| PENNSYLVANIA                                                   |   | 23-2934601                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| 10 North Highway 31, P.O. Box 278, Pennington, NJ              |   | 08534                                |
| (Address of principal executive offices)                       |   | (Zip Code)                           |
|                                                           |   |                                 |

|                        |   | Number of Shares Outstanding as of April 23, 2010 |
|-----------------------------|--------|---------------------------------------------------|
| COMMON STOCK (No Par Value) |   | 6,442,257                                         |
| (Title of Class)            |   | (Outstanding Shares)                              |

----

|                                                                                                | Page  |
|-----------------------------------------------------------------------------------------------------|------------|
| PART I. FINANCIAL INFORMATION                                                                       |       |
| Item 1. Financial Statements                                                                        | 5          |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24         |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                  | 38         |
| Item 4. Controls and Procedures                                                                     | 41         |
| PART II. OTHER INFORMATION                                                                          |       |
| Item 1. Legal Proceedings                                                                           | 41         |
| Item 1A. Risk Factors                                                                               | 41         |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 | 42         |
| Item 3. Defaults Upon Senior Securities                                                             | 42         |
| Item 4. (Removed and Reserved)                                                                      | 42         |
| Item 5. Other Information                                                                           | 42         |
| Item 6. Exhibits                                                                                    | 42         |
| SIGNATURES                                                                                          | 43         |
| Exhibits:                                                                                           |
|                                                                                                |

|        |                                                                                                                                                                                              |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit No. | Title                                                                                                                                                                                             |
| 3.1         | Articles of Incorporation of Mercer Insurance Group, Inc. (incorporated by reference herein to the Company’s Pre-effective Amendment No. 3 on Form S-1, SEC File No. 333-104897.)           |
| 3.2         | Bylaws of Mercer Insurance Group, Inc. (incorporated by reference herein to the Company’s Annual Report on Form 10-K, SEC File No. 000-25425, for the fiscal year ended December 31, 2003.) |
| 31.1        | Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002                                                                                         |
| 31.2        | Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002                                                                                         |
| 32.1        | Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002                                                                                         |
| 32.2        | Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002                                                                                         |

----

| ·   | future economic conditions in the regional and national markets in which the Group competes which are less favorable than current or expected conditions; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | the concentration of insured accounts in California, New Jersey and Pennsylvania; |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | the effect of legislative, judicial, economic, demographic and regulatory events in the seven states in which we do the majority of our business as of March 31, 2010; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the continuation of an A.M. Best rating in the Excellent category; |
|--------------------|--------------------------------------------------------------------|

| ·   | the ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our producer network; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the ability to obtain regulatory approval for an acquisition, to close the transaction, and to successfully integrate an acquisition and its operations; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | financial market conditions, including, but not limited to, changes in interest rates and in the stock markets causing a reduction of investment income or investment gains, an acceleration of the amortization of deferred policy acquisition costs, reduction in the value of our investment portfolio or a reduction in the demand for our products; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the impact of acts of terrorism and acts of war; |
|--------------------|--------------------------------------------------|

| ·   | the effects of terrorist related insurance legislation and laws; |
|--------------------|------------------------------------------------------------------|

| ·   | inflation; |
|--------------------|------------|

| ·   | the cost, availability and collectability of reinsurance; |
|--------------------|-----------------------------------------------------------|

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

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

| ·   | changes in the coverage terms selected by insurance customers, including higher deductibles and lower limits; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

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

| ·   | the potential impact on our reported net income that could result from the adoption of future accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

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

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

| ·   | disruption in world financial markets, which could adversely affect demand for the Company’s products, and credit risk associated with agents, customers, and reinsurers, as well as adversely affecting the Company’s investment portfolio value and investment income. Disrupted markets could present difficulty if the Company needed to raise additional capital in the future, or |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | adverse changes in applicable laws, regulations or rules governing insurance holding companies and insurance companies, and environmental, tax or accounting matters including limitations on premium levels, increases in minimum capital and reserves, and other financial viability requirements, and changes that affect the cost of, or demand for our products. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

|                                                                                                                                                                        |   | 2010        |    |   | 2009   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|---------|--------|--------|--------|
| Assets                                                                                                                                                                      |   | (Unaudited) |    |   |   |   |
| Investments, at fair value:                                                                                                                                                 |   |        |    |   |   |   |
| Fixed-income securities, available for sale, at fair value    (cost $366,388 and $348,635, respectively)                                                |   | $           | 384,044 |   |   |   | 365,464 |   |
| Equity securities, at fair value (cost $8,050 and $7,516,    respectively)                                                                              |   |        | 10,229  |   |   |   | 9,484 |   |
| Total investments                                                                                                                                                           |   |        | 394,273 |   |   |   | 374,948 |   |
|                                                                                                                                                                        |   |        |    |   |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                   |   |        | 26,742  |   |   |   | 39,927 |   |
| Premiums receivable                                                                                                                                                         |   |        | 36,966  |   |   |   | 36,405 |   |
| Reinsurance receivables                                                                                                                                                     |   |        | 77,002  |   |   |   | 79,599 |   |
| Prepaid reinsurance premiums                                                                                                                                                |   |        | 5,959   |   |   |   | 5,871 |   |
| Deferred policy acquisition costs                                                                                                                                           |   |        | 18,261  |   |   |   | 18,876 |   |
| Accrued investment income                                                                                                                                                   |   |        | 3,821   |   |   |   | 4,287 |   |
| Property and equipment, net                                                                                                                                                 |   |        | 21,141  |   |   |   | 21,516 |   |
| Deferred income taxes                                                                                                                                                       |   |        | 5,052   |   |   |   | 4,941 |   |
| Goodwill                                                                                                                                                                    |   |        | 5,416   |   |   |   | 5,416 |   |
| Other assets                                                                                                                                                                |   |        | 4,215   |   |   |   | 3,568 |   |
| Total assets                                                                                                                                                                |   | $           | 598,848 |   |   |   | 595,354 |   |
| Liabilities and Equity                                                                                                                                                      |   |        |    |   |   |   |   |   |
| Liabilities:                                                                                                                                                                |   |        |    |   |   |   |   |   |
| Losses and loss adjustment expenses                                                                                                                                         |   | $           | 311,414 |   |   |   | 311,348 |   |
| Unearned premiums                                                                                                                                                           |   |        | 73,955  |   |   |   | 76,601 |   |
| Accounts payable and accrued expenses                                                                                                                                       |   |        | 9,753   |   |   |   | 12,150 |   |
| Other reinsurance balances                                                                                                                                                  |   |        | 16,296  |   |   |   | 12,386 |   |
| Trust preferred securities                                                                                                                                                  |   |        | 15,597  |   |   |   | 15,592 |   |
| Advances under line of credit                                                                                                                                               |   |        | 3,000   |   |   |   | 3,000 |   |
| Other liabilities                                                                                                                                                           |   |        | 4,632   |   |   |   | 4,069 |   |
| Total liabilities                                                                                                                                                           |   |        | 434,647 |   |   |   | 435,146 |   |
|                                                                                                                                                                        |   |        |    |   |   |   |   |   |
| Stockholders’ Equity:                                                                                                                                                 |   |        |    |   |   |   |   |   |
| Preferred stock, no par value, authorized 5,000,000 shares, no    shares issued and outstanding                                                         |   |        | -       |   |   |   | - |   |
| Common stock, no par value, authorized 15,000,000 shares,    issued 7,074,333 shares, outstanding    6,898,936 and 6,883,498 shares |   |        | -       |   |   |   | - |   |
| Additional paid-in capital                                                                                                                                                  |   |        | 72,289  |   |   |   | 72,139 |   |
| Accumulated other comprehensive income                                                                                                                                      |   |        | 12,906  |   |   |   | 12,220 |   |
| Retained Earnings                                                                                                                                                           |   |        | 89,104  |   |   |   | 86,101 |   |
| Unearned ESOP shares                                                                                                                                                        |   |        | (1,724  | )      |   |   | (1,878 | ) |
| Treasury stock, 632,076 shares                                                                                                                                              |   |        | (8,374  | )      |   |   | (8,374 | ) |
| Total stockholders’ equity                                                                                                                                            |   |        | 164,201 |   |   |   | 160,208 |   |
| Total liabilities and stockholders’ equity                                                                                                                            |   | $           | 598,848 |   |   |   | 595,354 |   |

