<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

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

                     FOR THE TRANSITION PERIOD FROM __________ TO ___________.

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                          COMMISSION FILE NUMBER 1-9640

                              MERCHANTS GROUP, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                         16-1280763
(State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                        Identification No.)

 250 MAIN STREET, BUFFALO, NEW YORK                             14202
(Address of principal executive offices)                     (Zip Code)

                                  716-849-3333
              (Registrant's telephone number, including area code)

Securities  registered pursuant to Section 12(b) of the Act:
  Title of each class - COMMON STOCK, $.01 PAR VALUE PER SHARE
  Name of each exchange on which registered - AMERICAN STOCK EXCHANGE, INC.

Securities registered pursuant to Section 12 (g) of the Act:  NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ x ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ x ]

As of February 28, 2001, 2,418,852 shares of common stock were outstanding. The
aggregate market value of the common shares held by non-affiliates of Merchants
Group, Inc. on February 28, 2001 was $14,059,000. Solely for purposes of this
calculation, the Company deemed every person who beneficially owned 5% or more
of its common stock and all directors and executive officers to be affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2001 Annual Meeting of
           stockholders are incorporated by reference into Part III.



                                       1
<PAGE>   2


                              MERCHANTS GROUP, INC.

                           ANNUAL REPORT ON FORM 10-K
                                DECEMBER 31, 2000
<TABLE>
<CAPTION>

          PART  I                                                                              PAGE #
          -------                                                                              ------
<S>                                                                                            <C>
ITEM 1.   BUSINESS.                                                                                3

ITEM 2.   PROPERTIES.                                                                             19

ITEM 3.   LEGAL PROCEEDINGS.                                                                      19

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                     19

          PART  II
          --------

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                                       20
          STOCKHOLDER MATTERS.

ITEM 6.   SELECTED FINANCIAL DATA.                                                                21

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                                       23
          CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES                                                29
          ABOUT MARKET RISK.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                                            31

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                                        31
          ACCOUNTING AND FINANCIAL DISCLOSURE.

          PART  III
          ---------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                     32

ITEM 11.  EXECUTIVE COMPENSATION.                                                                32

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                                        32
          AND MANAGEMENT.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                                        32

          PART  IV
          --------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND                                           33
          REPORTS ON FORM 8-K.
</TABLE>



                                       2
<PAGE>   3


                                     PART I

Item 1.  BUSINESS.

GENERAL

      Merchants Group, Inc. (the "Company"), which was incorporated in August
1986 as a Delaware holding company offers through its wholly owned subsidiary
Merchants Insurance Company of New Hampshire, Inc. ("MNH"), property and
casualty insurance to preferred risk individuals and small to medium sized
businesses in the northeastern United States.

ADMINISTRATION

      The Company and MNH operate and manage their business in conjunction with
Merchants Mutual Insurance Company ("Mutual"), a New York domiciled mutual
property and casualty insurance company, under a management agreement (the
"Management Agreement"). Mutual owns 10.5% of the Company's issued and
outstanding common stock. The Company and MNH do not have any operating assets
and have no employees. Under the Management Agreement, Mutual provides the
Company and MNH with the facilities, management and personnel required to
operate their day-to-day business. All costs incurred by Mutual with respect to
underwriting expenses are shared pro rata between Mutual and MNH based upon
their annual direct premiums written, and unallocated loss adjustment expenses
are allocated on the basis of the number of claims outstanding each month that
are attributable to each company. All of Mutual's and MNH's investment expenses
are shared pro rata based upon the average book value of the invested assets of
each company. MNH also pays Mutual an annual management fee of $50,000. The
Management Agreement requires that the Company and MNH pay Mutual 110% of
Mutual's costs of providing them with non-insurance related services, and that
the Company pay Mutual an annual fee of one half of one percent (.5%) of the
average book value of the Company's invested assets exclusive of the Company's
shares of MNH. Since the inception of the Management Agreement, Mutual has not
provided the Company or MNH with any non-insurance related services.

      The Management Agreement has certain features that are intended to prevent
conflicts of interest or to deal with them on an equitable basis should they
occur. Generally, business opportunities which are presented to the common
officers or employees of the companies must be presented to each company's Board
of Directors and approved and determined to be fair to each company in the
transaction by a majority of the directors of each company who are not
affiliated with any other company in the transaction.

      Any amendment to or modification of the Management Agreement must be
approved by the New York Insurance Department (the "Department"). The Management
Agreement provides that it may be terminated by any party to the agreement upon
five years written notice. On July 23, 1998, the Company gave notice to Mutual
of the Company's intention to terminate the Management Agreement. Mutual and MNH
have jointly developed and paid for all accounting, computer and insurance
marketing systems used in their businesses. Upon termination of the Management
Agreement, each company will have the right, at no cost, to obtain copies of all
these systems, together with the right to use these systems in perpetuity.


                                       3
<PAGE>   4

MARKETING

      The Company markets its products through approximately 686 independent
agents, who also represent Mutual. The Company's primary marketing efforts are
directed to those independent agents who are dedicated to providing superior
service to their customers. The Company believes the opportunity for growth
exists through further penetration of agencies who are strategically aligned
with the Company's commitment to growth in its targeted markets.

      The Company believes that as a regional insurance company it has certain
advantages, including a closer relationship with its agents and a better
knowledge of its operating territories, that enable it to compete effectively
against larger regional and national carriers. The Company believes it
distinguishes itself from its competitors by providing its agents and
policyholders with superior service and ease of doing business, products that
target certain segments of the commercial and personal insurance markets, and an
agents' compensation program which, in addition to standard commission rates,
provides agents with a profit sharing plan.

      The Company services its agents from five Strategic Business Centers and
from its home office in Buffalo, New York. The Strategic Business Centers are
located in the Company's operating territories and focus primarily on policy
sales and underwriting. The manager of a Strategic Business Center appoints new
agents, agrees upon annual unit sales and premium objectives with the principal
of the agency, and ensures that the principal of the agency communicates these
objectives to the agency's sales staff. Strategic Business Center managers and
Territory Managers, or "TM's," develop customized business plans for each agent,
which identify the opportunities to increase business and the actions required
to achieve the objectives agreed to by the agent and the Company.

      TM's meet with targeted agents' sales staff on a frequent basis to review
the Company's renewal policies, as well as to solicit policies new to the agent
and/or to the Company. TM's are equipped with electronic technology to provide
prompt and efficient pricing and communication and can provide quotes for all
lines of business at the agents' offices. The Company believes personal contact
between TM's, who have underwriting authority, and an agent's sales staff
provides the Company with a competitive advantage compared to many other
property and casualty insurers, whose field representatives have limited or no
underwriting authority. By placing an underwriting decision maker in the agent's
office, and thereby simplifying the underwriting process, the Company believes
it can maintain and improve the retention rate on its renewal policies, as well
as attract new policies.

      Each Strategic Business Center has an Agents' Advisory Council that meets
at least twice a year. The Advisory Councils provide a forum for the Company and
its agents to discuss issues of mutual interest, and to assure that the agents'
business needs are being met. Additionally, the Co-chairpersons of the Advisory
Councils from each Strategic Business Center meet twice each year with senior
officers of Mutual.

      In addition to standard commissions paid as a percentage of premiums
written, the Company's agents are eligible to participate in the Agents' Profit
Sharing Plan. This plan rewards agents based on premiums written and the loss
and allocated loss adjustment expense ("LAE") ratio on business placed by the
agent with the Company. Payments under the Agents' Profit Sharing Plan for 2000
totaled $1,649,000, or 1.5% of total direct premiums written. The Company
believes the terms of its Agents' Profit Sharing Plan encourage its agents to
increase the volume of profitable business they place with the Company.


                                       4
<PAGE>   5

      In order to assist its independent agents to compete more effectively with
insurance companies that have direct sales forces, and to strengthen its
relationship with those agents, the Company provides advanced automation
services. In 1999, the Company introduced the Merchants MerLink(TM) system.
MerLink(TM) enables independent agents to submit policies to Merchants over the
Internet using their existing business computer and software, and to have these
submissions automatically update the Company's insurance policy processing
system. The benefits to agents are simplified client management, more time
available for sales activities, and fewer errors. Currently, the Company is
using MerLink(TM) for policy transactions with over 90 agents primarily for
private passenger automobile and homeowners' policies. In 2000, the Company
began offering MerLink(TM) capability for certain commercial lines insurance
policies. The Company believes that developing automation capabilities to
facilitate the sharing of information with its agents will improve its
competitive position compared to other property and casualty insurers that do
not have such capabilities.

INSURANCE  UNDERWRITING

      The Company is licensed to issue insurance policies in 13 states,
primarily in the northeastern United States. In 2000, net premiums written
totaled $94,342,000, with 59% of the net premiums written derived from
commercial lines of insurance and 41% from personal lines of insurance.

      The following table sets forth the distribution of the Company's direct
premiums written by state for the years indicated:
<TABLE>
<CAPTION>

                       Years  Ended  December  31,
                       ---------------------------
                      1998         1999         2000
                      ----         ----         ----
<S>                    <C>          <C>          <C>
New York               65%          64%          66%
New Jersey             18           19           16
New Hampshire           9            8            8
Rhode Island            3            4            4
Pennsylvania            2            2            2
Massachusetts           2            2            3
Other                   1            1            1
                      ---          ---          ---
      Total           100%         100%         100%
                      ===          ===          ===
</TABLE>




                                       5
<PAGE>   6


     The Company is licensed to underwrite most major lines of property and
casualty insurance. It issues policies primarily to preferred risk individuals
and small to medium sized commercial risks. In general, the Company does not
insure risks that involve a high potential of loss or have a long-tail reporting
period. The types of risks insured in the Company's lines of business include:

     -    Personal automobile - full coverage of family-owned standard
          performance automobiles, generally requiring drivers with good driving
          records during the past three years.

     -    Homeowners' - properties generally with no losses in the last three
          years that are less than 30 years old and valued between $125,000 and
          $500,000.

     -    Commercial automobile - primarily light and medium use vehicles
          operating in a limited radius, with complete background information
          required of all drivers.

     -    Commercial multi-peril - properties with medium to high construction
          quality and low to moderate fire exposure, and occupancies with low to
          moderate exposure to hazardous materials and processes.

     -    General liability - low hazard service, mercantile and light
          processing businesses, generally with three years of business
          experience and with no losses in the last three years.

     -    Workers' compensation - risks with low loss frequency and severity,
          low to moderate exposure to hazardous materials and processes, and
          favorable experience modification factors. Generally, workers'
          compensation insurance is written in conjunction with other commercial
          insurance.

     The Company's pricing strategy is to offer its insurance at rates which
are designed to cover its costs, including the costs of any involuntary business
associated with a particular line of insurance or a particular territory. This
pricing strategy may make the Company's rates non-competitive with respect to
certain lines of insurance or certain geographic regions. For example, the
Company's published rates for personal automobile insurance in the densely
populated areas within its region of operations are significantly higher than
those of some of its competitors. The Company believes that its pricing strategy
allows the Company to write the types of insurance for which the price charged
reflects the cost of providing coverage.

     Agents of the Company are also agents of Mutual, which generally sells the
same lines of insurance as the Company to standard risk individuals and
businesses. Applicants that meet the Company's preferred risk criteria are
issued policies by the Company. Applicants that do not meet the Company's
underwriting criteria, but which meet the less restrictive criteria of Mutual,
are issued policies by Mutual, generally at higher premium rates. From 1993
through 1995, under a quota share reinsurance agreement with Mutual, MNH assumed
10% of the standard risks insured by Mutual, which would not generally meet
MNH's more stringent underwriting guidelines. The terms of that agreement allow
Mutual to reduce its cessions to MNH to 0% of Mutual's direct voluntary premiums
written for any calendar year prior to the beginning of that calendar year.
Mutual has not ceded any of its voluntary direct written premiums to MNH under
this agreement since 1995 and has informed the Company that it will not cede any
of its voluntary direct written premiums to MNH in 2001.


