10-Q/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1

Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

for the Quarterly Period Ended March 31, 2005,

or

Transition report pursuant to Section 13 or 15(d) Of the Exchange Act

for the Transition Period from                      to                     

No. 000-25425

(Commission File Number)

MERCER INSURANCE GROUP, INC.

(Exact name of Registrant as specified in its charter )

PENNSYLVANIA	23-2934601
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10 North Highway 31, P.O. Box 278, Pennington, NJ	08534
(Address of principal executive offices)	(Zip Code)

(609) 737-0426

(Registrant’s telephone number, including area
code)

(Former name, former address and former fiscal year, if changed since last
report)

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 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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Number of Shares Outstanding as of May 2, 2005
COMMON STOCK (No Par Value)	6,553,233
(Title of Class)	(Outstanding Shares)

EXPLANATORY NOTE

     The registrant is filing this Amendment No. 1 to its Form 10-Q for the quarter ended March 31, 2005, in response to a request by the SEC to remove narrative disclosure referring to overall or total underwriting profit or loss contained within Item 2, the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Other than the change referred to above, all other information included in the Mercer Insurance Group, Inc. Form 10-Q, as filed on May 10, 2005, remains unchanged. Items 1, 3 and 4 of Part I and all items of Part II of that filing have been omitted from this Amendment because they are unchanged. All information contained herein is as of March 31, 2005, and does not reflect any events that have occurred subsequent to that date.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
SIGNATURES	19
Exhibits:
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

(i)

Forward-looking Statements

     Mercer Insurance Group, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the exhibits hereto and thereto), in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

     These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company’s control). The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:

•   future economic conditions in the regional and national markets in which the Company competes which are less favorable than expected;

•   the effects of weather-related and other catastrophic events;

•   the concentration of insured accounts in New Jersey and Pennsylvania;

•   the effect of legislative, judicial, economic, demographic and regulatory events in the two states in which we do business;

•   the continuation of an A.M. Best rating in the Excellent category;

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

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

•   the impact of acts of terrorism and acts of war;

•   the effects of terrorist related insurance legislation and laws;

•   inflation;

•   the cost, availability and collectibility of reinsurance;

•   estimates and adequacy of loss reserves and trends in losses and loss adjustment expenses;

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

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

2

•   our inability to obtain regulatory approval of, or to implement, premium rate increases;

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

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

•   unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;

•   adverse litigation or arbitration results;

•   the ability to carry out our business plans; or

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

     The Company cautions that the foregoing list of important factors is not exclusive. Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this report. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following presents management’s discussion and analysis of our financial condition and results of operations as of the dates and for the periods indicated. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto included in this report. This discussion contains forward-looking information that involves risks and uncertainties. Actual results could differ significantly from these forward-looking statements. See “Forward-Looking Statements”.

Overview

THE CONVERSION TRANSACTION AND THE HOLDING COMPANY

     Mercer Insurance Group, Inc. (the “Company” or the “Holding Company”) is a holding company owning all of the outstanding shares of Mercer Insurance Company, the company resulting from the conversion of Mercer Mutual Insurance Company from the mutual to the stock form of organization on December 15, 2003 (the “Conversion”). Prior to the Conversion, and since 1844, Mercer Mutual Insurance Company was engaged in the business of selling property and casualty insurance.

Our Business

     The Company and its subsidiaries underwrite property and casualty insurance in New Jersey and Pennsylvania. Our consolidated operating insurance company subsidiaries are:

•   Mercer Insurance Company, a Pennsylvania property and casualty stock insurance company offering insurance coverage to businesses and individuals in New Jersey and Pennsylvania,

•   Mercer Insurance Company of New Jersey, Inc., a New Jersey property and casualty stock insurance company offering insurance coverage to businesses and individuals in New Jersey; and

•   Franklin Insurance Company, a property and casualty stock insurance company offering private passenger automobile and homeowners insurance to individuals located in Pennsylvania.