----

|                                                                                                                            |   | 2010                                          |   |   | 2009   |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|--------|--------|
|                                                                                                                            |   | (Dollars in thousands, except per share data) |   |
|                                                                                                                            |   | (Unaudited)                                   |   |
| Revenues:                                                                                                                       |   |                                          |   |   |   |   |
| Net premiums earned                                                                                                             |   | $                                             | 34,735 |   |   |   | 35,582 |   |
| Investment income, net of expenses                                                                                              |   |                                          | 3,506  |   |   |   | 3,603 |   |
| Net realized investment gains (losses)                                                                                          |   |                                          |   |   |   |   |   |   |
| Other-than-temporary impairments (none allocated to Other                                                                       |   |                                          | (89    | )      |   |   | (535 | ) |
| Comprehensive Income)                                                                                                           |   |                                          |   |   |   |   |   |   |
| Other net realized investment gains                                                                                             |   |                                          | 561    |   |   |   | 54 |   |
| Total net realized investment gains (losses)                                                                                    |   |                                          | 472    |   |   |   | (481 | ) |
| Other revenue                                                                                                                   |   |                                          | 456    |   |   |   | 488 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Total revenues                                                                                                                  |   |                                          | 39,169 |   |   |   | 39,192 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Expenses:                                                                                                                       |   |                                          |   |   |   |   |   |   |
| Losses and loss adjustment expenses                                                                                             |   |                                          | 21,913 |   |   |   | 22,199 |   |
| Amortization of deferred policy acquisition costs (related party    amounts of $263 and $253, respectively) |   |                                          | 9,385  |   |   |   | 9,905 |   |
| Other expenses                                                                                                                  |   |                                          | 2,764  |   |   |   | 2,891 |   |
| Interest expense                                                                                                                |   |                                          | 351    |   |   |   | 352 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Total expenses                                                                                                                  |   |                                          | 34,413 |   |   |   | 35,347 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Income before income taxes                                                                                                      |   |                                          | 4,756  |   |   |   | 3,845 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Income taxes                                                                                                                    |   |                                          | 1,284  |   |   |   | 954 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Net income                                                                                                                      |   | $                                             | 3,472  |   |   |   | 2,891 |   |
|                                                                                                                            |   |                                          |   |   |   |   |   |   |
| Earnings per common share:                                                                                                      |   |                                          |   |   |   |   |   |   |
|   Basic                                                                                                               |   | $                                             | 0.55   |   |   |   | 0.47 |   |
|   Diluted                                                                                                             |   | $                                             | 0.54   |   |   |   | 0.46 |   |

----

|                                                                                                         |   |      |   |   |   |   |   |       |   |   | Accumulated   |   |   |     |   |   |     |   |   |     |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|------------|--------|--------|---------------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|--------|--------|
|                                                                                                         |   |      |   |   |   |   |   | Additional |   |   | other         |   |   |     |   |   | Unearned |   |   |     |   |   |   |   |
|                                                                                                         |   | Preferred |   |   | Common |   |   | paid-in    |   |   | comprehensive |   |   | Retained |   |   | ESOP     |   |   | Treasury |   |   |   |   |
|                                                                                                         |   | stock     |   |   | stock  |   |   | capital    |   |   | income        |   |   | earnings |   |   | shares   |   |   | stock    |   |   | Total  |   |
| Balance, December 31, 2009                                                                              |   | $         | -      |   |   |   | -      |       |   |   | 72,139        |   |   |     | 12,220 |   |     |   | 86,101 |     |   |   | (1,878 | )      |   |   | (8,374 | ) |   |   | 160,208 |   |
| Net income                                                                                                   |   |      |   |   |   |   |   |       |   |   |          |   |   |     |   |   |     |   | 3,472  |     |   |   |   |   |   |   |   |   |   |   | 3,472 |   |
| Unrealized gains on securities:                                                                              |   |      |   |   |   |   |   |       |   |   |          |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains arising during period, net of related income tax expense of $550               |   |      |   |   |   |   |   |       |   |   |          |   |   |     | 1,069  |   |     |   |   |     |   |   |   |   |   |   |   |   |   |   | 1,069 |   |
| Less reclassification adjustment for gains included in net income, net of related income tax expense of $198 |   |      |   |   |   |   |   |       |   |   |          |   |   |     | (383   | )      |     |   |   |     |   |   |   |   |   |   |   |   |   |   | (383 | ) |
| Other comprehensive income                                                                                   |   |      |   |   |   |   |   |       |   |   |          |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |   |   |   |   | 686 |   |
| Comprehensive income                                                                                         |   |      |   |   |   |   |   |       |   |   |          |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |   |   |   |   | 4,158 |   |
| Stock compensation plan amortization                                                                         |   |      |   |   |   |   |   |       |   |   | 31            |   |   |     |   |   |     |   |   |     |   |   |   |   |   |   |   |   |   |   | 31 |   |
| ESOP shares committed                                                                                        |   |      |   |   |   |   |   |       |   |   | 119           |   |   |     |   |   |     |   |   |     |   |   | 154    |   |   |   |   |   |   |   | 273 |   |
| Dividends to stockholders                                                                                    |   |      |   |   |   |   |   |       |   |   |          |   |   |     |   |   |     |   | (469   | )        |   |   |   |   |   |   |   |   |   |   | (469 | ) |
| Balance, March 31, 2010                                                                                      |   | $         | -      |   |   |   | -      |       |   |   | 72,289        |   |   |     | 12,906 |   |     |   | 89,104 |     |   |   | (1,724 | )      |   |   | (8,374 | ) |   |   | 164,201 |   |

----

|                                                                                   |   | 2010                   |    |   | 2009   |   |
|----------------------------------------------------------------------------------------|--------|------------------------|---------|--------|--------|--------|
|                                                                                   |   | (Dollars in thousands) |    |
|                                                                                   |   | (Unaudited)            |    |   |   |   |
| Cash flows from operating activities:                                                  |   |                   |    |   |   |   |
| Net income                                                                             |   | $                      | 3,472   |   |   |   | 2,891 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                   |    |   |   |
| Depreciation and amortization of fixed assets                                          |   |                   | 792     |   |   |   | 770 |   |
| Amortization of premium, net                                                           |   |                   | 400     |   |   |   | 342 |   |
| Amortization of stock compensation                                                     |   |                   | 31      |   |   |   | 117 |   |
| ESOP share commitment                                                                  |   |                   | 273     |   |   |   | 210 |   |
| Net realized investment (gains) losses                                                 |   |                   | (472    | )      |   |   | 481 |   |
| Deferred income tax                                                                    |   |                   | (464    | )      |   |   | (1,507 | ) |
| Change in assets and liabilities:                                                      |   |                   |    |   |   |   |   |   |
| Premiums receivable                                                                    |   |                   | (561    | )      |   |   | 1,039 |   |
| Reinsurance receivables                                                                |   |                   | 2,597   |   |   |   | 3,526 |   |
| Prepaid reinsurance premiums                                                           |   |                   | (88     | )      |   |   | 1,162 |   |
| Deferred policy acquisition costs                                                      |   |                   | 615     |   |   |   | 1,432 |   |
| Other assets                                                                           |   |                   | (288    | )      |   |   | 217 |   |
| Losses and loss adjustment expenses                                                    |   |                   | 66      |   |   |   | 62 |   |
| Unearned premiums                                                                      |   |                   | (2,646  | )      |   |   | (4,887 | ) |
| Other reinsurance balances                                                             |   |                   | 3,910   |   |   |   | 1,087 |   |
| Other                                                                                  |   |                   | (2,576  | )      |   |   | (3,599 | ) |
| Net cash provided by operating activities                                              |   |                   | 5,061   |   |   |   | 3,343 |   |
|                                                                                   |   |                   |    |   |   |   |   |   |
| Cash flows from investing activities:                                                  |   |                   |    |   |   |   |   |   |
| Purchase of fixed income securities, available for sale                                |   |                   | (29,545 | )      |   |   | (28,185 | ) |
| Purchase of equity securities                                                          |   |                   | (1,002  | )      |   |   | - |   |
| Sale and maturity of fixed income securities, available for sale                       |   |                   | 12,511  |   |   |   | 15,869 |   |
| Sale of equity securities                                                              |   |                   | 675     |   |   |   | 1,717 |   |
| Purchase of property and equipment, net                                                |   |                   | (416    | )      |   |   | (2,991 | ) |
| Net cash used in investing activities                                                  |   |                   | (17,777 | )      |   |   | (13,590 | ) |
|                                                                                   |   |                   |    |   |   |   |   |   |
| Cash flows from financing activities:                                                  |   |                   |    |   |   |   |   |   |
| Purchase of treasury stock                                                             |   |                   | -       |   |   |   | (126 | ) |
| Dividends to stockholders                                                              |   |                   | (469    | )      |   |   | (464 | ) |
| Net cash used in financing activities                                                  |   |                   | (469    | )      |   |   | (590 | ) |
|                                                                                   |   |                   |    |   |   |   |   |   |
| Net decrease in cash and cash equivalents                                              |   |                   | (13,185 | )      |   |   | (10,837 | ) |
| Cash and cash equivalents at beginning of period                                       |   |                   | 39,927  |   |   |   | 37,043 |   |
| Cash and cash equivalents at end of period                                             |   | $                      | 26,742  |   |   |   | 26,206 |   |
|                                                                                   |   |                   |    |   |   |   |   |   |
| Cash paid during the period for:                                                       |   |                   |    |   |   |   |   |   |
| Interest                                                                               |   | $                      | 347     |   |   |   | 348 |   |
| Income taxes                                                                           |   | $                      | -       |   |   |   | - |   |