                                       6
<PAGE>   7

      The Company establishes premium rates for most of its policies based on
its loss experience, in some cases after considering prospective loss costs
suggested by the Insurance Services Office, Inc., an industry advisory group,
for the preferred individual and commercial classes of business that it insures.
The Company establishes rates independently for its personal automobile and
homeowners insurance policies and its specialty products, such as its
Contractors Coverall Plus and businessowners' policies.

      The following table shows, for each of the years in the three year period
ended December 31, 2000 (i) the amount of the Company's net premiums written
attributable to various personal lines and commercial lines and (ii)
underwriting results attributable to each such line as measured by the calendar
year loss ratio for such line. The loss ratio is the ratio of incurred losses to
net premiums earned for a given period.
<TABLE>
<CAPTION>

                                                             Year ended December 31,
                             ----------------------------------------------------------------------------------------
                                          1998                         1999                          2000
                             ----------------------------------------------------------------------------------------
                             Premiums                      Premiums                      Premiums
                             Written                        Written                      Written
                             ----------------------------------------------------------------------------------------
                                                  Loss                           Loss                         Loss
                              Amount        %     Ratio    Amount        %       Ratio   Amount        %      Ratio
                             ----------------------------------------------------------------------------------------
                                                              (dollars in thousands)
<S>                          <C>        <C>      <C>     <C>          <C>      <C>     <C>          <C>      <C>
Personal
      Auto Liability         $21,394      23.1%    79.3%   $18,915      20.0%    77.1%   $17,295      18.3%    79.0%
      Auto Physical Damage    13,199      14.2     45.8     12,328      13.1     49.0     12,031      12.8     54.6
      Homeowners'
          Multi-Peril          8,066       8.7     36.5      8,630       9.1     56.2      9,144       9.7     58.4
                             -------   -------             -------   -------             -------   -------
          Total               42,659      46.0     61.8     39,873      42.2     64.1     38,470      40.8     66.7

Commercial
      Auto Liability          12,986      14.0     41.5     14,816      15.7     50.9     15,548      16.5     87.4
      Auto Physical Damage     3,025       3.3     49.8      3,819       4.1     54.7      4,065       4.3     58.2
      Commercial
          Multi-Peril         21,878      23.6     49.5     22,854      24.2     69.5     25,900      27.4     52.1
      Workers'
          Compensation         7,159       7.7     87.8      7,692       8.1     22.0      7,421       7.9     84.6
      Other Lines              5,051       5.4     39.1      5,416       5.7     37.6      2,938       3.1     10.3
                             -------   -------             -------   -------             -------   -------
          Total               50,099      54.0     50.6     54,597      57.8     53.7     55,872      59.2     63.4
                             -------   -------             -------   -------             -------   -------
Total Personal &
      Commercial             $92,758     100.0%    56.5    $94,470     100.0%    58.2    $94,342     100.0%    64.7
                             =======   =======             =======   =======             =======   =======
</TABLE>

      Calendar year loss ratios set forth in the table above include an estimate
of losses for that accident year, as well as increases or decreases in estimates
made in that year for prior accident year losses. Depending on the size of the
increase or decrease in prior accident year losses, calendar year loss ratios
may not be as indicative of the profitability of policies in force in a
particular year as accident year loss ratios, which do not take into account
increases or decreases in reserves for prior accident year losses.



                                       7
<PAGE>   8


      The following table sets forth the composition of voluntary direct
premiums written for 1996 through 2000:
<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                                       -----------------------
                                                1996    1997     1998     1999     2000
                                                ---------------------------------------
<S>                                             <C>     <C>      <C>      <C>     <C>
Commercial                                        60%     57%      58%      61%     64%
Personal                                          40      43       42       39      36
                                                 ---     ---      ---      ---     ---
Total                                            100%    100%     100%     100%    100%
                                                 ===     ===      ===      ===     ===
</TABLE>

COMMERCIAL  LINES

      The Company's commercial business is primarily retail and mercantile in
nature and generally consists of small to medium sized, low hazard commercial
risks which as a group have relatively stable loss ratios. The Company's
underwriting criteria exclude lines of business and classes of risks that are
considered by the Company to be high hazard or volatile, or which involve latent
injury potential or other long-tail liability exposures. Although the commercial
underwriting objectives of the Company and Mutual are similar, the Company has
refined its selection criteria to include specific classes of businesses,
occupancies, and operations with lower hazard ratings, which present a
relatively lower exposure to loss and are charged a correspondingly lower
premium. The Company offers specialized products within the commercial
multi-peril line such as the Contractors Coverall Plus for artisan and trade
contractors.

      Despite the lack of significant premium rate increases in recent years in
most of its commercial lines and the significant level of competition in the
lines of business that the Company targets, the Company believes it can insure
commercial business profitably by selecting those classes of risks that offer
better than average profit potential. The Company competes for commercial
business based upon the service it provides to agents and policyholders, the
compensation it pays to its agents, and in certain instances, the price of its
products. The Company establishes prices after considering its costs, the
exposures inherent in a particular class of risk, estimated investment income,
projected future trends in loss frequency and severity, and the degree of
competition within a specific territory. Accordingly, the prices of the
Company's commercial products may vary considerably in relation to competitors'
prices.

PERSONAL  LINES

      The Company offers personal automobile and homeowners' insurance to
preferred risk individuals, generally requiring experienced drivers with no
accidents or moving violations in the last three years for personal automobile
insurance, and medium to high value homes with systems that are less than thirty
years old in fire protected areas for homeowners' insurance. Personal automobile
premium rates attempt to cover costs associated with required participation in
involuntary personal automobile programs, in addition to the costs directly
associated with the policies written voluntarily.

      The Company and Mutual have developed automated underwriting procedures
for personal automobile, homeowners and certain commercial lines of business,
which perform an initial review of policy applications based upon established
underwriting guidelines. Applications that do not meet the guidelines for
automated acceptance are either referred to underwriters who review the
applications and assess exposure, or rejected if the risk characteristics are
such that neither the Company nor Mutual would insure the applicant.


                                       8
<PAGE>   9

      As a condition to writing voluntary business in most states in which it
operates, the Company must participate in state-mandated programs which provide
insurance for individuals and businesses unable to obtain insurance voluntarily,
primarily for personal automobile insurance. The legislation creating these
programs usually allocates a pro rata portion of the risks attributable to such
insureds to each company writing voluntary business in the state on the basis of
its voluntary premiums written or the number of automobiles which it insures
voluntarily.

      The Company's gross (direct and assumed) premiums written attributable to
involuntary policies were $6,036,000, $3,726,000 and $2,158,000 in 1998, 1999
and 2000, respectively, mostly in New York. The Company is unable to predict the
level of its annual involuntary business for 2001 or future years.

CLAIMS

      Insurance claims on policies written by the Company are investigated and
settled by claims adjusters employed by Mutual pursuant to the Management
Agreement. The Company and Mutual maintain several claims offices within their
operating territories. In areas where there is insufficient claim volume to
justify the cost of internal claims staff, the Company and Mutual use
independent appraisers and adjusters to investigate claims. The Company's claims
policy emphasizes timely investigation of claims, settlement of valid claims for
equitable amounts, maintenance of adequate reserves for claims and control of
external claims adjustment expenses. In order to support its claims policy, the
Company maintains a program designed to ensure that as soon as practical, claims
are assigned an accurate value based on available information. The program
includes the centralization of certain branch claims operations and an emphasis
on the training of claims adjusters and supervisors by senior claims staff. This
claims policy is designed to support the Company's marketing policy and provide
agents and policyholders with prompt service and support.

      Claims settlement authority levels are established for each adjuster,
supervisor and manager based on their expertise and experience. When the Company
receives notice of a claim, it is assigned to an adjuster based upon its type,
severity and line of business. The claims staff then reviews the claim, obtains
appropriate information and establishes a loss reserve. Claims that exceed
certain dollar amounts or that cannot be readily settled are assigned to more
senior claims staff.

LOSS AND LAE RESERVES

      The Company, like other insurance companies, establishes reserves for
losses and LAE. These reserves are estimates intended to cover the probable
ultimate cost of settling all losses incurred and unpaid, including those losses
not yet reported to the Company. An insurer's ultimate liability is likely to
differ from its interim estimates because during the life of a claim, which may
be many years, additional facts affecting an insurer's liability may become
known. The reserves of an insurer are frequently adjusted based on monitoring by
the insurer and periodic review by state insurance departments. The Company
retains an independent actuarial firm to satisfy state insurance departments'
requirements with respect to the certification of reserves for losses and LAE.

      Loss reserves are established for known claims based on the type and
circumstance of the loss and the results of similar losses. For claims not yet
reported to the Company, loss reserves are based on statistical information from
previous experience periods adjusted for inflation, trends in court decisions
and economic conditions. LAE reserves are intended to cover the ultimate cost of
investigating all losses that have occurred and defending lawsuits, if any,
arising from these losses. LAE reserves are evaluated periodically



                                       9
<PAGE>   10

using statistical techniques which compare current costs with historical data.
Inflation is implicitly reflected in the reserving process through analysis of
cost trends and review of historical reserve results. With the exception of
workers' compensation claims, loss reserves are not discounted for financial
statement purposes.

      The Company's reserving process is based on the assumption that past
experiences, adjusted for the effect of current developments and trends, are
relevant in predicting future events. In the absence of specific developments,
the process also assumes that the legal climate regarding the claims process and
underlying liabilities remains constant. Other assumptions employed by the
Company or its actuarial firm change from time to time as circumstances change.
In estimating loss and LAE reserves, the Company employs a number of actuarial
methods, depending on their applicability to each line of business, in order to
balance the advantages and disadvantages of each method. No single method is
used to estimate loss and LAE reserves. Although different actuarial methods may
give rise to different reserve estimates, which may be higher or lower than the
reserves actually established by the Company, the Company believes that those
differences are not material.

      The Company has recorded changes in reserves for prior accident year
losses in most years. In 1998 and 1999, the Company decreased its reserves for
prior years by $2,145,000 and $3,749,000, respectively, primarily due to
favorable loss experience related to automobile liability policies in 1998 and
workers compensation policies in 1999. In 2000, the Company increased its
reserves for prior years by $1,428,000, primarily due to higher than anticipated
frequency and severity of losses related to personal automobile, commercial
automobile and workers' compensation policies.

      The following table sets forth the changes in the reserve for losses and
LAE for 1998, 1999 and 2000.
<TABLE>
<CAPTION>

                                                                                       Year  Ended  December  31,
                                                                                       --------------------------
                                                                                    1998         1999         2000
                                                                                  ---------    ---------    ---------
                                                                                              (in thousands)

<S>                                                                               <C>          <C>          <C>
Reserve for losses and LAE at beginning of year                                   $ 141,205    $ 136,685    $ 133,526
      Less reinsurance recoverables                                                  10,372        9,816        6,026
                                                                                  ---------    ---------    ---------
      Net balance at beginning of year                                              130,833      126,869      127,500
                                                                                  ---------    ---------    ---------
Provision for losses and LAE for claims occurring in:
      Current year                                                                   67,379       69,835       69,946
      Prior years                                                                    (2,145)      (3,749)       1,428
                                                                                  ---------    ---------    ---------
                                                                                     65,234       66,086       71,374
                                                                                  ---------    ---------    ---------
Losses and LAE payments for claims occurring in:
      Current year                                                                   26,765       28,330       26,655
      Prior years                                                                    42,433       37,125       40,970
                                                                                  ---------    ---------    ---------
                                                                                     69,198       65,455       67,625
                                                                                  ---------    ---------    ---------
Reserve for losses and LAE at end of year, net                                      126,869      127,500      131,249
      Plus reinsurance recoverables                                                   9,816        6,026       13,826
                                                                                  ---------    ---------    ---------
      Balance at end of year                                                      $ 136,685    $ 133,526    $ 145,075
                                                                                  =========    =========    =========
</TABLE>


                                       10
<PAGE>   11

      The first line of the following table presents, as of the end of the year
at the top of each column, the estimated amount of unpaid losses and LAE for
claims arising in that year and in all prior years, including claims that had
occurred but were not yet reported to the Company. For each column, the rows of
the table present, for the same group of claims, the amount of unpaid losses and
LAE as re-estimated as of the end of each succeeding year. The estimate is
modified as more information becomes known about the number and severity of
claims for each year. The "cumulative redundancy (deficiency)" represents the
change in the estimated amount of unpaid losses and LAE from the end of the year
at the top of each column through the end of 2000.