     The Company is subject to regulation by the Pennsylvania Insurance Department and the New Jersey Department of Banking and Insurance as its primary regulators because it is the holding company for Mercer Insurance Company, and, indirectly, Mercer Insurance Company of New Jersey, Inc. and Franklin Insurance Company.

     We manage our business and report our operating results in three operating segments: commercial lines insurance, personal lines insurance and the investment function. See Note 2 of the notes to our condensed consolidated financial statements included in this report. However, assets are not allocated to segments and are reviewed in the aggregate for decision-making purposes. Our commercial lines insurance business consists primarily of multi-peril and general liability and related coverages. Our personal lines insurance business consists primarily of homeowners (in New Jersey and Pennsylvania) and private passenger automobile (in Pennsylvania only) insurance coverages. We market both the commercial and personal insurance lines through independent producers.

4

     Our income is principally derived from insurance premiums received from insureds in the commercial lines (businesses insured) and personal lines (individuals insured) segments, less the costs of underwriting the insurance policies, the costs of settling and paying claims reported on the policies, and from investment income reduced by investment expenses and gains or losses on holdings in our investment portfolio. Variability in our income is caused by a variety of circumstances, some within the control of our companies and some not within our control. Premium volume is affected by, among other things, the availability and regular flow to our insurance companies of quality, properly-priced risks being produced by our agents, the ability to retain on renewal existing good-performing accounts, competition from other insurance companies, regulatory rate approvals, our reputation, and other limitations created by the marketplace or regulators. Our underwriting costs are affected by, among other things, the amount of commission and profit-sharing commission we pay our agents to produce the underwriting risks for which we receive premiums, the cost of issuing insurance policies and maintaining our customer and agent relationships, marketing costs, taxes we pay to the states in which we operate on the amount of premium we collect, and other assessments and charges imposed on our companies by the regulators in the states in which we do business. Our claim and claim settlement costs are affected by, among other things, the quality of our accounts, severe or extreme weather in our operating region, the nature of the claim, the regulatory and legal environment in our territories, inflation in underlying medical and property repair costs, and the availability and cost of reinsurance. Our investment income and realized gains and losses are determined by, among other things, market forces, the rates of interest and dividends paid on our investment portfolio holdings, the credit or investment quality of the issuers and the success of their underlying businesses, the market perception of the issuers, and other factors such as ratings by rating agencies and analysts.

Critical Accounting Policies

     General. The Company’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP). We are required to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related footnotes. We evaluate these estimates and assumptions on an on-going basis based on historical developments, market conditions, industry trends and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to our estimates and assumptions, and that reported results of operations will not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. We believe the following policies are the most sensitive to estimates and judgments.

     Liabilities for Loss and Loss Adjustment Expenses. The liability for losses and loss adjustment expenses represents estimates of the ultimate unpaid cost of all losses incurred, including losses for claims that have not yet been reported to our insurance companies. The amount of loss reserves for reported claims is based primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and the insurance policy provisions relating to the type of loss. The amounts of loss reserves for unreported claims and loss adjustment expenses are determined using historical information by line of insurance as adjusted to current conditions. Inflation is implicitly provided for in the reserving function through analysis of costs, trends and reviews of historical reserving results over multiple years.

     Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. Specifically, on a quarterly basis, we review, by line of business, existing reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior accident years. We use historical paid and incurred losses and accident year data to derive expected ultimate loss and loss adjustment expense ratios by line of business. We then apply these expected loss and loss adjustment expense ratios to in-force business to derive a reserve level for each line of business. This amount, together with reserves required by new reported claims and changes to existing case reserves, is compared to existing reserves to establish the adjustment to reserves that is required. In connection with the determination of

5

the reserves, we also consider other specific factors such as recent weather-related losses, trends in historical paid losses, and legal and judicial trends with respect to theories of liability. Because of the nature of our business, which generally provides coverage for short-term risks, loss development is comparatively rapid and historical paid losses have been a reliable predictive measure of future losses.