----

| (1) | Basis of Presentation |
|-----|-----------------------|

----

----

| (2) | INVESTMENTS |
|-----|-------------|

|                                                                                               |   |  Three months ended |   |
|----------------------------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                                               |   |  March 31,          |   |
|                                                                                               |   | 2010                     |   |   | 2009 |   |
| Investment income:                                                                                 |   |                     |   |   |   |   |
|    Fixed income securities                                                          |   | $                        | 3,989  |   |   |   | 3,937 |   |
|    Equity securities                                                                |   |                     | 60     |   |   |   | 80 |   |
|    Cash and equivalents                                                             |   |                     | 33     |   |   |   | 47 |   |
|           Gross investment income                |   |                     | 4,082  |   |   |   | 4,064 |   |
|     Less investment expenses                                                   |   |                     | 576    |   |   |   | 461 |   |
|           Net investment income                  |   |                     | 3,506  |   |   |   | 3,603 |   |
| Net realized gains (losses):                                                                       |   |                     |   |   |   |   |   |   |
|    Fixed income securities                                                          |   |                     | 374    |   |   |   | (319 | ) |
|    Equity securities                                                                |   |                     | 207    |   |   |   | (243 | ) |
|    Mark-to-market valuation for interest rate swaps                                 |   |                     | (109   | ) |   |   | 81 |   |
|           Net realized investment gains (losses) |   |                     | 472    |   |   |   | (481 | ) |
| Net investment income and net realized investment gains                                            |   | $                        | 3,978  |   |   |   | 3,122 |   |

| Change in Unrealized Gains and Losses: |   | March 31, |   |
|----------------------------------------|--------|-----------|--------|
|                                   |   | 2010      |   |
| Fixed-income securities                |   | $         | 827    |   |
| Equity securities                      |   |      | 211    |   |
|                                   |   | $         | 1,038  |   |

----

|                                                                                                                                            |   |     |    |   |       |       |   |       |       |   |      |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|--------|------------|------------|--------|------------|------------|--------|-----------|-----------|
|                                                                                                                                            |   |     |    |   | Gross      |       |   | Gross      |       |   | Estimated |      |
|                                                                                                                                            |   |     |    |   | Unrealized |       |   | Unrealized |       |   | Fair      |      |
|                                                                                                                                            |   | Cost (1) |    |   | Gains      |       |   | Losses     |       |   | Value     |      |
| At March 31, 2010:                                                                                                                              |   |     |    |   |       |       |   |       |       |   |      |      |
| Fixed-income securities, available for sale:                                                                                                    |   |     |    |   |       |       |   |       |       |   |      |      |
| U.S. government and government agencies (2)                                                                                                     |   | $        | 72,466  |   |       |       | 3,553  |       |       |   | 52        |      |   |   | 75,967 |   |
| Obligations of states and political                subdivisions |   |     | 133,551 |   |       |       | 6,250  |       |       |   | 29        |      |   |   | 139,772 |   |
| Industrial and miscellaneous                                                                                                                    |   |     | 142,725 |   |       |       | 7,027  |       |       |   | 186       |      |   |   | 149,566 |   |
| Mortgage-backed securities                                                                                                                      |   |     | 17,646  |   |       |       | 1,096  |       |       |   | 3         |      |   |   | 18,739 |   |
| Total fixed maturities                                                                                                                          |   |     | 366,388 |   |       |       | 17,926 |       |       |   | 270       |      |   |   | 384,044 |   |
| Equity securities:                                                                                                                              |   |     |    |   |       |       |   |       |       |   |      |      |   |   |   |   |
| At estimated market value                                                                                                                       |   |     | 8,050   |   |       |       | 2,193  |       |       |   | 14        |      |   |   | 10,229 |   |
| Total                                                                                                                                           |   | $        | 374,438 |   |       |       | 20,119 |       |       |   | 284       |      |   |   | 394,273 |   |
|                                                                                                                                            |   |     |    |   |       |       |   |       |       |   |      |      |   |   |   |   |
|                                                                                                                                            |   |     |    |   |       | Gross      |   |       | Gross      |   |      | Estimated |   |
|                                                                                                                                            |   |     |    |   |       | Unrealized |   |       | Unrealized |   |      | Fair      |   |
|                                                                                                                                            |   | Cost (1) |    |   | Gains      |       |   | Losses     |       |   | Value     |      |
| At December 31, 2009:                                                                                                                           |   |     |    |   |       |       |   |       |       |   |      |      |   |   |   |   |
| Fixed-income securities, available for sale:                                                                                                    |   |     |    |   |       |       |   |       |       |   |      |      |   |   |   |   |
| U.S. government and government agencies (2)                                                                                                     |   | $        | 68,864  |   |       |       | 3,209  |       |       |   | 52        |      |   |   | 72,021 |   |
| Obligations of states and political                subdivisions |   |     | 136,706 |   |       |       | 6,743  |       |       |   | 156       |      |   |   | 143,293 |   |
| Industrial and miscellaneous                                                                                                                    |   |     | 124,135 |   |       |       | 6,380  |       |       |   | 292       |      |   |   | 130,223 |   |
| Mortgage-backed securities                                                                                                                      |   |     | 18,930  |   |       |       | 1,008  |       |       |   | 11        |      |   |   | 19,927 |   |
| Total fixed maturities                                                                                                                          |   |     | 348,635 |   |       |       | 17,340 |       |       |   | 511       |      |   |   | 365,464 |   |
| Equity securities:                                                                                                                              |   |     |    |   |       |       |   |       |       |   |      |      |   |   |   |   |
| At estimated market value                                                                                                                       |   |     | 7,516   |   |       |       | 2,001  |       |       |   | 33        |      |   |   | 9,484 |   |
| Total                                                                                                                                           |   | $        | 356,151 |   |       |       | 19,341 |       |       |   | 544       |      |   |   | 374,948 |   |

|   | (1)   | Original cost of equity and  fixed-income securities adjusted for other than temporary impairment writedowns and amortization of premium and accretion of discount. |
|--------|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2)   | Includes approximately $54,708 and $55,092 (cost) and $57,806 and $57,874 (fair value), respectively, of mortgage-backed securities implicitly or explicitly backed by the U.S. government and government agencies as of March 31, 2010 and December 31, 2009. |
|--------|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                          |   |           |    |   |              |   |    |     |   |   |       |   |
|-------------------------------|--------|----------------|---------|--------|-------------------|--------|---------|----------|--------|--------|------------|--------|
|                          |   |           |    |   |              |   |    |     |   |   |       |   |
|                          |   | March 31, 2010 |    |   | December 31, 2009 |   |
|                          |   | Cost (1)       |    |   | Fair Value        |   |    | Cost (1) |   |   | Fair Value |   |
|                          |   |           |    |
| Industrial and miscellaneous: |   |           |    |   |              |   |    |     |   |   |       |   |
|                          |   |           |    |   |              |   |    |     |   |   |       |   |
| Fixed income securities       |   |           |    |   |              |   |    |     |   |   |       |   |
| Retail specialty              |   | $              | 48,555  |   |              | $      | 50,622  |     |   | $      | 42,211     |   |   | $ | 43,897 |   |
| Energy                        |   |           | 34,863  |   |              |   | 36,698  |     |   |   | 30,685     |   |   |   | 32,317 |   |
| Financial                     |   |           | 32,145  |   |              |   | 34,097  |     |   |   | 29,612     |   |   |   | 31,537 |   |
| Pharmaceutical                |   |           | 14,907  |   |              |   | 15,342  |     |   |   | 9,367      |   |   |   | 9,744 |   |
| Information Technology        |   |           | 12,255  |   |              |   | 12,807  |     |   |   | 12,260     |   |   |   | 12,728 |   |
|    Total       |   | $              | 142,725 |   |              | $      | 149,566 |     |   | $      | 124,135    |   |   | $ | 130,223 |   |
|                          |   |           |    |   |              |   |    |     |   |   |       |   |   |   |   |   |
|                          |   |           |    |   |              |   |    |     |   |   |       |   |   |   |   |   |
| Equity securities             |   |           |    |   |              |   |    |     |   |   |       |   |   |   |   |   |
| Retail specialty              |   | $              | 4,000   |   |              | $      | 4,890   |     |   | $      | 3,488      |   |   | $ | 4,216 |   |
| Financial                     |   |           | 1,293   |   |              |   | 1,587   |     |   |   | 1,293      |   |   |   | 1,505 |   |
| Information Technology        |   |           | 1,261   |   |              |   | 1,671   |     |   |   | 995        |   |   |   | 1,363 |   |
| Pharmaceutical                |   |           | 1,333   |   |              |   | 1,844   |     |   |   | 1,333      |   |   |   | 1,764 |   |
| Energy                        |   |           | 163     |   |              |   | 237     |     |   |   | 407        |   |   |   | 636 |   |
|    Total       |   | $              | 8,050   |   |              | $      | 10,229  |     |   | $      | 7,516      |   |   | $ | 9,484 |   |