      For each column in the table, the change from the liability for losses and
LAE shown on the first line to the liability as re-estimated as of the end of
the following year was included in operating results for the following year.
That change includes the change in the previous year's column from the liability
as re-estimated one year later to the liability as re-estimated two years later
which, in turn, includes the change in the second preceding column from the
liability as re-estimated two years later to the liability as re-estimated three
years later, and so forth.

      The rows of the lower portion of the table present, as of the end of each
succeeding year, the amount of paid losses and LAE for claims unpaid at the end
of the year at the top of each column.



                                       11
<PAGE>   12

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                     -----------------------
                         1990     1991      1992    1993     1994      1995      1996     1997    1998      1999
                        -------  -------  -------  -------  -------   -------- -------- -------- --------  --------
                                                            (in thousands)
<S>                     <C>      <C>      <C>      <C>      <C>       <C>       <C>       <C>       <C>       <C>
Liability for
 losses and LAE:

                        $71,222  $77,274  $86,159  $89,939  $97,614   $113,718  $126,260  $130,781  $126,820  $127,458

Liability
 re-estimated as of:
One year later           77,548   80,841   88,284   94,921  108,659    120,550   130,768   128,636   123,071   128,886
Two years later          75,987   81,743   91,224  100,607  113,091    128,192   133,029   130,498   120,345
Three years later        78,106   83,693   95,396  106,382  121,051    129,724   132,948   127,893
Four years later         79,563   87,105   99,779  112,983  121,791    131,647   129,210
Five years later         81,308   90,428  104,699  112,963  122,886    127,183
Six years later          84,530   92,370  104,808  112,886  120,128
Seven years later        85,219   93,046  105,183  110,843
Eight years later        84,765   93,346  103,196
Nine years later         84,896   91,920
Ten years later          84,424

Cumulative Redundancy
 (Deficiency):

                      $ (13,202) (14,646) (17,037) (20,904) (22,514)   (13,465)   (2,950)    2,888     6,475    (1,428)
                      %   (18.5)   (19.0)   (19.8)   (23.2)   (23.1)     (11.8)     (2.3)      2.2       5.1      (1.1)

Paid (Cumulative)
 as of:
One year later           32,666    0,082   35,724   34,551   36,916     38,549    40,954    42,433    37,125  40,970
Two years later          47,339   50,490   56,003   56,965   60,074     64,323    69,035    66,477    63,325
Three years later        61,585   63,925   69,863   72,963   77,982     84,638    86,364    86,313
Four years later         70,219   72,917   80,156   83,998   91,948     96,491    98,300
Five years later         75,018   79,374   86,808   93,295   99,171    104,063
Six years later          78,398   82,602   91,919   96,949  103,829
Seven years later        79,884   84,707   94,022   99,525
Eight years later        80,706   85,920   95,347
Nine years later         81,320   86,555
Ten years later          81,772
</TABLE>

      The loss and LAE reserves reported in the Company's consolidated financial
statements prepared in accordance with generally accepted accounting principles
("GAAP") differ from those reported in the statements filed by MNH with the New
Hampshire Insurance Department in accordance with statutory accounting
principles ("STAT") as follows:
<TABLE>
<CAPTION>
                                                   As  of  December  31,
                                                   ---------------------
                                                 1998       1999       2000
                                               --------   --------   --------
                                                       (in thousands)
<S>                                            <C>        <C>        <C>
Loss and LAE reserves on a STAT basis          $126,820   $127,458   $131,178
Adjustments:
      Ceded reinsurance balances recoverable      9,816      6,026     13,826
      Write-down of reinsurance recoverable          49         42         71
                                               --------   --------   --------
Loss and LAE reserves on a GAAP basis          $136,685   $133,526   $145,075
                                               ========   ========   ========
</TABLE>



                                       12
<PAGE>   13


REINSURANCE

      The Company follows the customary industry practice of reinsuring a
portion of the exposure under its policies and as consideration pays to its
reinsurers a portion of the premium received on its policies. Insurance is ceded
principally to reduce an insurer's liability on individual risks and to protect
against catastrophic losses. Although reinsurance does not legally discharge an
insurer from its primary liability for the full amount of coverage provided by
its policies, it does make the assuming reinsurer liable to the insurer to the
extent of the reinsurance ceded.

      The Company is a party to reinsurance contracts under which certain types
of policies are automatically reinsured without the need for approval by the
reinsurer with respect to the individual risks that are covered ("treaty"
reinsurance). The Company also is a party to reinsurance contracts which are
handled on an individual policy or per risk basis and require the specific
agreement of the reinsurer as to each risk insured ("facultative" reinsurance).
Occasionally, the Company may secure facultative reinsurance to supplement its
coverage under treaty reinsurance.

      Effective January 1, 1998, the Company changed its primary reinsurer and
coverage. Prior to that time, the Company's excess of loss arrangements for
automobile liability, general liability and workers' compensation insurance
provided for recovery of losses over $500,000 up to a maximum of $5,000,000 per
occurrence. For claims occurring prior to 1993, the $500,000 threshold was
indexed for inflation for casualty lines other than workers' compensation and
New York State no-fault, and applied retroactively to all occurrences until they
are settled. There was no index provision for casualty claims occurring after
1992. This coverage was supplemented by additional treaty reinsurance covering
losses up to $5,000,000 in excess of the first $5,000,000.

      Effective January 1, 1998, the Company's property and casualty excess of
loss reinsurance agreement provides for recovery of casualty losses over
$500,000 up to $10,000,000 per occurrence and property losses over $500,000 up
to $10,000,000 per occurrence. This coverage is supplemented by a contingent
casualty layer of reinsurance for workers' compensation claims of $5,000,000 in
excess of the first $10,000,000 subject to a calendar year limit of $20,000,000.

      Property catastrophe coverage provides for recovery of 50% of $5,000,000
and of 95% of the next $45,000,000, subject to aggregate retained losses of
$5,000,000 per occurrence. The property catastrophe reinsurance coverage is
shared by the Company and Mutual on a pro rata basis based upon the gross
reported losses of the Company and Mutual for a covered event.

      Prior to January 1, 1998, property reinsurance agreements provided for
recovery of property losses over $500,000 up to $2,000,000 per occurrence
without any index provision. Property catastrophe coverage placed with many
reinsurers worldwide provided for recovery of 95% of $40,000,000, subject to
aggregate retained losses of $5,000,000 for each natural disaster. The
reinsurance premium rate paid varied for each line of business.

      Effective January 1, 2000, the Company implemented a program to underwrite
specialized commercial auto insurance. All policies issued under this program
are 100% reinsured through certain subscribing underwriting members of Lloyd's
of London and therefore have no impact on net premiums earned or net losses and
LAE incurred by the Company.


                                       13
<PAGE>   14

      Effective January 1, 1993, Mutual and MNH entered into a quota share
reinsurance agreement under which MNH may assume up to 10% of Mutual's direct
voluntary written premiums and related losses and allocated LAE in exchange for
a reinsurance commission of 35%. The agreement also provides for MNH to pay a
contingent commission to Mutual equal to any underwriting profit on the premiums
assumed. Mutual pays the ceded premiums, net of commissions and paid losses, to
MNH on a monthly basis and MNH invests these funds and earns investment income.
To the extent commissions and paid losses exceed premiums, MNH is required to
pay the net monthly balance to Mutual. The agreement may be terminated by either
party effective as of any January 1 with the prior approval of the New York
Superintendent of Insurance and upon six months' notice to the other party. In
addition, the agreement may be terminated by MNH at any time if any amount
payable to MNH by Mutual becomes more than 90 days overdue or if there is a
change in control of Mutual approved by the New York Superintendent of
Insurance. Further, the agreement allows Mutual to reduce its cessions to MNH
from a maximum of 10% to a minimum of 0% of Mutual's direct voluntary premiums
written for any calendar year prior to the beginning of that calendar year.
Mutual has not ceded any portion of its direct voluntary written premiums to MNH
since 1995 and has informed the Company that it will not cede any voluntary
direct written premiums to MNH in 2001.

INVESTMENTS

      The primary source of funds for investment by the Company is premiums
collected. Although premiums, net of commissions and other underwriting costs,
are taken into income ratably over the terms of the policies, they provide funds
for investment from the date they are received. Similarly, although
establishment of and changes in reserves for losses and LAE are included in
results of operations immediately, the amounts so set aside are available to be
invested until the Company pays those claims.

      The investments of the Company are regulated by New Hampshire insurance
law and are reviewed by the Board of Directors of the Company. Other than
certain short-term investments held to maintain liquidity, the Company primarily
invests in medium-term bonds, mortgage-backed and other asset-backed securities
including collateralized mortgage obligations, and tax-exempt securities. The
mortgage-backed securities held by the Company are typically purchased at
expected yields which are greater than comparable maturity Treasury securities
and are AAA or AA rated.

      The Company had $16,207,000 of tax-exempt bonds in its investment
portfolio at December 31, 2000. The Company believes these tax-exempt bonds are
of high quality (rated A or better) and, at the time of purchase, offered an
after-tax total return greater than comparable taxable securities.

      At December 31, 2000, the Company had $4,550,000 of short-term investments
with maturities less than 30 days, and $10,083,000 of non-investment grade
securities. These non-investment grade securities represented 5% of the
investment portfolio as compared to $11,082,000, or 5%, of the investment
portfolio at December 31, 1999.



                                       14
<PAGE>   15


      The table below gives information regarding the Company's investments as
of the dates indicated.
<TABLE>
<CAPTION>

                                                            As  of  December  31,
                                                            ---------------------
                                             1998                   1999                    2000
                                      Amount       %         Amount        %         Amount        %
                                     --------   --------    --------   --------     --------   --------
                                                         (dollars in thousands)
<S>                                  <C>            <C>     <C>            <C>      <C>            <C>
Fixed Maturities (1):
      U.S. Government and Agencies   $ 30,392       14.1%   $ 27,663       13.0%    $ 44,055       20.4%
      Corporate Bonds                 140,326       65.2     152,984       71.9      135,895       63.0
      Tax-Exempt Bonds                 27,066       12.6      15,982        7.5       16,207        7.5
                                     --------   --------    --------   --------     --------   --------
          Total Bonds                 197,784       91.9     196,629       92.4      196,157       90.9
Preferred stocks (2)                   10,373        4.9      12,941        6.1       13,911        6.5
Short-Term Investments (3)              6,280        2.9       2,544        1.2        4,550        2.1
Other (4)                                 735         .3         797         .3        1,036         .5
                                     --------   --------    --------   --------     --------   --------
Total Invested Assets                $215,172      100.0%   $212,911      100.0%    $215,654      100.0%
                                     ========   ========    ========   ========     ========   ========
</TABLE>


(1)  Fixed Maturities are shown at their carrying amounts in the respective
     balance sheet. Held to Maturity fixed maturities are included at amortized
     cost. Available for Sale fixed maturities are included at fair value.

(2)  Shown at fair value.

(3)  Shown at cost, which approximates fair value.

(4)  Shown at estimated fair value or unpaid principal balance, which
     approximates estimated fair value.

      The table below sets forth the Company's net investment income and net
realized gains and losses, excluding the effect of income taxes, for the periods
shown:
<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                   -----------------------
                                                1998          1999         2000
                                             ---------     ---------    ---------
                                                     (dollars in thousands)
<S>                 <C>                      <C>           <C>          <C>
Average investments (1)                      $ 211,272     $ 211,956    $ 212,832
Net investment income                           13,277        13,147       13,903
Net investment income as a percentage
    of average investments (2)                     6.3%          6.2%         6.5%

Net realized gains (losses) on investments   $      (2)    $      60    $     109
</TABLE>

(1)  At amortized cost.

