTY  SUBSIDIARIES

     YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
     (in  thousands)
<TABLE>
<CAPTION>



                                                 LOSSES AND
                                               LOSS SETTLEMENT
                  LIABILITY                       EXPENSES
                  FOR UNPAID   DISCOUNT,         (BENEFITS)
                  LOSSES AND   IF ANY,            INCURRED         PAID LOSSES
                  LOSS         DEDUCTED          RELATED TO        AND LOSS
                  SETTLEMENT   FROM           CURRENT   PRIOR      SETTLEMENT
                  EXPENSES     RESERVES(1)     YEAR     YEARS      EXPENSES
                 -----------   -----------   --------   ---------   ----------
<S>              <C>           <C>            <C>        <C>         <C>
Year ended:

 Decmber 31,
  2001           $879,056      $8,007        $537,172   $(17,350)   $511,545
                 ========      ======        ========   ========    ========

 December 31,
  2000           $864,843      $7,774        $541,738   $(48,937)   $524,131
                 ========      ======        ========   ========    ========

 December 31,
  1999           $901,352      $8,992        $582,534   $(59,532)   $512,607
                 ========      ======        ========   ========    ========
</TABLE>


Notes:  (1)   The  amount  of discount relates to certain long-term disability
              workers'  compensation  cases.  A discount rate of 3.5% (5% on
              New Jersey cases) was  used.

        (2)   Information  required  by  remaining  columns  is  contained  in
              Schedule  III.


Page  49

<PAGE>


                          SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) 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.

               HARLEYSVILLE  GROUP  INC.


Date:  March  22,  2002     By:     /s/  WALTER  R.  BATEMAN
                                    ------------------------
                                    Walter  R.  Bateman
                                    Chairman  of  the  Board,
                                    President  and
                                    Chief  Executive  Officer


          Pursuant  to  the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in  the  capacities  and  on  the  dates  indicated.


       SIGNATURE                     TITLE                    DATE
-------------------------     ------------------------      ---------

                              Chairman  of  the  Board,
                              President,
                              Chief  Executive  Officer
/s/  WALTER  R.  BATEMAN      and  a  Director              March  22,  2002
------------------------
Walter  R.  Bateman


                              Senior  Vice  President
                              and  Chief  Financial
                              Officer  (principal  financial
                              officer  and  principal
/s/  BRUCE  J.  MAGEE         accounting  officer)          March  22,  2002
---------------------
Bruce  J.  Magee

Page  50

<PAGE>



                      SIGNATURES
                      (Continued)

        SIGNATURE                    TITLE            DATE
-------------------------         -----------      ----------


/s/  LOWELL  R.  BECK               Director     March  22,  2002
---------------------
Lowell  R.  Beck


/s/  MICHAEL  L.  BROWNE            Director     March  22,  2002
------------------------
Michael  L.  Browne


/s/  ROBERT  D.  BUZZELL            Director     March  22,  2002
-----------------------
 Robert  D.  Buzzell


/s/  MIRIAN  M.  GRADDICK-WEIR      Director     March  22,  2002
------------------------------
Mirian  M.  Graddick-Weir


/s/  JOSEPH  E.  MCMENAMIN          Director     March  22,  2002
--------------------------
Joseph  E.  McMenamin


/s/  FRANK  E.  REED                Director     March  22,  2002
--------------------
Frank  E.  Reed


/s/  JERRY  S.  ROSENBLOOM          Director     March  22,  2002
--------------------------
Jerry  S.  Rosenbloom

Page  51

PAGE



     EXHIBIT  INDEX

 EXHIBIT
   NO.                DESCRIPTION  OF  EXHIBITS
------     --------------------------------------------------

 (13)(A)   Selected Consolidated Financial Data from the
           Company's 2001 annual report  to  stockholders.

 (13)(B)   Management's  Discussion  and Analysis of Results
           of Operations and Financial  Condition  from  the
           Company's  2001  annual report to stockholders.

 (13)(C)   Quantitative and Qualitative Disclosures About
           Market Risk from the Company's  2001  annual
           report  to  stockholders.

 (13)(D)   Consolidated  financial  statements  from the
           Company's 2001 annual report  to  stockholders.

 (13)(E)   Market  for  Common  Stock and Related Security
           Holder Matters from the  Company's  2001  annual
           report  to  stockholders.

 (21)      Subsidiaries  of  Registrant.

 (23)      Independent  Auditors'  Consent  and  Report  on
           Schedules.

 (99)      Form 11-K Annual Report for the Harleysville
           Group Inc. Employee Stock Purchase  Plan  for  the
           year  ended  December  31,  2001.

PAGE