----

|                                      |   | Less than 12 Months |   |   | 12 Months or Longer |   |   | Total      |   |
|-------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|------------|--------|
|                                      |   | Estimated           |   |   | Unrealized          |   |   | Estimated  |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
|                                      |   | Fair Value          |   |   | Losses              |   |   | Fair Value |   |   | Losses |   |   | Fair Value |   |   | Losses |   |
|                                      |   |                |   |
| U.S. Treasury securities and              |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    obligations of U.S.     |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    government corporations |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    and agencies            |   | $                   | 12,665 |   |                | $      | 52     |       |   | $ | - |   |   | $ | - |   |   | $ | 12,665 |   |   | $ | 52 |   |
| Obligations of states and                 |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    political subdivisions  |   |                | 1,921  |   |                |   | 29     |       |   |   | - |   |   |   | - |   |   |   | 1,921 |   |   |   | 29 |   |
| Industrial and Miscellaneous securities   |   |                | 20,152 |   |                |   | 186    |       |   |   | - |   |   |   | - |   |   |   | 20,152 |   |   |   | 186 |   |
| Mortgage-backed securities                |   |                | -      |   |                |   | -      |       |   |   | 215 |   |   |   | 3 |   |   |   | 215 |   |   |   | 3 |   |
| Total fixed maturities                    |   |                | 34,738 |   |                |   | 267    |       |   |   | 215 |   |   |   | 3 |   |   |   | 34,953 |   |   |   | 270 |   |
| Total equity securities                   |   |                | 1,184  |   |                |   | 14     |       |   |   | - |   |   |   | - |   |   |   | 1,184 |   |   |   | 14 |   |
| Total securities in a                     |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| temporary unrealized loss                 |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| position                                  |   | $                   | 35,922 |   |                | $      | 281    |       |   | $ | 215 |   |   | $ | 3 |   |   | $ | 36,137 |   |   | $ | 284 |   |

|                                   |   |      |    |   |       |   |
|----------------------------------------|--------|-----------|---------|--------|------------|--------|
|                                   |   | Amortized |    |   | Estimated  |   |
|                                   |   | Cost      |    |   | Fair Value |   |
|                                   |   |      |    |   |       |   |
| Due in one year or less                |   | $         | 18,040  |   |       |   | 18,423 |   |
| Due after one year through five years  |   |      | 108,750 |   |       |   | 113,553 |   |
| Due after five years through ten years |   |      | 154,027 |   |       |   | 161,948 |   |
| Due after ten years                    |   |      | 13,217  |   |       |   | 13,575 |   |
|                                   |   |      | 294,034 |   |       |   | 307,499 |   |
| Mortgage-backed securities             |   |      | 72,354  |   |       |   | 76,545 |   |
|                                   |   | $         | 366,388 |   |       |   | 384,044 |   |

----

|                                                                                  |   | Three months |   |
|---------------------------------------------------------------------------------------|--------|--------------|--------|
|                                                                                  |   | ended        |   |
|                                                                                  |   | March 31,    |   |
|                                                                                  |   | 2010         |   |
|                                                                                  |   |         |   |
|                                                                                  |   |         |   |
| Beginning balance of cumulative credit loss for securities held at January 1, 2010    |   | $            | 3,732  |   |
| Additional credit loss for securities previously other-than-temorarily impaired       |   |         | 8      |   |
| Credit loss for securities not previously other-than-temorarily impaired              |   |         | -      |   |
| Reduction in credit loss for securities disposed or collected                         |   |         | (247   | ) |
| Reduction in credit loss for securities other-than-temporarily impaired which were    |   |         | -      |   |
|      intended to be or were required of necessity to be sold |   |         |   |   |
| Change in credit loss due to accretion of increase in cash flows for securities       |   |         | -      |   |
|      previously other-than-temporarily impaired              |   |         |   |   |
| Ending balance March 31, 2010                                                         |   | $            | 3,493  |   |

|                                                                      |   | 2010   |   |   | 2009   |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Gross realized gains:                                                     |   |   |   |   |   |   |
|      Gains on sale of securities                 |   |   | 670    |   |   |   | 138 |   |
|      Mark-to-market for interest rate swaps      |   |   | -      |   |   |   | 81 |   |
|           Total         |   |   | 670    |   |   |   | 219 |   |
| Gross realized losses:                                                    |   |   |   |   |   |   |   |   |
|      Losses on sale of securities                |   |   | -      |   |   |   | 165 |   |
|      Other than temporary impairment write-downs |   |   | 89     |   |   |   | 535 |   |
|      Mark-to-market for interest rate swaps      |   |   | 109    |   |   |   | - |   |
|           Total         |   |   | 198    |   |   |   | 700 |   |
|                                                                      |   |   |   |   |   |   |   |   |
|      Net realized gain (loss)                    |   |   | 472    |   |   | $      | (481 | ) |

|   |   |
|--------|--------|

|  (3) | Segment Information |
|-----------|---------------------|

----

|                                   |   | Three Months Ended March 31, |   |
|----------------------------------------|--------|------------------------------|--------|
|                                   |   | 2010                         |   |   | 2009 |   |
|                                   |   | (In thousands)               |   |
| Revenues:                              |   |                         |   |   |   |   |
| Net premiums earned:                   |   |                         |   |   |   |   |
| Commercial lines                       |   | $                            | 29,945 |   |   | $ | 30,704 |   |
| Personal lines                         |   |                         | 4,790  |   |   |   | 4,878 |   |
| Total net premiums earned              |   |                         | 34,735 |   |   |   | 35,582 |   |
| Net investment income                  |   |                         | 3,506  |   |   |   | 3,603 |   |
| Net realized investment gains (losses) |   |                         | 472    |   |   |   | (481 | ) |
| Other revenue                          |   |                         | 456    |   |   |   | 488 |   |
| Total revenues                         |   | $                            | 39,169 |   |   | $ | 39,192 |   |
| Income before income taxes:            |   |                         |   |   |   |   |   |   |
| Underwriting income (loss):            |   |                         |   |   |   |   |   |   |
| Commercial lines                       |   | $                            | 1,967  |   |   | $ | 1,320 |   |
| Personal lines                         |   |                         | (1,294 | ) |   |   | (733 | ) |
| Total underwriting income              |   |                         | 673    |   |   |   | 587 |   |
| Net investment income                  |   |                         | 3,506  |   |   |   | 3,603 |   |
| Net realized investment gains (losses) |   |                         | 472    |   |   |   | (481 | ) |
| Other                                  |   |                         | 105    |   |   |   | 136 |   |
| Income before income taxes             |   | $                            | 4,756  |   |   | $ | 3,845 |   |