(2)  The taxable equivalent yield for the years ended December 31, 1998, 1999
     and 2000 was 6.8%, 7.0%, and 7.2%, respectively, assuming an effective tax
     rate of 34%.



                                       15
<PAGE>   16

      The table below sets forth the carrying value of bonds and percentage
distribution of various maturities at the dates indicated. Fixed Maturities are
shown at their carrying amounts in the respective balance sheet. Held to
Maturity fixed maturities are included at amortized cost. Available for Sale
fixed maturities are included at fair value. The estimated repayment date is
used instead of the ultimate repayment date for mortgage backed and other asset
backed securities.

<TABLE>
<CAPTION>

                                                    As of December 31,
                           ------------------------------------------------------------------
                                   1998                     1999                  2000
                           ------------------------------------------------------------------
                            Amount         %        Amount         %      Amount          %
                           --------      -----     --------      -----    --------      -----
                                                   (dollars in thousands)
<S>                          <C>          <C>      <C>            <C>     <C>            <C>
1 year or less               51,892       26.2%    $ 49,742       25.3%   $ 78,181       39.9%
1 year through 5 years      126,631       64.0      132,421       67.4      81,827       41.7
5 years through 10 years     17,721        9.0       12,619        6.4      34,562       17.6
More than 10 years            1,540         .8        1,847         .9       1,587         .8
                           --------      -----     --------      -----    --------      -----
      Total                $197,784      100.0%    $196,629      100.0%   $196,157      100.0%
                           ========   ========     ========   ========    ========   ========
</TABLE>

COMPETITION

      The property and casualty insurance business is highly competitive. The
Company is in direct competition with many national and regional multiple-line
insurers, many of which are substantially larger than the Company and have
considerably greater financial resources. Competition is further intensified by
the independent agency system because each of the independent agents who sells
the Company's policies also represents one or more other insurers. Also, the
Company's agents compete with direct writing insurers and this indirectly
affects the Company.

      Historically, the property and casualty industry has tended to be cyclical
in nature. During the "up" cycle, or "hard market," the industry is
characterized by price increases, strengthening of loss and LAE reserves,
surplus growth and improved underwriting results. Near the end of the "up"
cycle, an increase in capacity causes insurance companies to begin to compete
for market share on the basis of price. This price competition causes the
emergence of the "down" cycle, or "soft market," characterized by a reduction in
the premium growth rate and a general decline in profitability. Generally, the
down cycle is eventually accompanied by a decline in the adequacy of loss and
LAE reserves and a decrease in premium writing capacity. The property and
casualty insurance industry has experienced a cyclical downturn for the past
several years due primarily to intense premium rate competition and an excess
capacity to write premiums. Recently, there has been some evidence of price
firming in the commercial lines segment within the property casualty industry.
However, many of the circumstances which led to the current cyclical downturn in
the property and casualty insurance industry continue to exist, and the Company
cannot predict when or if market conditions for the industry will improve.

REGULATION

GENERAL

      MNH is subject to regulation under applicable insurance statutes,
including insurance holding company statutes, of the various states in which it
writes insurance. Insurance regulation is intended to provide safeguards for
policyholders rather than to protect stockholders of insurance companies or
their holding companies. Insurance laws of the various states establish
regulatory agencies with broad administrative


                                       16
<PAGE>   17

powers including, but not limited to, the power to grant or revoke licenses to
transact insurance business and to regulate trade practices, investments,
premium rates, the deposit of securities, the form and content of financial
statements and insurance policies, accounting practices, the maintenance of
specified reserves and capital, and insurers' consumer privacy policies. The
regulatory agencies of each state have statutory authority to enforce their laws
and regulations through various administrative orders, civil and criminal
enforcement proceedings, and the suspension or revocation of certificates of
authority. In extreme cases, including insolvency, impending insolvency and
other matters, a regulatory authority may take over the management and operation
of an insurer's business and assets.

      Under insolvency or guaranty laws in the states in which MNH operates,
insurers doing business in those states can be assessed up to prescribed limits
for policyholder losses caused by other insurance companies that become
insolvent. The extent of any requirement for MNH to make any further payment
under these laws is not determinable. Most laws do provide, however, that an
assessment may be excused or deferred if it would threaten a solvent insurer's
financial strength. In addition, MNH is required to participate in various
mandatory pools or underwriting associations in certain states in which it
operates.

      The property and casualty insurance industry has been the subject of
regulations and legislative activity in various states attempting to address the
affordability and availability of different lines of insurance. The regulations
and legislation generally restrict the discretion an insurance company has in
operating its business. It is not possible to predict the effect, if any, that
new regulations and legislation would have on the Company and MNH.

      The Company depends on cash dividends from MNH to pay cash dividends to
its stockholders and to meet its expenses. MNH is subject to New Hampshire state
insurance laws which restrict its ability to pay dividends without the prior
approval of state regulatory authorities. These restrictions limit dividends to
those that, when added to all other dividends paid within the preceding twelve
months, would not exceed 10% of the insurer's policyholders' surplus as of the
preceding December 31st. The maximum amount of dividends that MNH could pay
during any twelve month period ending in 2001 without the prior approval of the
New Hampshire Insurance Commissioner is $5,061,000. MNH paid the maximum
allowable dividends to the Company in 2000. Dividends were paid in February
2000, May 2000 and September 2000, of $2,200,000, $1,500,000 and $1,500,000,
respectively. MNH paid a dividend of $2,200,000 to the Company on February 15,
2001 and as such is restricted from paying another dividend to the Company until
May 2001 without the prior approval of the New Hampshire Insurance Commissioner.

      In certain states in which it operates, MNH is required to maintain
deposits with the appropriate regulatory authority to secure its obligations
under certain insurance policies written in the jurisdiction. At December 31,
2000, investments of MNH having a par value of $1,900,000 were on deposit with
regulatory authorities.

      MNH and Mutual are required to file detailed annual reports with the
appropriate regulatory agency in each of the states in which they do business.
Their business and accounts are subject to examination by such agencies at any
time, and the laws of many states require periodic examination. The State of New
Hampshire Insurance Department most recently examined the accounts of MNH as of
December 31, 1997. MNH's annual statement as of that date was accepted as
submitted, without adjustment. The State of New Hampshire Insurance Department
is currently examining the accounts of MNH as of December 31, 1999.

      In 1993 the National Association of Insurance Commissioners ("NAIC")
adopted a risk-based capital measurement formula to be applied to all property
and casualty insurance companies. The formula

                                       17
<PAGE>   18

calculates a minimum required statutory net worth, based on the underwriting,
investment, credit, loss reserve and other business risks inherent in an
individual company's operations. Any insurance company that does not meet
threshold risk-based capital measurement standards could be forced to reduce the
scope of its operations and ultimately could become subject to statutory
receivership proceedings. MNH's capital substantially exceeds the statutory
minimum as determined by the risk-based capital measurement formula as of
December 31, 2000.

      The NAIC has established eleven financial ratios (the Insurance Regulatory
Information System, or "IRIS") to assist state insurance departments in their
oversight of the financial condition of insurance companies operating in their
respective states. The NAIC calculates these ratios based on information
submitted by insurers on an annual basis and shares the information with the
applicable state insurance departments. The ratios relate to leverage,
profitability, liquidity and loss reserve development. Each of the Company's
ratios for 2000 falls within the usual or acceptable range as published by the
NAIC.

RATES

      Premium rate regulations vary greatly among states and lines of insurance,
and frequently require approval of the regulatory authority or limited review by
the authority prior to changes in rates. However, in New York and certain other
states, insurers writing private passenger automobile policies and in designated
commercial risk, professional liability and public entity insurance markets may
periodically revise rates within the limits of applicable flexibility bands
("flex-bands") on a file and use basis, but must obtain the Department's prior
approval in order to implement rate increases or decreases outside these
flex-bands.

INSURANCE HOLDING COMPANIES

      The Company is subject to statutes governing insurance holding company
systems. Typically, such statutes require the Company to file information
periodically concerning its capital structure, ownership, financial condition
and general business operations and material inter-company transactions not in
the ordinary course of business. Under the terms of applicable New Hampshire
statutes, any person or entity desiring to purchase shares which would result in
such person beneficially owning 10% or more of the Company's outstanding voting
securities would be required to obtain regulatory approval prior to the
purchase.

INVOLUNTARY INSURANCE

      As a condition to writing voluntary insurance in most of the states in
which it operates, the Company must participate in programs that provide
insurance for persons or businesses unable to obtain insurance voluntarily.
Uncertainties as to the size of the involuntary market population make it
difficult to predict the amount of involuntary business in a given year.

EMPLOYEES

      The Company has no employees. At December 31, 2000, Mutual had 334
full-time equivalent employees. The Company believes that Mutual's relationship
with its employees is satisfactory.


                                       18
<PAGE>   19

Item 2.  PROPERTIES.

      Although the Company has no facilities, it benefits from the facilities of
Mutual pursuant to the Management Agreement, under which the Company is charged
a proportionate share of the costs of such facilities.

      The Company's corporate headquarters are located in Buffalo, New York in a
building owned by Mutual that contains approximately 113,000 square feet of
office space. Mutual also has regional underwriting and/or claims office
facilities in Buffalo, Albany and Hauppauge, New York; Manchester, New
Hampshire; and Moorestown, New Jersey. All of the offices except the Buffalo
office are leased.

Item 3.  LEGAL PROCEEDINGS.

      MNH, like many other property and casualty insurance companies, is subject
to environmental damage claims asserted by or against its insureds. Management
of the Company is of the opinion that based on various court decisions
throughout the country such claims should not be recoverable under the terms of
MNH's insurance policies because of either specific or general coverage
exclusions contained in the policies. However, there is no assurance that the
courts will agree with MNH's position in every case, nor can there be assurance
that material claims will not be asserted under policies which a court will find
do not explicitly or implicitly exclude claims for environmental damages.
Management, however, is not aware of any pending claim or group of claims which
would result in a liability that would have a material adverse effect on the
financial condition of the Company or MNH.

      In addition to the foregoing matters, MNH is a defendant in a number of
other legal proceedings in the ordinary course of its business. Management of
the Company is of the opinion that the ultimate aggregate liability, if any,
resulting from such proceedings will not materially affect the financial
condition of the Company or MNH.

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

None.



                                       19
<PAGE>   20


                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS.

       The Company's common stock is traded on the American Stock Exchange (AMEX
symbol: MGP). The following table sets forth the high and low closing prices of
the common stock for the periods indicated as reported on the American Stock
Exchange.
<TABLE>
<CAPTION>

2000:                      High                            Low                  Dividend
-----                      ----                            ---                  --------
<S>                       <C>                             <C>                    <C>
Fourth Quarter            $18.25                          $17.00                 $  .10
Third Quarter              18.50                           17.00                    .10
Second Quarter             16.88                           15.06                    .10
First Quarter              20.00                           14.88                    .10

1999:                      High                            Low                  Dividend
-----                      ----                            ---                  --------

Fourth Quarter            $23.13                          $19.50                 $  .10
Third Quarter              24.38                           22.38                    .10
Second Quarter             22.38                           21.25                    .10
First Quarter              22.50                           21.00                    .05
</TABLE>


       The number of stockholders of record of the Company's Common Stock as of
February 28, 2001 was 99. Securities held by nominees are counted as one
stockholder of record.

       The Company has paid a quarterly cash dividend to its common stockholders
since the third quarter of 1993. Continued payment of this dividend and its
amount will depend upon the Company's operating results, financial condition,
capital requirements and other relevant factors, including legal restrictions
applicable to the payment of dividends by its insurance subsidiary, MNH.

