Merchants Group Inc. offers property and casualty insurance to preferred risk individuals and small to medium sized businesses in the northeastern United States through its wholly owned subsidiary, Merchants Insurance Company of New Hampshire Inc. (MNH). The Company and MNH operate and manage their business in conjunction with Merchants Mutual Insurance Company (Mutual), a mutual property and casualty insurance company, under a management agreement (the Management Agreement). As of December 31, 2002, Mutual owned 12.1% of the Companys issued and outstanding common stock. Under the Management Agreement, Mutual provides the Company and MNH with the facilities, management and personnel required to operate their day-to-day business.