----

| (4) | Reinsurance |
|-----|-------------|

| (5) | Comprehensive Income |
|-----|----------------------|

|                                                                                                                                                                                                                                            |   | Three months ended |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                                                                                                                                            |   | March 31,          |   |
|                                                                                                                                                                                                                                            |   | 2010               |   |   | 2009 |   |
|                                                                                                                                                                                                                                            |   | (In thousands)     |   |
| Net income                                                                                                                                                                                                                                      |   | $                  | 3,472  |   |   | $ | 2,891 |   |
| Other comprehensive income (loss), net of tax:                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
|     Unrealized gains on securities:                                                                                                                                                                                         |   |               |   |   |   |   |   |   |
|        Unrealized holding gains arising during period, net of related income tax          expense of $550 and $810                                         |   |               | 1,069  |   |   |   | 1,573 |   |
|        Less reclassification adjustment for (gains) losses included in net income, net of related          income tax expense (benefit) of $198 and ($191) |   |               | (383   | ) |   |   | 371 |   |
|     Defined benefit pension plan, net of related income tax expense of $0 and $1                                                                                                                                            |   |               | -      |   |   |   | 1 |   |
|                                                                                                                                                                                                                                            |   |               | 686    |   |   |   | 1,945 |   |
| Comprehensive income                                                                                                                                                                                                                            |   | $                  | 4,158  |   |   | $ | 4,836 |   |

| (6) | Share-based Compensation |
|-----|--------------------------|

----

|                                                                                            |   |            |    |   |                                    |      |
|-------------------------------------------------------------------------------------------------|--------|-----------------|---------|--------|-----------------------------------------|-----------|
|                                                                                            |   | Number ofShares |    |   | Weighted AverageExercise Priceper Share |      |
| Outstanding at December 31, 2009                                                                |   |            | 590,700 |   |                                    | $         | 13.26 |   |
| Granted - 2010                                                                                  |   |            | -       |   |                                    |      | - |   |
| Exercised - 2010                                                                                |   |            | -       |   |                                    |      | - |   |
| Forfeited - 2010                                                                                |   |            | -       |   |                                    |      | - |   |
| Outstanding at March 31, 2010                                                                   |   |            | 590,700 |   |                                    | $         | 13.26 |   |
| Exercisable at:                                                                                 |   |            |    |   |                                    |      |   |   |
| March 31, 2010                                                                                  |   |            | 569,700 |   |                                    | $         | 13.13 |   |
| Weighted-average remaining contractual life                                                     |   |            |    |   |                                    | 4.4 years |   |
| Compensation remaining to be recognized for unvested stock options at March 31, 2010 (millions) |   |            | $       | 0.1    |                                    |
| Weighted-average remaining amortization period                                                  |   |            |    |   |                                    | 0.7 years |   |
| Aggregate Intrinsic Value of outstanding options, March 31, 2010 (millions)                     |   |            |    |   |                                    | $         | 3.1 |   |
| Aggregate Intrinsic Value of exercisable options, March 31, 2010 (millions)                     |   |            |    |   |                                    | $         | 3.0 |   |

----

|                                                                                               |   | Number ofShares |   |   | Weighted AverageFair Valueper Share |      |
|----------------------------------------------------------------------------------------------------|--------|-----------------|--------|--------|-------------------------------------|-----------|
| Unvested restricted stock at December 31, 2009                                                     |   |            | 3,000  |   |                                | $         | 22.18 |   |
| Granted - 2010                                                                                     |   |            | -      |   |                                |      | - |   |
| Vested - 2010                                                                                      |   |            | -      |   |                                |      | - |   |
| Forfeited - 2010                                                                                   |   |            | -      |   |                                |      | - |   |
| Unvested restricted stock at March 31, 2010                                                        |   |            | 3,000  |   |                                | $         | 22.18 |   |
| Compensation remaining to be recognized for unvested restricted stock at March 31, 2010 (millions) |   |            |   |   |                                |      | 0.04 |   |
| Weighted-average remaining amortization period                                                     |   |            |   |   |                                | 1.0 years |   |

| (7)   | Earnings per Share |
|-----------------|--------------------|

|   | The computation of basic and diluted earnings per share is as follows: |
|--------|------------------------------------------------------------------------|

|                                                                                            |   |                                          |      |   |   |   |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|--------|--------|--------|
|                                                                                            |   | Three months endedMarch 31,                   |      |
|                                                                                            |   | 2010                                          |      |   | 2009   |   |
|                                                                                            |   | (Dollars in thousands, except per share data) |      |
| Numerator for basic and diluted earnings per share:                                             |   |                                          |      |   |   |   |
| Net income                                                                                      |   | $                                             | 3,472     |   |   | $      | 2,891 |   |
| Denominator for basic earnings per share - weighted-average shares   outstanding |   |                                          | 6,259,228 |   |   |   | 6,180,227 |   |
| Effect of stock incentive plans                                                                 |   |                                          | 154,261   |   |   |   | 52,817 |   |
| Denominator for diluted earnings per share                                                      |   |                                          | 6,413,489 |   |   |   | 6,233,044 |   |
| Basic earnings per share                                                                        |   | $                                             | 0.55      |   |   | $      | 0.47 |   |
| Diluted earnings per share                                                                      |   | $                                             | 0.54      |   |   | $      | 0.46 |   |

| ·   | Level 1 - Valuations based on unadjusted quoted market prices in active markets for identical assets that the Group has the ability to access. Since the valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant amount or degree of judgment. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 - Valuations based on quoted prices for similar assets in active markets; quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Level 3 - Valuations that are derived from techniques in which one or more of the significant inputs are unobservable, including broker quotes which are non-binding. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

|                                            |   | March 31, 2010 |    |
|-------------------------------------------------|--------|----------------|---------|
| (in thousands)                                  |   | Total          |    | QuotedPrices inActiveMarkets forIdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |   | SignificantUnobservableInputs(Level 3) |   |
|                                            |   |           |    |   |   |   |   |   |   |   |   |   |
| Fixed-income securities, available for sale     |   | $              | 384,044 |   |   | $ | 5,624 |   |   | $ | 377,039 |   |   | $ | 1,381 |   |
| Equity securities                               |   |           | 10,229  |   |   |   | 10,162 |   |   |   | - |   |   |   | 67 |   |
|      Total assets      |   | $              | 394,273 |   |   | $ | 15,786 |   |   | $ | 377,039 |   |   | $ | 1,448 |   |
|                                            |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities                               |   | $              | 1,469   |   |   | $ | - |   |   | $ | 1,469 |   |   | $ | - |   |
|      Total liabilities |   | $              | 1,469   |   |   | $ | - |   |   | $ | 1,469 |   |   | $ | - |   |

|                                            |   | December 31, 2009 |    |
|-------------------------------------------------|--------|-------------------|---------|
| (in thousands)                                  |   | Total             |    | Level 1 |   | Level 2 |   | Level 3 |   |
|                                            |   |              |    |   |   |   |   |   |   |   |   |   |
| Fixed-income securities, available for sale     |   | $                 | 365,464 |   |   | $ | 5,596 |   |   | $ | 358,520 |   |   | $ | 1,348 |   |
| Equity securities                               |   |              | 9,484   |   |   |   | 9,417 |   |   |   | - |   |   |   | 67 |   |
|      Total assets      |   | $                 | 374,948 |   |   | $ | 15,013 |   |   | $ | 358,520 |   |   | $ | 1,415 |   |
|                                            |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities                               |   | $                 | 1,360   |   |   | $ | - |   |   | $ | 1,360 |   |   | $ | - |   |
|      Total liabilities |   | $                 | 1,360   |   |   | $ | - |   |   | $ | 1,360 |   |   | $ | - |   |

----

|                                                                                   |   | For the Three Months Ended               |   |             | For the Three Months Ended |                                     |
|----------------------------------------------------------------------------------------|--------|------------------------------------------|--------|------------------|----------------------------|------------------------------------------|
|                                                                                   |   | March 31, 2010                           |   |             | March 31, 2009             |                                     |
| (in thousands)                                                                         |   | Fixed-incomesecurities,availablefor sale |   | Equitysecurities |                       | Fixed-incomesecurities,availablefor sale |   | Equitysecurities |   |
|                                                                                   |   |                                     |   |             |                       |                                     |   |   |   |   |   |   |
| Balance, beginning of period                                                           |   | $                                        | 1,348  |             |                       | $                                        | 67 |   |   | $ | 1,767 |   |   | $ | 46 |   |
|     Total net loss included in net income                          |   |                                     | -      |             |                       |                                     | - |   |   |   | (285 | ) |   |   | - |   |
|     Total net gain (losses) included in other comprehensive income |   |                                     | 33     |             |                       |                                     | - |   |   |   | (15 | ) |   |   | - |   |
|     Purchases, sales, issuances and settlements, net               |   |                                     | -      |             |                       |                                     | - |   |   |   | (2 | ) |   |   | - |   |
| Balance, end of period                                                                 |   | $                                        | 1,381  |             |                       | $                                        | 67 |   |   | $ | 1,465 |   |   | $ | 46 |   |

| (9)   | Derivative Instruments and Hedging Activities |
|-----------------|-----------------------------------------------|