       As a holding company, the Company depends on dividends from its
subsidiary, MNH, to pay cash dividends to its stockholders. MNH is subject to
New Hampshire state insurance laws which restrict its ability to pay dividends
without the prior approval of state regulatory authorities. These restrictions
limit dividends to those that, when added to all other dividends paid within the
preceding twelve months, would not exceed 10% of the insurer's policyholders'
surplus as of the preceding December 31. The maximum amount of dividends that
MNH could pay during any twelve month period ending in 2001 without prior
approval of the New Hampshire Insurance Commissioner is $5,061,000.



                                       20
<PAGE>   21


Item 6.  SELECTED FINANCIAL DATA.

       The selected financial data set forth in the following table for each of
the five years in the period ended December 31, 2000 have been derived from the
audited consolidated financial statements of the Company.
<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                    -----------------------------------------------------------
                                                       1996         1997        1998         1999        2000
                                                    ---------    ---------   ---------    ---------   ---------
                                                                (in thousands, except per share amounts)


<S>                                                 <C>          <C>         <C>          <C>         <C>
Net premiums written                                $  96,622    $  96,811   $  92,758    $  94,470   $  94,342
                                                    =========    =========   =========    =========   =========
Net premiums earned                                 $  95,752    $  96,054   $  93,540    $  94,775   $  94,259
Net investment income                                  11,724       12,770      13,277       13,147      13,903
Net realized investment gains (losses)                    996          112          (2)          60         109
     Other revenues                                       172          214         153          434         355
                                                    ---------    ---------   ---------    ---------   ---------
     Total revenues                                   108,644      109,150     106,968      108,416     108,626
                                                    ---------    ---------   ---------    ---------   ---------
Net losses and loss adjustment expenses                79,603       71,627      65,234       66,086      71,374
Amortization of deferred policy acquisition costs      25,374       25,454      24,788       25,115      24,979
Other underwriting expenses                             6,397        7,063       8,173        6,801       5,266
                                                    ---------    ---------   ---------    ---------   ---------
Total expenses                                        111,374      104,144      98,195       98,002     101,619
                                                    ---------    ---------   ---------    ---------   ---------
Income (loss) before income taxes                      (2,730)       5,006       8,773       10,414       7,007
Provision (benefit) for income taxes                   (1,582)         808       2,850        3,621       2,668
                                                    ---------    ---------   ---------    ---------   ---------
Net income (loss)                                   $  (1,148)   $   4,198   $   5,923    $   6,793   $   4,339
                                                    =========    =========   =========    =========   =========
Earnings (loss) per share:
Basic                                               $    (.36)   $    1.41   $    2.05    $    2.48   $    1.75
                                                    =========    =========   =========    =========   =========
Diluted                                             $    (.36)   $    1.41   $    2.04    $    2.48   $    1.74
                                                    =========    =========   =========    =========   =========
Weighted average number of shares
    outstanding:
Basic                                                   3,174        2,973       2,895        2,738       2,485
Diluted                                                 3,182        2,980       2,904        2,743       2,487

Balance Sheet Data: (at year end)
---------------------------------
Total investments                                   $ 201,597    $ 210,244   $ 215,172    $ 212,911   $ 215,654
Total assets                                          262,123      273,974     274,523      269,523     281,621
Reserve for losses and loss
     adjustment expenses                              133,479      141,205     136,685      133,526     145,075
Unearned premiums                                      49,710       50,406      49,382       49,616      50,857
Stockholders' equity                                   65,029       67,462      71,783       69,387      70,122

Dividend Data:
--------------
Cash dividend per common share                      $     .20    $     .20   $     .20    $     .35   $     .40
</TABLE>



                                       21
<PAGE>   22


"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:

With the exception of historical information, the matters and statements
discussed, made or incorporated by reference in this Annual Report on Form 10-K
constitute forward-looking statements and are discussed, made or incorporated by
reference, as the case may be, pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve certain assumptions, risks and uncertainties that could cause
actual results to differ materially from those included in or contemplated by
those statements. These assumptions, risks and uncertainties include, but are
not limited to, those associated with factors affecting the property and
casualty insurance industry generally, including price competition, the
Company's dependence on state insurance departments for approval of rate
increases, size and frequency of claims, escalating damage awards, natural
disasters, fluctuations in interest rates and general business conditions; the
Company's dependence on investment income; the geographic concentration of the
Company's business in the northeastern United States and in particular in New
York, New Hampshire, New Jersey, Rhode Island, Pennsylvania and Massachusetts;
the adequacy of the Company's loss reserves; government regulation of the
insurance industry; exposure to environmental claims; dependence of the Company
on its relationship with Mutual; and the other risks and uncertainties discussed
or indicated in all documents filed by the Company with the Commission. The
Company expressly disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the filing of this
report.


                                       22

<PAGE>   23

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

2000 COMPARED TO 1999.

       Total revenues for 2000 were $108,626,000, an increase of $210,000, or
less than 1%, from $108,416,000 in 1999.

       Direct premiums written for 2000 were $107,234,000, an increase of
$7,007,000, or 7%, from $100,227,000 in 1999. Net written premiums for 2000 were
$94,342,000, a decrease of $128,000 from $94,470,000 in 1999.

       In 2000, the Company implemented a program to underwrite specialized
commercial auto insurance (the Auto Program). All policies issued under the Auto
Program are 100% reinsured through certain Lloyd's syndicates and therefore have
no impact on net premiums written, net premiums earned or net losses and LAE
incurred by the Company. The Company records all direct underwriting expenses
incurred, including commissions with respect to the acquisition of these
policies, which are offset by reinsurance commission income.

       Voluntary personal lines direct premiums written for 2000 were
$38,491,000, substantially unchanged from $38,493,000 in 1999. Private passenger
automobile direct premiums written, which comprised 74% and 76% of total
voluntary personal lines direct premiums written in 2000 and 1999, respectively,
decreased 2% in 2000 compared to 1999 primarily due to fewer new policies and
renewal policies retained resulting from price-based market competition.
Homeowners direct premiums written increased 6% in 2000 compared to 1999 due to
an 8% increase in policies in force resulting primarily from a 7% increase in
new business units in 2000 as compared to 1999.

       Voluntary commercial lines direct premiums written for 2000 were
$67,225,000, an increase of 13% from $59,621,000 in 1999. This increase resulted
primarily from a $6,553,000, or 35%, increase in commercial auto direct premiums
written and a $1,013,000, or 13%, increase in contractors coverall direct
premiums written.

       The increase in commercial auto direct premiums written was primarily
attributable to $5,470,000 of direct premiums written for the Auto Program.
There were no Auto Program direct premiums written in 1999. Voluntary commercial
auto direct premiums written excluding the Auto Program were $19,654,000, an
increase of $1,083,000, or 6%, from $18,571,000 in 1999, primarily due to an
increase in average premium per policy. The increase in contractors coverall
direct premiums written was primarily due to a 24% increase in policies in force
in 2000 compared to 1999 somewhat offset by a decrease in average premium per
policy.

       Involuntary direct premiums written, primarily involuntary private
passenger automobile insurance, which comprised 1% and 2% of total direct
premiums written during 2000 and 1999, respectively, were $1,518,000 for 2000
compared to $2,113,000 in 1999, a decrease of $595,000 or 28%. This decrease
resulted primarily from decreased mandatory assignments from the New York
Automobile Insurance Plan ("NYAIP"), which provides coverage for individuals who
are unable to obtain auto insurance in the voluntary market. Assignments from
the NYAIP vary depending upon a company's private passenger automobile market
share and the size of the NYAIP.


                                       23
<PAGE>   24

       Net premiums earned for 2000 were $94,259,000, a decrease of $516,000, or
less than 1%, from $94,775,000 in 1999. This decrease in net premiums earned
resulted primarily from a decrease in assumed premiums earned and is consistent
with the decrease in net written premiums.

       Net investment income was $13,903,000 in 2000, an increase of 6% from
$13,147,000 in 1999, primarily due to an increase in average portfolio yield.
Higher reinvestment rates in the Company's targeted maturity sector (2 years)
led to the increase in average portfolio yield.

       Net losses and LAE were $71,374,000 for 2000, an increase of 8% from
$66,086,000 for 1999. The loss and LAE ratio increased to 75.7% in 2000 from
69.7% in 1999. In 2000, the Company recorded an increase to its reserves related
to all prior accident years of $1,428,000. This increase, which was primarily
attributable to higher than estimated loss experience on personal and commercial
automobile and workers' compensation policies, added 1.5 percentage points to
the Company's 2000 calendar year loss and LAE ratio. In 1999, the Company
recorded a decrease to its reserves for prior years' accidents of $3,749,000,
which in turn reduced the Company's 1999 calendar year loss and LAE ratio by 3.9
percentage points.

       The ratio of amortized deferred policy acquisition costs and other
underwriting expenses to net premiums earned decreased to 32.1% in 2000 from
33.7% in 1999, primarily due to lower agency incentive commissions resulting
from the increase in net losses and LAE and revisions to the profit sharing
program for agents, and to lower incentive compensation expenses. Expenses that
vary directly with the Company's premium volume, primarily commissions, premium
taxes and state assessments, represented 19.3% and 20.6% of net premiums earned
in 2000 and 1999, respectively. Certain other underwriting expenses, such as
salaries, employee benefits and other operating expenses vary indirectly with
volume and comprise the remainder of the Company's underwriting expenses.

       The Company's effective income tax rate for 2000 was 38.1%. Non-taxable
investment income reduced the Company's effective tax rate by approximately five
percentage points.

1999 COMPARED TO 1998.

       Total revenues for 1999 were $108,416,000, an increase of $1,448,000, or
1%, from $106,968,000 in 1998.

       Direct premiums written for 1999 were $100,227,000, an increase of
$1,271,000, or 1%, from $98,956,000 in 1998. Net written premiums for 1999 were
$94,470,000, an increase of $1,712,000, or 2%, from $92,758,000 in 1998.

       Voluntary personal lines direct premiums written for 1999 were
$38,493,000, a decrease of 3% from $39,518,000 in 1998. Private passenger
automobile direct premiums written, which comprised 76% and 78% of total
voluntary personal lines direct premiums written in 1999 and 1998, respectively,
decreased 5% in 1999 compared to 1998 primarily due to fewer new policies and
renewal policies retained resulting from price-based market competition.
Voluntary private passenger automobile policies in force at December 31, 1999,
decreased 7% compared to December 31, 1998. Homeowners direct premiums written
increased 6% in 1999 compared to 1998 due to a 9% increase in policies in force
resulting from an increase in new business units in 1999 as compared to 1998.


                                       24
<PAGE>   25

       Voluntary commercial lines direct premiums written for 1999 were
$59,621,000, an increase of 10% from $54,246,000 in 1998. This increase resulted
primarily from a $3,173,000, or 21%, increase in commercial auto direct premiums
written, a $573,000, or 8%, increase in workers' compensation direct premiums
written and a $1,406,000, or 22%, increase in contractors coverall direct
premiums written.

       The increase in commercial auto direct premiums written was primarily due
to a 25% increase in policies in force at December 31, 1999 compared to December
31, 1998, partially offset by a 3% decrease in average premium per commercial
auto policy at December 31, 1999 compared to December 31, 1998. The commercial
auto market continued to respond favorably in 1999 to the Company's commercial
auto product enhancements and premium rate decreases enacted in early 1998. The
increase in workers' compensation direct premiums written was due to a 9%
increase in new business units in 1999 as compared to 1998. The increase in
contractors coverall direct premiums written was primarily due to a 14% increase
in average policies in force in 1999 compared to 1998 which in turn was due to
rate decreases in this line of business effective in the first quarter of 1999.

       Involuntary direct premiums written, primarily involuntary private
passenger automobile insurance, which comprised 2% and 5% of total direct
premiums written during 1999 and 1998, respectively, were $2,113,000 for 1999
compared to $5,192,000 in 1998. This 59% decrease resulted primarily from
decreased mandatory assignments from the NYAIP. During 1999 the NYAIP continued
to adjust its assignments as a result of having over assigned policies to the
Company in 1997 and an overall decrease in the NYAIP's pool of business.
Assignments from the NYAIP vary depending upon a company's private passenger
automobile market share and the size of the NYAIP.

       Net premiums earned for 1999 were $94,775,000, an increase of $1,235,000,
or 1%, from $93,540,000 in 1998. Net premiums earned increased primarily due to
the 1% increase in direct premiums written.

       Net investment income was $13,147,000 in 1999, a decrease of 1% from
$13,277,000 in 1998, due to a decrease in average portfolio yield. Average
invested assets in 1999 were substantially unchanged from 1998.

       Other revenues were $434,000 for 1999, an increase of $281,000, or 184%,
from $153,000 in 1998, primarily due to increased investment income from
residual market facilities.

       Net losses and LAE were $66,086,000 for 1999, an increase of 1% from
$65,234,000 in 1998. The increase in net losses and LAE was primarily
attributable to a non-recurring charge related to insurance related assessments,
which was offset by a non-recurring reduction in other underwriting expenses.
Absent this non-recurring charge, net losses and LAE were relatively unchanged
compared to 1998. The Company recorded decreases to its reserves for losses
related to prior accident years of $3,749,000 and $2,145,000 in 1999 and 1998,
respectively. These decreases in reserves for prior accident years reduced the
loss and LAE ratio in 1999 and 1998 by 3.9 and 2.3 percentage points,
respectively, and were primarily the result of favorable loss experience related
to workers' compensation policies in 1999 and auto liability policies in 1998.
The decrease in reserves for prior accident years was somewhat offset by an
increase in the loss and LAE ratio for losses and LAE occurring in the current
accident year.


                                       25
<PAGE>   26

       Involuntary automobile insurance business increased the Company's
calendar year loss and LAE ratio by approximately 1.1 and 3.5 percentage points
for the years ended December 31, 1999 and 1998, respectively. The combined ratio
on involuntary automobile business was greater than the combined ratio on
voluntary automobile business.

       The ratio of policy acquisition costs and other underwriting expenses to
net premiums earned decreased to 33.7% in 1999 from 35.2% in 1998, primarily due
to the aforementioned non-recurring reduction in insurance related assessments.
Expenses that vary directly with the Company's premium volume, primarily
commissions, premium taxes and state assessments, represented 20.6% and 21.7% of
net premiums earned in 1999 and 1998, respectively. Certain other underwriting
expenses, such as salaries, employee benefits and other operating expenses vary
indirectly with volume and comprise the remainder of the Company's underwriting
expenses.

       The amounts recorded by the Company for income taxes in 1999 and 1998
differed from those calculated using statutory income tax rates primarily due to
tax exempt bond income.

LIQUIDITY AND CAPITAL RESOURCES

       In developing its investment strategy, the Company determines a level of
cash and short-term investments which, when combined with expected cash flow, is
estimated to be adequate to meet expected cash obligations. Historically, the
excess of premiums collected over payments on claims, combined with cash income
from investments, has provided the Company with short-term funds in excess of
normal operating demands for cash.

       The Company's objectives with respect to its investment portfolio include
maximizing total return while protecting policyholders' surplus and maintaining
flexibility. Like other property and casualty insurers, the Company relies on
premiums as a major source of cash, and therefore liquidity. Cash flows from the
Company's investment portfolio, either in the form of interest or principal
payments, are an additional source of liquidity. Because the duration of the
Company's investment portfolio relative to the duration of its liabilities is
closely managed, increases or decreases in market interest rates are not
expected to have a material effect on the Company's liquidity, or its results of
operations.

       The Company generally designates newly acquired fixed maturity
investments as available for sale and carries these investments at fair value.
Unrealized gains and losses related to these investments are recorded as
accumulated other comprehensive income within stockholders' equity. At December
31, 2000, the Company recorded as accumulated other comprehensive loss in its
Consolidated Balance Sheet $875,000 of unrealized losses, net of taxes,
associated with its investments classified as available for sale. During 2000
the Company recorded $313,000 of unrealized gains, net of tax, associated with
its available for sale investments as other comprehensive income.

       At December 31, 2000, the Company's portfolio of fixed maturity
investments represented 91.0% of invested assets. Management believes that this
level of bond holdings is consistent with the Company's liquidity needs because
it anticipates that cash receipts from net premiums written and investment
income will enable the Company to satisfy its cash obligations. Furthermore, a
portion of the Company's bond portfolio is invested in mortgage-backed and other
asset-backed securities which, in addition to interest income, provide monthly
paydowns of bond principal.


                                       26
<PAGE>   27

       At December 31, 2000, $80,434,000, or 41.0%, of the Company's fixed
maturity portfolio was invested in mortgage-backed and other asset-backed
securities. The Company invests in a variety of collateralized mortgage
obligation ("CMO") products but has not invested in the derivative type of CMO
products such as interest only, principal only or inverse floating rate
securities. All of the Company's CMO investments have an active secondary market
and their effect on the Company's liquidity does not differ from that of other
fixed maturity investments. The Company does not own any other derivative
financial instruments.

       At December 31, 2000, $10,083,000, or 5%, of the Company's investment
portfolio was invested in non-investment grade securities compared to
$11,082,000, or 5%, at December 31, 1999. All of the Company's non-investment
grade securities are currently performing to the Company's expectations at the
time of purchase.

        During 2000 the Company repurchased 165,100 shares of its common stock
at an average price of $17.71 and was holding 811,100 shares in treasury as of
December 31, 2000.

       The Company maintains a $2,000,000 unsecured credit facility from a bank
in the form of a master grid note. Any borrowings under this facility are
payable on demand and carry an interest rate which can be fixed or variable and
is negotiated at the time of each advance. This facility is available for
general working capital purposes and for repurchases of the Company's common
stock. At December 31, 2000, no amount was outstanding on this loan.

       As a holding company, the Company is dependent upon cash dividends from
MNH to meet its obligations and to pay any cash dividends. MNH is subject to New
Hampshire insurance laws which place certain restrictions on its ability to pay
dividends without the prior approval of state regulatory authorities. These
restrictions limit dividends to those that, when added to all other dividends
paid within the preceding twelve months, would not exceed 10% of the insurer's
policyholders' surplus as of the preceding December 31st. The maximum amount of
dividends that MNH could pay during any twelve month period ending in 2001
without the prior approval of the New Hampshire Insurance Commissioner is
$5,061,000. MNH paid the maximum allowable dividend to the Company in 2000.
Dividends were paid in February 2000, May 2000 and September 2000, of
$2,200,000, $1,500,000 and $1,500,000, respectively. MNH paid a dividend of
$2,200,000 to the Company on February 15, 2001 and as such is restricted from
paying another dividend to the Company until May, 2001. The Company paid a
quarterly cash dividend to its common stockholders of $.10 per share in 2000,
which amounted to $993,000 in 2000.

       Industry and regulatory guidelines suggest that the ratio of a property
and casualty insurer's annual net premiums written to its statutory surplus
should not exceed 3 to 1. The Company has consistently followed a business
strategy that would allow MNH to meet this 3 to 1 regulatory guideline. MNH's
ratio of net premiums written to statutory surplus for 2000 was 1.8 to 1.

ENVIRONMENTAL CLAIMS

       MNH, like many other property and casualty insurance companies, is
subject to environmental damage claims asserted by or against its insureds.
Management of the Company is of the opinion that based on various court
decisions throughout the country, such claims should not be recoverable under
the terms of MNH's insurance policies because of either specific or general
coverage exclusions contained in the policies. However, there is no assurance
that the courts will agree with MNH's position in every case, nor can there be
assurance that material claims will not be asserted under policies which a court
will find do not explicitly or implicitly exclude claims for environmental
damages. Management, however, is not aware of any pending



                                       27
<PAGE>   28

claim or group of claims which would result in a liability that would have a
material adverse effect on the financial condition of the Company or MNH.

INFLATION

       Inflation affects the Company, like other companies in the property and
casualty insurance industry, by contributing to higher losses, LAE and operating
costs, as well as greater investment income resulting from the higher interest
rates which can prevail in an inflationary period. Premium rates, however, may
not keep pace with inflation since competitive forces may limit the Company's
ability to increase premium rates. The Company considers inflationary trends in
estimating its reserves for claims reported and for incurred but not reported
claims.

RELATIONSHIP WITH MUTUAL

       The Company's and MNH's business and day-to-day operations are closely
aligned with those of Mutual. This is the result of a combination of factors.
Mutual has had a historical ownership interest in the Company and MNH. Prior to
November 1986 MNH was a wholly-owned subsidiary of Mutual. Following the
Company's initial public offering in November 1986 and until a secondary stock
offering in July 1993 the Company was a majority-owned subsidiary of Mutual.
Mutual currently owns 10.5% of the Company's common stock. Under the Management
Agreement, Mutual provides the Company and MNH with all facilities and personnel
to operate their business. The only officers of the Company or MNH who are paid
full time employees are employees of Mutual whose services are purchased under
the Management Agreement. Also, the operation of MNH's insurance business, which
offers substantially the same lines of insurance as Mutual through the same
independent insurance agents, creates a very close relationship among the
companies.

       During 1998, Mutual initiated discussions with the Company concerning
proposals for the acquisition of the Company by Mutual. The Company determined
that the terms proposed by Mutual were inadequate. The Company also determined
that the Management Agreement prevents the Company's shareholders from realizing
the Company's fair value in a sale or merger, and on July 23, 1998 the Company
gave notice to Mutual of its intention to terminate the Management Agreement.
The provisions of the Management Agreement require five years' prior written
notice for its termination. The Company does not expect the notice of
termination to have any material, short-term effect on the Company's operations.
However, the Company believes that the Management Agreement, as currently
written, creates a conflict of interest between the Company and Mutual in their
joint operations and prevents the Company's shareholders from realizing the fair
market value of their shares.


                                       28
<PAGE>   29

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

       Market risk represents the potential for loss due to changes in the fair
value of financial instruments. The market risk related to the Company's
financial instruments primarily relates to its investment portfolio. The value
of the Company's investment portfolio of $215,654,000 at December 31, 2000 is
subject to changes in interest rates and to a lesser extent on credit quality.
Further, certain mortgage-backed and asset-backed securities are exposed to
accelerated prepayment risk generally caused by interest rate movements. If
interest rates were to decline, mortgage holders would be more likely to
refinance existing mortgages at lower rates. Acceleration of future repayments
could adversely affect future investment income, if reinvestment of the
accelerated receipts was made in lower yielding securities.

       The table below provides information related to the Company's fixed
maturity investments at December 31, 2000. The table presents cash flows of
principal amounts and related weighted average interest rates by expected
maturity dates. The cash flows are based upon the maturity date or, in the case
of mortgage-backed and asset-backed securities, expected payment patterns.
Actual cash flows could differ from those shown in the table.