----

|                                                  | March 31,2010        |   | December 31,2009     |   |
|-------------------------------------------------------|----------------------|--------|----------------------|--------|
|                                                  | BalanceSheetLocation |   | Fair Value liability |   | BalanceSheetLocation |   | Fair Value liability |   |
| Interest rate swaps:                                  |                 |   |                 |   |   |   |   |   |
|                                                  |                 |   |                 |   |   |   |   |   |
| Union Bank of California   (Trust I)   | Other liabilities    |   | $                    | (442   | ) | Other liabilities |   | $ | (417 | ) |
| Union Bank of California   (Trust II)  | Other liabilities    |   |                 | (294   | ) | Other liabilities |   |   | (274 | ) |
| Union Bank of California   (Trust III) | Other liabilities    |   |                 | (733   | ) | Other liabilities |   |   | (669 | ) |
|                                                  |                 |   |                 |   |   |   |   |   |   |   |
|      Total derivatives       |                 |   | $                    | (1,469 | ) |   |   | $ | (1,360 | ) |

|                                                  | Three months ended                    |   |
|-------------------------------------------------------|---------------------------------------|--------|
|                                                  | March 31,2010                         |   | March 31,2009 |   |
|                                                  | Location of Gain Recognized in Income |   | Amount of (loss) Recognized in Income |   | Location of gain Recognized in Income |   | Amount of gain Recognized in Income |   |
| Interest rate swaps:                                  |                                  |   |   |   |   |   |   |   |
|                                                  |                                  |   |   |   |   |   |   |   |
| Union Bank of California   (Trust I)   | Net realized investment gains         |   | $ | (25 | ) | Net realized investment losses |   | $ | 12 |   |
| Union Bank of California   (Trust II)  | Net realized investment gains         |   |   | (20 | ) | Net realized investment losses |   |   | 13 |   |
| Union Bank of California   (Trust III) | Net realized investment gains         |   |   | (64 | ) | Net realized investment losses |   |   | 56 |   |
|                                                  |                                  |   |   |   |   |   |   |   |   |   |
|      Total derivatives       |                                  |   | $ | (109 | ) |   |   | $ | 81 |   |

----

Item 2

|   | • | Mercer Insurance Company (MIC), a Pennsylvania property and casualty stock insurance company offering insurance coverages to businesses and individuals in New Jersey, New York and Pennsylvania; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Mercer Insurance Company of New Jersey, Inc. (MICNJ), a New Jersey property and casualty stock insurance company offering insurance coverages to businesses and individuals located in New Jersey and businesses located in New York; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Franklin Insurance Company (FIC), a Pennsylvania property and casualty stock insurance company offering private passenger automobile and homeowners insurance to individuals located in Pennsylvania; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Financial Pacific Insurance Company (FPIC), a California property and casualty stock insurance company offering insurance and surety products to small and medium sized commercial businesses in Arizona, California, Nevada and Oregon, and direct mail surety products to commercial businesses in various other states. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|                                                  |   |           |    |   |                   |   |
|-------------------------------------------------------|--------|----------------|---------|--------|------------------------|--------|
|                                                  |   | March 31,2010  |    |   | December 31, 2009 |   |
|                                                  |   | (In thousands) |    |
| Commercial lines:                                     |   |           |    |   |                   |   |
| Commercial multi-peril                                |   | $              | 244,552 |   |                   | $      | 245,361 |   |
| Commercial automobile                                 |   |           | 33,897  |   |                   |   | 34,164 |   |
| Surety                                                |   |           | 8,783   |   |                   |   | 8,799 |   |
| Workers' compensation                                 |   |           | 8,729   |   |                   |   | 8,728 |   |
| Other liability                                       |   |           | 4,459   |   |                   |   | 4,766 |   |
| Fire, allied, inland marine                           |   |           | 153     |   |                   |   | 27 |   |
|                                                  |   |           | 300,573 |   |                   |   | 301,845 |   |
| Personal lines:                                       |   |           |    |   |                   |   |   |   |
| Homeowners                                            |   |           | 7,292   |   |                   |   | 6,457 |   |
| Personal automobile                                   |   |           | 2,576   |   |                   |   | 2,113 |   |
| Other liability                                       |   |           | 594     |   |                   |   | 506 |   |
| Fire, allied, inland marine                           |   |           | 297     |   |                   |   | 345 |   |
| Workers' compensation                                 |   |           | 82      |   |                   |   | 82 |   |
|                                                  |   |           | 10,841  |   |                   |   | 9,503 |   |
|         Total |   | $              | 311,414 |   |                   | $      | 311,348 |   |

----

----

| Three months ended March 31,           |   |                   |   |   |   |   |   |   |   |   |     |   |
|----------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Income                   |   | 2010                   |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                                   |   | (Dollars in thousands) |   |   |   |   |   |   |   |
| Commercial lines underwriting income   |   | $                      | 1,967  |   |   | $      | 1,320  |   |   | $      | 647      |   |   |   | 49.0 | % |
| Personal lines underwriting loss       |   |                   | (1,294 | )      |   |   | (733   | )      |   |   | (561     | )      |   |   | (76.5 | ) % |
| Total underwriting income              |   |                   | 673    |   |   |   | 587    |   |   |   | 86       |   |   |   | 14.7 | % |
| Net investment income                  |   |                   | 3,506  |   |   |   | 3,603  |   |   |   | (97      | )      |   |   | (2.7 | ) % |
| Net realized investment gains (losses) |   |                   | 472    |   |   |   | (481   | )      |   |   | 953      |   |   |   | N/M |   |
| Other                                  |   |                   | 456    |   |   |   | 488    |   |   |   | (32      | )      |   |   | (6.6 | ) % |
| Interest expense                       |   |                   | (351   | )      |   |   | (352   | )      |   |   | 1        |   |   |   | (0.3 | ) % |
| Income before income taxes             |   |                   | 4,756  |   |   |   | 3,845  |   |   |   | 911      |   |   |   | 23.7 | % |
| Income taxes                           |   |                   | 1,284  |   |   |   | 954    |   |   |   | 330      |   |   |   | 34.6 | % |
| Net Income                             |   |                   | 3,472  |   |   |   | 2,891  |   |   |   | 581      |   |   |   | 20.1 | % |
|                                   |   |                   |   |   |   |   |   |   |   |   |     |   |   |   |   |   |
| Loss/ LAE ratio (GAAP)                 |   |                   | 63.1   | %      |   |   | 62.4   | %      |   |   | 0.7      | %      |   |   |   |   |
| Underwriting expense ratio (GAAP)      |   |                   | 35.0   | %      |   |   | 36.0   | %      |   |   | (1.0     | ) %    |   |   |   |   |
| Combined ratio (GAAP)                  |   |                   | 98.1   | %      |   |   | 98.4   | %      |   |   | (0.3     | ) %    |   |   |   |   |
|                                   |   |                   |   |   |   |   |   |   |   |   |     |   |   |   |   |   |
| Loss/ LAE ratio (Statutory)            |   |                   | 63.5   | %      |   |   | 62.4   | %      |   |   | 1.1      | %      |   |   |   |   |
| Underwriting expense ratio (Statutory) |   |                   | 35.7   | %      |   |   | 36.1   | %      |   |   | (0.4     | ) %    |   |   |   |   |
| Combined ratio (Statutory)             |   |                   | 99.2   | %      |   |   | 98.5   | %      |   |   | 0.7      | %      |   |   |   |   |

|                 (N/M means  “not meaningful”) |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Three Months Ended March 31,           |   |           |   |   |   |   |   |   |   |   |     |   |
|----------------------------------------|--------|----------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Revenue                  |   | 2010           |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                                   |   | (In thousands) |   |   |   |   |   |   |   |
| Direct premiums written                |   | $              | 35,751 |   |   | $      | 34,993 |   |   | $      | 758      |   |   |   | 2.2 | % |
| Net premiums written                   |   |           | 32,000 |   |   |   | 31,856 |   |   |   | 144      |   |   |   | 0.5 | % |
| Net premiums earned                    |   |           | 34,735 |   |   |   | 35,582 |   |   |   | (847     | )      |   |   | (2.4 | )% |
| Net investment income                  |   |           | 3,506  |   |   |   | 3,603  |   |   |   | (97      | )      |   |   | (2.7 | )% |
| Net realized investment gains (losses) |   |           | 472    |   |   |   | (481   | )      |   |   | 953      |   |   |   | N/M |   |
| Other revenue                          |   |           | 456    |   |   |   | 488    |   |   |   | (32      | )      |   |   | (6.6 | )% |
| Total revenue                          |   | $              | 39,169 |   |   | $      | 39,192 |   |   | $      | (23      | )      |   |   | (0.1 | )% |