                                       29
<PAGE>   30


Expected Cash Flows of Principal Amounts ($ in 000's):

<TABLE>
<CAPTION>
                                                                                                               TOTAL
                                                                                                         -------------------
                                                                                                                     Esti-
                                                                                                           Amor-     mated
                                                                                               There-      tized     Market
                                   2001         2002        2003         2004        2005      after       Cost      Value
                                 --------    --------    --------    --------    --------    --------    --------   --------
<S>                              <C>         <C>         <C>         <C>         <C>         <C>         <C>        <C>
Held to Maturity
----------------
Mortgage & asset backed
       securities                $      0    $    642    $  1,644    $  1,556    $  1,355    $  7,677    $ 12,874   $ 13,576
    Average interest rate             0.0%        7.2%        7.1%        7.1%        7.1%        7.3%       --         --
                                 --------    --------    --------    --------    --------    --------    --------   --------
Total                            $      0    $    642    $  1,644    $  1,556    $  1,355    $  7,677    $ 12,874   $ 13,576
                                 ========    ========    ========    ========    ========    ========    ========   ========
Available for Sale
------------------
U.S. Treasury securities and
       obligations of U.S.
       Government corporations
       and agencies              $ 18,661    $  3,823    $      0    $      0    $      0    $ 21,399    $ 43,883   $ 44,055
    Average interest rate             5.4%        6.9%        0.0%        0.0%        0.0%        7.3%       --         --

Obligations of states and
       political subdivisions       8,698       1,712       5,299           0           0         365      16,074     16,207
    Average interest rate             4.8%        5.6%        5.3%        0.0%        0.0%        5.4%       --         --

Corporate securities               20,097      26,121       7,559           0           0       2,442      56,219     55,461
    Average interest rate             7.0%        7.2%        8.4%        0.0%        0.0%        8.0%       --         --

Mortgage & asset
       backed securities           30,715      19,220       6,880       3,237       2,799       4,365      67,216     67,560
    Average interest rate             6.8%        6.9%        6.9%        7.0%        7.1%        7.2%       --         --
                                 --------    --------    --------    --------    --------    --------    --------   --------
Total                            $ 78,171    $ 50,876    $ 19,738    $  3,237    $  2,799    $ 28,571    $183,392   $183,283
                                 ========    ========    ========    ========    ========    ========    ========   ========
</TABLE>

       The discussion and the estimated amounts referred to above include
forward-looking statements of market risk which involve certain assumptions as
to market interest rates and the credit quality of the fixed maturity
investments. Actual future market conditions may differ materially from such
assumptions. Accordingly, the forward-looking statements should not be
considered projections of future events by the Company.


                                       30
<PAGE>   31

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

       The consolidated financial statements required in response to this Item
are submitted as part of Item 14 (a) of this report, and are incorporated in
this item by reference.

       Quarterly data for the two most recent fiscal years is set forth below:
<TABLE>
<CAPTION>

                                             Three months ended
                                             ------------------
                                     3/31       6/30     9/30     12/31
                                    -------   -------   -------   -------
                                   (in thousands, except per share amounts)
<S>                                 <C>       <C>       <C>       <C>
2000
----
    Net premiums earned             $23,033   $23,606   $23,822   $23,798
    Net investment income             3,456     3,388     3,481     3,578
    Net realized investment gains      --           5       104      --
    Other revenues                       66        16        81       192
                                    -------   -------   -------   -------
    Total revenues                  $26,555   $27,015   $27,488   $27,568
                                    =======   =======   =======   =======
    Income before income taxes      $ 1,272   $ 2,783   $ 2,617   $   335
    Net income                      $   817   $ 1,801   $ 1,670   $    51
    Net income per diluted share    $   .32   $   .72   $   .68   $   .02

1999
----
    Net premiums earned             $23,662   $23,524   $24,040   $23,549
    Net investment income             3,271     3,208     3,280     3,388
    Net realized investment gains         1         6        53      --
    Other revenues                      142       124        95        73
                                    -------   -------   -------   -------
    Total revenues                  $27,076   $26,862   $27,468   $27,010
                                    =======   =======   =======   =======
    Income before income taxes      $ 2,495   $ 2,857   $ 2,457   $ 2,605
    Net income                      $ 1,649   $ 1,850   $ 1,650   $ 1,644
    Net income per diluted share    $   .58   $   .67   $   .61   $   .63
</TABLE>




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

None.


                                       31
<PAGE>   32


                                    PART III


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

       The information in response to this item is incorporated by reference
herein to the information under the caption "Election of Directors" presented in
the Company's definitive proxy statement filed or to be filed pursuant to
Regulation 14A and used in connection with the Company's 2001 Annual Meeting of
Shareholders to be held on or about May 2, 2001, provided, however, that
information appearing under the heading "Report of the Audit Committee" is not
incorporated herein and should not be deemed included in this document for any
purpose.

Item 11. EXECUTIVE COMPENSATION.

       The information in response to this item is incorporated by reference
herein to the information under the captions "Executive Compensation" and
"Compensation of Directors" presented in the Company's definitive proxy
statement filed or to be filed pursuant to Regulation 14A and used in connection
with the Company's 2001 Annual Meeting of Shareholders to be held on or about
May 2, 2001, PROVIDED, HOWEVER that information appearing under the captions
"Compensation Committee Report on Executive Compensation" and "Performance
Comparison" is not incorporated herein and should not be deemed to be included
in this document for any purpose.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

       The information in response to this item is incorporated by reference
herein to the information under the caption "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" presented in the
Company's definitive proxy statement filed or to be filed pursuant to Regulation
14A and used in connection with the Company's 2001 Annual Meeting of
Stockholders to be held on or about May 2, 2001.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       The information in response to this item is incorporated herein by
reference to the information under the caption "Management Agreement" and
"Certain Transactions" presented in the Company's definitive proxy statement
filed or to be filed pursuant to Regulation 14A and used in connection with the
Company's 2001 Annual Meeting of Shareholders to be held on or about May 2,
2001.


                                       32
<PAGE>   33

                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

  (a) (1) The following financial statements of Merchants Group, Inc. are
          included on pages F-1 to F-22:

          Report of Independent Accountants

          Consolidated Balance Sheet - December 31, 1999 and 2000.

          Consolidated Statement of Operations - Years ended December 31, 1998,
          1999 and 2000.

          Consolidated Statement of Changes in Stockholders' Equity - Years
          ended December 31, 1998, 1999 and 2000.

          Consolidated Statement of Cash Flows - Years ended December 31, 1998,
          1999 and 2000.

          Notes to Consolidated Financial Statements.

      (2) The following financial statement schedules of Merchants Group, Inc.
          are filed herewith pursuant to Item 8:

          Schedule I -

               Summary of Investments - Other Than Investments in Related
               Parties.

          Schedule II -

               Amounts Receivable From/Payable to Related Parties, and
               Underwriters, Promoters and Employees Other Than Related Parties.

          Schedule III -

               Condensed Financial Information of Registrant.

          Schedule V -

               Supplemental Insurance Information (see Schedule X).

          Schedule VI - Reinsurance

          Schedule X -

               Supplemental Insurance Information Concerning Property - Casualty
               Subsidiaries

  (b) Reports on Form 8-K.
      There were no reports on Form 8-K filed for the quarter ended December
      31, 2000.

  (c) Exhibits required by Item 601 of Regulation S-K:

      (3)  (a) Restated Certificate of Incorporation (incorporated by reference
               to Exhibit No. 3C to Amendment No. 1 to the Company's
               Registration Statement (No. 33-9188) on Form S-1 filed on
               November 7, 1986).

          (b)  Restated By-laws (incorporated by reference to Exhibit No. 3D to
               Amendment No. 1 to the Company's Registration Statement (No.
               33-9188) on Form S-1 filed on November 7, 1986).


                                       33
<PAGE>   34

      (10)(a) Management Agreement dated as of September 29, 1986 by and
               among Merchants Mutual Insurance Company, Registrant and
               Merchants Insurance Company of New Hampshire, Inc. (incorporated
               by reference to Exhibit No. 10A to the Company's Registration
               Statement (No. 33-9188) on Form S-1 filed on September 30, 1986).

          (b)  Agreement of Reinsurance No. 6922 between Merchants Mutual
               Insurance Company, Merchants Insurance Company of New Hampshire,
               Inc. and General Reinsurance Corporation (incorporated by
               reference to Exhibit No. 10E to the Company's Registration
               Statement (No. 33-9188) on Form S-1 filed on September 30, 1986).

          (c)  Agreement of Reinsurance No. 7299 between Merchants Mutual
               Insurance Company, Merchants Insurance Company of New Hampshire,
               Inc. and General Reinsurance Corporation, (incorporated by
               reference to Exhibit No. 10o to the Company's 1987 Annual Report
               on Form 10-K (File No. 1-9640) filed on March 19, 1988).

          (d)  Agreement of Reinsurance dated January 27, 1993, between
               Merchants Mutual Insurance Company and Merchants Insurance
               Company of New Hampshire, Inc. (incorporated by reference to
               Exhibit (3) in the Company's Current Report on Form 8-K (File No.
               1-9640) filed on January 29, 1993).

          (e)  Agreement of Reinsurance No. 8009 between Merchants Mutual
               Insurance Company, Merchants Insurance Company of New Hampshire,
               Inc. and General Reinsurance Corporation, (incorporated by
               reference to Exhibit 10e to the Company's 1995 Annual Report on
               Form 10-K filed on March 28, 1996).

          (f)  Property and Casualty Excess of Loss Reinsurance Agreement
               between Merchants Mutual Insurance Company, Merchants Insurance
               Company of New Hampshire, Inc. and American Reinsurance Company,
               including endorsement, (incorporated by reference to Exhibit 10g
               to the Company's 1998 Annual Report on Form 10-K filed on March
               29, 1999).

          (g)  Property Catastrophe Excess of Loss Reinsurance Agreement between
               Merchants Mutual Insurance Company, Merchants Insurance Company
               of New Hampshire, Inc. and the Subscribing Reinsurers Executing
               the Interest and Liabilities Contracts attached to this
               agreement, effective January 1, 2000 (filed herewith).

          (h)  Quota Share Reinsurance Treaty Agreement between Merchants
               Insurance Company of New Hampshire, Inc. and The Subscribing
               Underwriting Members of Lloyd's, London specifically identified
               on the schedules attached to this agreement dated January 1, 2000
               (filed herewith).

        * (i) Merchants Mutual Capital Accumulation Plan (incorporated by
              reference to Exhibit No. 10G to the Company's Registration
              Statement (No. 33-9188) on Form S-1 filed on September 30, 1986).



                                       34
<PAGE>   35
        * (j) Merchants Mutual Capital Accumulation Plan, fifth amendment,
              effective January 1, 1999 (filed herewith).

        * (k) Merchants Mutual Capital Accumulation Plan Trust Agreement
              (restated as of January 1, 1996 (incorporated by reference to
              Exhibit 10(i) to the Company's 1996 Annual Report on Form 10-K
              (File No. 1-9640) filed on March 28, 1997).

        * (l) Merchants Mutual Supplemental Executive Retirement Plan dated as
              of December 29, 1989 and Agreement of Trust dated as of December
              29, 1989 (incorporated by reference to Exhibit No. 10K to the
              Company's 1989 Annual Report on Form 10-K (File No. 1-9640) filed
              on March 21, 1990).

        * (m) Amendment dated June 10, 1992 to Agreement of Trust under
              Merchants Mutual Supplemental Executive Retirement Plan dated as
              of December 29, 1989 (incorporated by reference to Exhibit No. 10R
              to the Company's 1992 Annual Report on Form 10-K (File No. 1-9640)
              filed on March 31, 1993).

        * (n) Merchants Group, Inc. 1986 Stock Option Plan As Amended Through
              February 16, 1993 (incorporated by reference to Exhibit No. 10E to
              the Company's 1992 Annual Report on Form 10-K (File No. 1-9640)
              filed on March 31, 1993).

        * (o) Form of Amended Indemnification Agreement entered into by
              Registrant with each director and executive office of Registrant
              (incorporated by reference to Exhibit No. 10N to Amendment No. 1
              to the Company's Registration Statement on (No. 33-9188) Form S-1
              filed on November 7, 1986).

        * (p) Merchants Mutual Insurance Company Adjusted Return on Equity
              Incentive Compensation Plan January 1, 2000 (filed herewith).

        * (q) Merchants Mutual Insurance Company Adjusted Return on Equity
              Long Term Incentive Compensation Plan January 1, 2000 (filed
              herewith).

        * (r) Employee Retention Agreement between Robert M. Zak and Merchants
              Mutual Insurance Company dated as of March 1, 1999 (incorporated
              by reference to Exhibit No. 10-A to the Company's June 30, 1999
              Quarterly Report on Form 10-Q filed on August 12, 1999).

        * (s) Employee Retention Agreement between Edward M. Murphy and
              Merchants Mutual Insurance Company dated as of March 1, 1999
              (incorporated by reference to Exhibit 10r to the Company's 1998
              Annual Report on Form 10-K filed on March 29, 1999).

        * (t) Employee Retention Agreement between Kenneth J. Wilson and
              Merchants Mutual Insurance Company dated as of March 1, 1999
              (incorporated by reference to Exhibit 10s to the Company's 1998
              Annual Report on Form 10-K filed on March 29, 1999).