----

| Three Months Ended March 31,                                |   |           |   |   |   |   |   |   |   |   |     |   |
|-------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Investment Income and Realized Gains (losses) |   | 2010           |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                                                        |   | (In thousands) |   |   |   |   |   |   |   |
| Fixed income securities                                     |   | $              | 3,989  |   |   | $      | 3,937  |   |   | $      | 52       |   |   |   | 1.3 | % |
| Dividends                                                   |   |           | 60     |   |   |   | 80     |   |   |   | (20      | )      |   |   | (25.0 | )% |
| Cash, cash equivalents & other                          |   |           | 33     |   |   |   | 47     |   |   |   | (14      | )      |   |   | (29.8 | )% |
| Gross investment income                                     |   |           | 4,082  |   |   |   | 4,064  |   |   |   | 18       |   |   |   | 0.4 | % |
| Investment expenses                                         |   |           | (576   | )      |   |   | (461   | )      |   |   | (115     | )      |   |   | (24.9 | )% |
| Net investment income                                       |   |           | 3,506  |   |   |   | 3,603  |   |   | $      | (97      | )      |   |   | (2.7 | )% |
|                                                        |   |           |   |   |   |   |   |   |   |   |     |   |   |   |   |   |
| Realized gains (losses) - fixed income securities           |   |           | 374    |   |   |   | (319   | )      |   | $      | 693      |   |   |   | N/M |   |
| Realized gains (losses) - equity securities                 |   |           | 207    |   |   |   | (243   | )      |   |   | 450      |   |   |   | N/M |   |
| Mark-to-market valuation for interest rate swaps            |   |           | (109   | )      |   |   | 81     |   |   |   | (190     | )      |   |   | N/M |   |
| Net realized gains (losses)                                 |   |           | 472    |   |   |   | (481   | )      |   | $      | 953      |   |   |   | N/M |   |

| (N/M means  “not meaningful”) |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

----

|                                                  |   |           |    |   |              |   |    |     |   |   |       |   |
|-------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|---------|----------|--------|--------|------------|--------|
|                                                  |   |           |    |   |              |   |    |     |   |   |       |   |
|                                                  |   | March 31, 2010 |    |   | December 31, 2009 |   |
|                                                  |   | Cost (2)       |    |   | Fair Value        |   |    | Cost (2) |   |   | Fair Value |   |
|                                                  |   | (In thousands) |    |
|                                                  |   |           |    |   |              |   |    |     |   |   |       |   |
|                                                  |   |           |    |   |              |   |    |     |   |   |       |   |
| Fixed income securities (1)                           |   |           |    |   |              |   |    |     |   |   |       |   |
| United States government and government agencies (3)  |   | $              | 72,466  |   |              | $      | 75,967  |     |   | $      | 68,864     |   |   | $ | 72,021 |   |
| Obligations of states and political subdivisions      |   |           | 133,551 |   |              |   | 139,772 |     |   |   | 136,706    |   |   |   | 143,293 |   |
| Industrial and miscellaneous                          |   |           | 142,725 |   |              |   | 149,566 |     |   |   | 124,135    |   |   |   | 130,223 |   |
| Mortgage-backed certificates                          |   |           | 17,646  |   |              |   | 18,739  |     |   |   | 18,930     |   |   |   | 19,927 |   |
|    Total fixed income securities       |   |           | 366,388 |   |              |   | 384,044 |     |   |   | 348,635    |   |   |   | 365,464 |   |
| Equity securities                                     |   |           | 8,050   |   |              |   | 10,229  |     |   |   | 7,516      |   |   |   | 9,484 |   |
|         Total |   | $              | 374,438 |   |              | $      | 394,273 |     |   | $      | 356,151    |   |   | $ | 374,948 |   |

| (1) | In our consolidated financial statements, investments are carried at fair value. |
|-----|----------------------------------------------------------------------------------|

| (2)   | Original cost of equity and fixed income securities adjusted for other than temporary impairment write downs and amortization of premium and accretion of discount. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Includes approximately $54,708 and $55,092 (cost) and $57,806 and $57,874 (estimated fair value) of mortgage-backed securities backed by the U.S. government and government agencies as of March 31, 2010, and  December 31, 2009, respectively. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                      |   | Less than 12 Months |   |   | 12 Months or Longer |   |   | Total      |   |
|-------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|------------|--------|
|                                      |   | Estimated           |   |   | Unrealized          |   |   | Estimated  |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
|                                      |   | Fair Value          |   |   | Losses              |   |   | Fair Value |   |   | Losses |   |   | Fair Value |   |   | Losses |   |
|                                      |   |                |   |
| U.S. Treasury securities and              |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    obligations of U.S.     |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    government corporations |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    and agencies            |   | $                   | 12,665 |   |                | $      | 52     |       |   | $ | - |   |   | $ | - |   |   | $ | 12,665 |   |   | $ | 52 |   |
| Obligations of states and                 |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    political subdivisions  |   |                | 1,921  |   |                |   | 29     |       |   |   | - |   |   |   | - |   |   |   | 1,921 |   |   |   | 29 |   |
| Corporate securities                      |   |                | 20,152 |   |                |   | 186    |       |   |   | - |   |   |   | - |   |   |   | 20,152 |   |   |   | 186 |   |
| Mortgage-backed securities                |   |                | -      |   |                |   | -      |       |   |   | 215 |   |   |   | 3 |   |   |   | 215 |   |   |   | 3 |   |
| Total fixed maturities                    |   |                | 34,738 |   |                |   | 267    |       |   |   | 215 |   |   |   | 3 |   |   |   | 34,953 |   |   |   | 270 |   |
| Total equity securities                   |   |                | 1,184  |   |                |   | 14     |       |   |   | - |   |   |   | - |   |   |   | 1,184 |   |   |   | 14 |   |
| Total securities in a                     |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| temporary unrealized loss                 |   |                |   |   |                |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| position                                  |   | $                   | 35,922 |   |                | $      | 281    |       |   | $ | 215 |   |   | $ | 3 |   |   | $ | 36,137 |   |   | $ | 284 |   |

| Three Months Ended March 31,        |   |                   |   |   |   |   |   |   |   |   |     |   |
|-------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Commercial Lines (CL) |   | 2010                   |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                                |   | (Dollars in thousands) |   |   |   |   |   |   |   |
| CL Direct premiums written          |   | $                      | 31,099 |   |   | $      | 30,237 |   |   | $      | 862      |   |   |   | 2.9 | % |
| CL Net premiums written             |   | $                      | 27,898 |   |   | $      | 27,590 |   |   | $      | 308      |   |   |   | 1.1 | % |
| CL Net premiums earned              |   | $                      | 29,945 |   |   | $      | 30,704 |   |   | $      | (759     | )      |   |   | (2.5 | )% |
|                                |   |                   |   |   |   |   |   |   |   |   |     |   |   |   |   |   |
| CL Loss/ LAE expense ratio (GAAP)   |   |                   | 58.7   | %      |   |   | 59.9   | %      |   |   | (1.2     | )%     |   |   |   |   |
| CL Expense ratio (GAAP)             |   |                   | 34.7   | %      |   |   | 35.8   | %      |   |   | (1.1     | )%     |   |   |   |   |
| CL Combined ratio (GAAP)            |   |                   | 93.4   | %      |   |   | 95.7   | %      |   |   | (2.3     | )%     |   |   |   |   |

----

| Three Months Ended March 31,      |   |                   |   |   |   |   |   |   |   |   |     |   |
|-----------------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Personal Lines (PL) |   | 2010                   |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                              |   | (Dollars in thousands) |   |   |   |   |   |   |   |
| PL Direct premiums written        |   | $                      | 4,652  |   |   | $      | 4,755  |   |   | $      | (103     | )      |   |   | (2.2 | )% |
| PL Net premiums written           |   | $                      | 4,102  |   |   | $      | 4,266  |   |   | $      | (164     | )      |   |   | (3.8 | )% |
| PL Net premiums earned            |   | $                      | 4,790  |   |   | $      | 4,878  |   |   | $      | (88      | )      |   |   | (1.8 | )% |
|                              |   |                   |   |   |   |   |   |   |   |   |     |   |   |   |   |   |
| PL Loss/ LAE expense ratio (GAAP) |   |                   | 90.7   | %      |   |   | 78.3   | %      |   |   | 12.4     | %      |   |   |   |   |
| PL Expense ratio (GAAP)           |   |                   | 36.3   | %      |   |   | 36.7   | %      |   |   | (0.4     | )%     |   |   |   |   |
| PL Combined ratio (GAAP)          |   |                   | 127.0  | %      |   |   | 115.0  | %      |   |   | 12.0     | %      |   |   |   |   |

----

| Three Months Ended March 31,               |   |                   |   |   |   |   |   |   |   |   |     |   |
|--------------------------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Expenses and Expense Ratio   |   | 2010                   |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                                       |   | (Dollars in thousands) |   |   |   |   |   |   |   |
| Amortization of Deferred Acquisition Costs |   | $                      | 9,385  |   |   | $      | 9,905  |   |   | $      | (520     | )      |   |   | (5.2 | )% |
| As a % of net premiums earned              |   |                   | 27.0   | %      |   |   | 27.8   | %      |   |   | (0.8     | )%     |   |   |
| Other underwriting expenses                |   |                   | 2,764  |   |   |   | 2,891  |   |   |   | (127     | )      |   |   | (4.4 | )% |
| Underwriting expenses                      |   | $                      | 12,149 |   |   | $      | 12,796 |   |   | $      | (647     | )      |   |   | (5.1 | )% |
| Underwriting expense ratio                 |   |                   | 35.0   | %      |   |   | 36.0   | %      |   |   | (1.0     | )%     |   |   |

----

| Three Months Ended March 31 |   |                   |   |   |   |   |   |   |   |   |     |   |
|-----------------------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| 2010 vs. 2009 Income Taxes  |   | 2010                   |   |   | 2009   |   |   | Change |   |   | % Change |   |
|                        |   | (Dollars in thousands) |   |   |   |   |   |   |   |
| Income before income taxes  |   | $                      | 4,756  |   |   | $      | 3,845  |   |   | $      | 911      |   |   |   | 23.7 | % |
| Income taxes                |   |                   | 1,284  |   |   |   | 954    |   |   |   | 330      |   |   |   | 34.6 | % |
| Net income                  |   | $                      | 3,472  |   |   | $      | 2,891  |   |   | $      | 581      |   |   |   | 20.1 | % |
| Effective tax rate          |   |                   | 27.0   | %      |   |   | 24.8   | %      |   |   |     |   |   |   |   |   |

----

----

Item 3

----

|                                        |  Average Credit |   | Market |        |   | % of Total     |   |   | Unrealized |   |
|---------------------------------------------|----------------------|--------|--------|-------------|--------|----------------|--------|--------|------------|--------|
|                                        |  Rating         |   | Value  |        |   | Muni Portfolio |   |   | Gain/Loss  |   |
|                                        |                 |   |   |        |   |           |   |   |       |   |
|  Uninsured Securities                  |  AA+            |   | $      | 43,418,659  |   |           |   | 31     | %          |   | $ | 1,978,663 |   |
|                                        |                 |   |   |        |   |           |   |   |       |   |   |   |   |
|  Securities with Insurance Enhancement |  AA+            |   | $      | 96,353,065  |   |           |   | 69     | %          |   | $ | 4,242,174 |   |
|                                        |                 |   |   |        |   |           |   |   |       |   |   |   |   |
|  Total                                 |                 |   | $      | 139,771,724 |   |           |   | 100    | %          |   | $ | 6,220,837 |   |
|                                        |                 |   |   |        |   |           |   |   |       |   |   |   |   |

----

| (1)         | (2)                         | (3)              | (1) + (2)            | (1) + (3)                   |
|-------------|-----------------------------|------------------|----------------------|-----------------------------|
|        |                        |             | Insured Bonds        | Insured Bonds               | Total Municipal Bonds | Total Municipal Bonds |
| Non-Insured | (with insured               | (with underlying | (with insured        | (with underlying            |
|        |                        |             |    rating) |   credit rating)       |   ratings) |   credit ratings) |
|        |                        |             |                 |                        |   |   |   |   |   |   |   |   |   |   |
|        |                        | Mkt              |                 |                        | Mkt |   |   | Mkt |   |   | Mkt |   |   | Mkt |
| Rating      |  Mkt Value             |  Val (%)    | Rating               |  Mkt Value             |  Val (%) | Rating |  Mkt Value |  Val (%) | Rating |  Mkt Value |  Val (%) | Rating |  Mkt Value |  Val (%) |
|        |                        |             |                 |                        |   |   |   |   |   |   |   |   |   |   |
| AAA         |  26,891,273            | 61.9%            | AAA                  |  40,909,748            | 42.5% | AAA |  15,144,490 | 15.7% | AAA |     67,801,021 | 48.5% | AAA |     42,035,763 | 30.1% |
| AA+         |    4,513,089 | 10.4%            | AA+                  |  22,626,115            | 23.5% | AA+ |  28,979,114 | 30.1% | AA+ |     27,139,204 | 19.4% | AA+ |     33,492,203 | 24.0% |
| AA          |    8,932,670 | 20.6%            | AA                   |  19,085,448            | 19.8% | AA |  25,315,120 | 26.3% | AA |     28,018,118 | 20.0% | AA |     34,247,790 | 24.5% |
| AA-         |    1,591,811 | 3.7%             | AA-                  |    8,821,415 | 9.2% | AA- |  12,569,001 | 13.0% | AA- |     10,413,226 | 7.5% | AA- |     14,160,812 | 10.1% |
| A+          |                        |             | A+                   |    2,770,769 | 2.9% | A+ |    4,454,819 | 4.6% | A+ |       2,770,769 | 2.0% | A+ |       4,454,819 | 3.2% |
| A           |    1,489,816 | 3.4%             | A                    |    1,064,350 | 1.1% | A |    5,822,328 | 6.0% | A |       2,554,166 | 1.8% | A |       7,312,144 | 5.2% |
| A-          |                        |             | A-                   |                        |   | A- |    2,992,973 | 3.1% | A- |                   - | 0.0% | A- |       2,992,973 | 2.1% |
| BBB-        |                        |             | BBB-                 |    1,075,220 | 1.1% | BBB- |    1,075,220 | 1.1% | BBB- |       1,075,220 | 0.8% | BBB- |       1,075,220 | 0.8% |
|        |                        |             |                 |                        |   |   |   |   |   |   |   |   |   |   |
| AA+         |  43,418,659            |             | AA+                  |  96,353,065            |   | AA |  96,353,065 |   | AA+ |   139,771,724 |   | AA |   139,771,724 |   |
|        |                        |             |                 |                        |   |   |   |   |   |   |   |   |   |   |

----

Item 

Item 

Item 

----

Item 

Item 

Item 

Item 

Item 

| Exhibit No. | Title                                                                                                                                                                                           |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1         | Articles of Incorporation of Mercer Insurance Group, Inc. (incorporated by reference herein to the Group’s Pre-effective Amendment No. 3 on Form S-1, SEC File No. 333-104897.)           |
| 3.2         | Bylaws of Mercer Insurance Group, Inc. (incorporated by reference herein to the Group’s Annual Report on Form 10-K, SEC File No. 000-25425, for the fiscal year ended December 31, 2003.) |
| 31.1        | Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002, (filed herewith)                                                                     |
| 31.2        | Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002, (filed herewith)                                                                     |
| 32.1        | Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002, (filed herewith)                                                                     |
| 32.2        | Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002, (filed herewith)                                                                     |

----

SIGNATURES

|                | MERCER INSURANCE GROUP, INC. (Registrant) |
|---------------------|-------------------------------------------|
|                |                                      |   |
| Dated: May 10, 2010 | By:                                       | /s/ Andrew R. Speaker |
|                |                                      | Andrew R. Speaker, |
|                |                                      | President and Chief Executive Officer |
|                |                                      |   |
| Dated: May 10, 2010 | By:                                       | /s/ David B. Merclean |
|                |                                      | David B. Merclean, |
|                |                                      | Senior Vice President of Finance and Chief Financial Officer |
|                |                                      | Principal Accounting Officer |

----