                                       35
<PAGE>   36

     (11) (a) Statement re computation of per share earnings (incorporated
              herein by reference to Note 9 to the Consolidated Financial
              Statements included in Item 8).

     (21)     List of Subsidiaries of Registrant (incorporated by  reference
              to Exhibit No. 22 to the Company's Registration Statement ( No.
              33-9188) on Form S-1 filed on September 30, 1986).

     (23)     Consent of Independent Accountants (filed herewith).


* Indicates a management contract or compensation plan or arrangement.



                                       36
<PAGE>   37


                              MERCHANTS GROUP, INC.
                      SCHEDULE I - SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                                December 31, 2000
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                         Amount at
                                                                        which shown
                                      Amortized Cost/     Market       in the balance
Type of Investment                          Cost           value            sheet
------------------                    ---------------     ------       --------------
<S>                                       <C>            <C>             <C>

Fixed maturities:
United States Government and
    government agencies and authorities   $ 43,883       $ 44,055        $ 44,055
Corporate bonds                             56,219         55,461          55,461
Mortgage and asset backed securities        80,090         81,136          80,434
Tax exempt bonds                            16,074         16,207          16,207
                                          --------       --------        --------
       Total fixed maturities              196,266        196,859         196,157

Preferred stocks                            14,611         13,911          13,911

Short-term investments                       4,550          4,550           4,550

Other                                        1,036          1,036           1,036
                                          --------       --------        --------
                                          $216,463       $216,356        $215,654
                                          ========       ========        ========
</TABLE>










                                       37
<PAGE>   38








                              MERCHANTS GROUP, INC.
        SCHEDULE II - AMOUNTS RECEIVABLE FROM/PAYABLE TO RELATED PARTIES,
                 AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
                              THAN RELATED PARTIES
                  Years ended December 31, 1998, 1999 and 2000
                                 (in thousands)
<TABLE>
<CAPTION>


                                                 1998       1999       2000
                                                -------    -------    -------

<S>                                             <C>        <C>        <C>
Receivable from (payable to) Merchants Mutual
    Insurance Company(1):

Balance at beginning of period                  $   527    $(1,321)   $  (681)
Change during the period                         (1,848)       703         10
                                                -------    -------    -------
Balance at end of period                        $(1,321)   $  (681)   $  (608)
                                                =======    =======    =======
</TABLE>


(1)    Under a Management Agreement, Merchants Mutual Insurance Company
       ("Mutual") provides employees, services and facilities for Merchants
       Insurance Company of New Hampshire, Inc. ("MNH") to carry on its
       insurance business on a cost reimbursed basis. The balance in the
       intercompany receivable (payable) account indicates the amount due from
       (to) Mutual for the excess (deficiency) of premiums collected over (from)
       payments for losses, employees, services and facilities provided to MNH.



                                       38
<PAGE>   39


                              MERCHANTS GROUP, INC.
          SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                (in thousands except per share and share amounts)


<TABLE>
<CAPTION>
BALANCE SHEET                                                                    December  31,
-------------                                                                    -------------
                                                                               1999        2000
                                                                             --------    --------
<S>                                                                          <C>         <C>
       Assets
       ------
Investment in subsidiary                                                     $ 70,362    $ 69,937
Other assets                                                                       98         243
                                                                             --------    --------
       Total assets                                                          $ 70,460    $ 70,180
                                                                             ========    ========
       Liabilities and Stockholders' Equity
       ------------------------------------
Other liabilities                                                            $     48    $     58
Demand loan                                                                     1,025        --
                                                                             --------    --------
       Total liabilities                                                        1,073          58
                                                                             ========    ========
Stockholders' equity:
    Preferred stock, $.01 par value, authorized and
         unissued 3,000,000 shares                                               --          --
    Preferred stock, no par value, $424.30 stated value,
         no shares issued or outstanding at December 31,
         1999 or 2000                                                            --          --
    Common stock, $.01 par value, authorized 10,000,000 shares; issued and
         outstanding of 2,595,852 shares at December 31,
         1999 and 2,430,752 shares at December 31, 2000                            32          32
    Additional paid in capital                                                 35,680      35,680
    Treasury stock, 646,000 shares at December 31, 1999
         and 811,100 shares at December 31, 2000                              (13,139)    (16,063)
    Accumulated other comprehensive loss                                       (1,188)       (875)
    Accumulated earnings                                                       48,002      51,348
                                                                             --------    --------
       Total stockholders' equity                                              69,387      70,122
                                                                             --------    --------
       Total liabilities and stockholders' equity                            $ 70,460    $ 70,180
                                                                             ========    ========
</TABLE>






                                       39
<PAGE>   40






                              MERCHANTS GROUP, INC.
          SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                    Continued
                                 (in thousands)



INCOME STATEMENT
-----------------
<TABLE>
<CAPTION>

                                                 Year ended December 31,
                                                 -----------------------
                                               1998       1999       2000
                                              -------    -------    -------
<S>                                           <C>        <C>        <C>
Revenues:
       Equity in net income of subsidiary     $ 6,161    $ 6,937    $ 4,462
       Investment income (loss)                    61         39        (23)
                                              -------    -------    -------
              Total revenues                    6,222      6,976      4,439
Expenses:
       General and administrative expenses        337        237        174
                                              -------    -------    -------
       Operating income before income taxes     5,885      6,739      4,265
Income tax benefit                                (38)       (54)       (74)
                                              -------    -------    -------
              Net income                      $ 5,923    $ 6,793    $ 4,339
                                              =======    =======    =======
</TABLE>










                                       40
<PAGE>   41





                              MERCHANTS GROUP, INC.
          SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                 (in thousands)



STATEMENT OF CASH FLOWS
-----------------------

Increase (Decrease) in Cash and Cash Equivalents:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                                -----------------------------
                                                                                   1998       1999       2000
                                                                                -------    -------    -------
                                                                                        (in thousands)
<S>                                                                             <C>        <C>        <C>
Cash flows from operating activities:                                           $  (251)   $  (142)   $  (169)
                                                                                -------    -------    -------
Cash flows from investing activities:
       Receipt of subsidiary common stock dividend                                2,600      5,000      5,200
       Sale (purchase) of other investments, net                                   (630)       936        (86)
                                                                                -------    -------    -------
       Cash flows from investing activities                                       1,970      5,936      5,114
                                                                                -------    -------    -------
Cash flows from financing activities:
       Purchase of treasury stock                                                (1,191)    (6,042)    (2,924)
       Proceeds from (repayment of) demand loan                                    --        1,025     (1,025)
       Cash dividends                                                              (579)      (955)      (993)
       Exercise of common stock options                                              56        169       --
                                                                                -------    -------    -------
       Cash flows from financing activities                                      (1,714)    (5,803)    (4,942)
                                                                                -------    -------    -------
Net increase (decrease) in cash and cash equivalents                                  5         (9)         3
Cash and cash equivalents, beginning of year                                          5         10          1
                                                                                -------    -------    -------
Cash and cash equivalents, end of year                                          $    10    $     1    $     4
                                                                                =======    =======    =======
Reconciliation of net income to net
  cash provided by operations:

Net income                                                                      $ 5,923    $ 6,793    $ 4,339

Adjustments to reconcile net income
  to net cash provided by operations:
              Equity in income of subsidiary                                     (6,161)    (6,937)    (4,462)
              Increase (decrease) in other liabilities                              (13)      --           10
              (Increase) decrease in other
                 (non-investment) assets                                             (6)      --          (56)
              Other, net                                                              6          2       --
                                                                                -------    -------    -------
Net cash used in operating activities                                           $  (251)   $  (142)   $  (169)
                                                                                =======    =======    =======
</TABLE>


                                       41
<PAGE>   42

                              MERCHANTS GROUP, INC.
                 SCHEDULE III - CONDENSED FINANCIAL INFORMATION



NOTES TO CONDENSED FINANCIAL STATEMENTS

       Cash dividends of $2,600,000, $5,000,000 and $5,200,000 were paid to the
Registrant by its consolidated subsidiary in the years ended December 31, 1998,
1999 and 2000, respectively.



                                       42
<PAGE>   43


                              MERCHANTS GROUP, INC.
                            SCHEDULE VI - REINSURANCE
                    YEARS ENDED DECEMBER 31, 1998, 1999, 2000
                        (in thousands except percentages)


<TABLE>
<CAPTION>

                                                                           Percentage
                                             Ceded      Assumed            of amount
                                  Gross    to other    from other   Net      assumed
                                  amount   companies   companies   amount    to net
                                 --------   --------   --------   -------- -----------
<S>                              <C>        <C>        <C>        <C>           <C>
Year ended December 31, 1998
Property and Casualty Premiums   $ 98,956    $ 7,042   $  844     $92,758       .9%

Year ended December 31, 1999
Property and Casualty Premiums   $100,227    $ 7,369   $1,612     $94,470      1.7%

Year Ended December 31, 2000
Property and Casualty Premiums   $107,234    $13,532   $  640     $94,342       .7%
</TABLE>


                                       43
<PAGE>   44


                              MERCHANTS GROUP, INC.
           SCHEDULE X - SUPPLEMENTAL INSURANCE INFORMATION CONCERNING
                        PROPERTY - CASUALTY SUBSIDIARIES
                  Years ended December 31, 1998, 1999 and 2000
                                 (in thousands)

<TABLE>
<CAPTION>


                             Reserves                                           Losses & loss
                   Deferred  for        Discount                              adjustment expenses  Amoritiza-
                   policy    losses &   if any,                        Net    incurred related to   tion of    Paid losses
                   acquis-   loss ad-  deducted               Net     invest-      1)      (2)     deferred    & loss ad-  Direct
                    ition    justment    from    Unearned   earned     ment      Current   Prior  acquisition   justment   premium
                    costs    expenses  reserves   premiums  premiums  income      years    years     costs      expenses   written
                   -------   --------    ------    -------   -------  -------    -------  -------    -------     -------   --------
<S>              <C>       <C>         <C>       <C>       <C>      <C>        <C>      <C>        <C>         <C>       <C>
Year ended:

December 31, 1998  $12,390   $136,685    $9,256    $49,382   $93,540  $13,277    $67,379  $ (2,145)  $24,788    $69,198   $ 98,956

December 31, 1999  $12,309   $133,526    $8,492    $49,616   $94,775  $13,147    $69,835  $ (3,749)  $25,115    $65,455   $100,227

December 31, 2000  $12,331   $145,075    $7,170    $50,857   $94,259  $13,903    $69,946  $ (1,428)  $24,979    $67,771   $107,234
</TABLE>




                                       44

<PAGE>   45

SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         Merchants Group, Inc.
                                         ---------------------
Date: March 22, 2001         BY: /s/ Robert M. Zak,  Senior Vice President
                                 ----------------------------------------
                                 Robert M. Zak, Senior Vice President and
                                 Chief Operating Officer

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

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

<S>                                     <C>                          <C>
/s/Richard E. Garman                     Director, Chairman            March 22, 2001
--------------------                     of the Board
Richard E. Garman


/s/Brent D. Baird                        Director, President           March 22, 2001
-----------------
Brent D. Baird

/s/Robert M. Zak                         Director, Sr. VP &            March 22, 2001
---------------                          Chief Operating
Robert M. Zak                            Officer

/s/Kenneth J. Wilson                     Vice President & CFO          March 22, 2001
-------------------                      (principal financial
Kenneth J. Wilson                        and accounting officer)

/s/Andrew A. Alberti                     Director                      March 22, 2001
-------------------
Andrew A. Alberti

/s/Frank J. Colantuono                   Director                      March 22, 2001
----------------------
Frank J. Colantuono

/s/Thomas E. Kahn                        Director                      March 22, 2001
----------------
Thomas E. Kahn

/s/Henry P. Semmelhack                   Director                      March 22, 2001
---------------------
Henry P. Semmelhack
</TABLE>





                                       45