     Nevertheless, reserves are estimates because there are uncertainties inherent in the determination of ultimate losses. Court decisions, regulatory changes and economic conditions can affect the ultimate cost of claims that occurred in the past as well as create uncertainties regarding future loss cost trends. Accordingly, the ultimate liability for unpaid losses and loss settlement expenses will likely differ from the amount recorded at March 31, 2005. Changes in estimates or differences between estimates and amounts ultimately paid are reflected in current operations. Loss reserving techniques and assumptions have been consistently applied during the periods presented.

     The table below summarizes the effect on net loss reserves and equity in the event of reasonably likely changes in the variables considered in establishing loss and loss adjustment expense reserves. The range of reasonably likely changes was established based on a review of changes in accident year development by line of business and applied to loss reserves as a whole. The selected range of changes does not indicate what could be the potential best or worst case or likely scenarios:

	Adjustment
	Change in Loss and			Adjusted Loss and					Adjusted Loss and Loss		Percentage Change
	Loss Adjustment			Loss Reserves Net of		Percentage Change in			Adjustment Reserves		in Stockholders’
	Reserves Net of			Reinsurance as of		Stockholders' Equity as			Net of Reinsurance as of		Equity as of
	Reinsurance			March 31, 2005		of March 31, 2005(1)			December 31, 2004		December 31, 2004 (1)
(Dollars in thousands)
		(10.0	)%		29,791		2.3	%		29,669		2.2	%
		(7.5	)%		30,618		1.7	%		30,493		1.6	%
		(5.0	)%		31,446		1.1	%		31,317		1.1	%
		(2.5	)%		32,273		0.6	%		32,141		0.5	%
	Base				33,101		—			32,965		—
		2.5	%		33,929		(0.6	)%		33,789		(0.5	)%
		5.0	%		34,756		(1.1	)%		34,613		(1.1	)%
		7.5	%		35,584		(1.7	)%		35,437		(1.6	)%
		10.0	%		36,411		(2.3	)%		36,262		(2.2	)%

(1) Net of Tax

     The property and casualty industry has incurred substantial aggregate losses from claims related to asbestos-related illnesses, environmental remediation, product and construction defect liability, mold, and other uncertain exposures. We have not experienced significant losses from these types of claims.

6

     The table below summarizes loss and loss adjustment reserves by major line of business:

	March 31, 2005		December 31, 2004
	(Dollars in thousands)
Commercial lines:
Commercial multi-peril	$	6,703	$	5,441
Other liability		9,380		9,374
Workers’ compensation		4,710		4,627
Commercial automobile		1,416		1,456
Fire, allied, inland marine		785		781
		22,994		21,679
Personal lines:
Homeowners		9,222		10,095
Personal automobile		2,186		2,283
Fire, allied, inland marine		346		338
Other liability		1,408		1,596
Workers’ compensation		90		37
		13,252		14,349
Total	$	36,246	$	36,028

     Investments. Unrealized investment gains or losses on investments carried at fair value, net of applicable income taxes, are reflected directly in stockholders’ equity as a component of comprehensive income and, accordingly, have no effect on net income. A decline in fair value of an investment below its cost that is deemed other than temporary is charged to earnings as a realized loss. We monitor our investment portfolio and review investments that have experienced a decline in fair value below cost to evaluate whether the decline is other than temporary. These evaluations involve judgment and consider the magnitude and reasons for a decline and the prospects for the fair value to recover in the near term. Adverse investment market conditions, or poor operating results of underlying investments, could result in impairment charges in the future.

     The Company’s policy on impairment of value of investments is as follows: if a security has a market value below cost it is considered impaired. For any such security a review of the financial condition and prospects of the company will be performed by the Investment Committee to determine if the decline in market value is other than temporary. If it is determined that the decline in market value is “other than temporary”, the carrying value of the security will be written down to “realizable value” and the amount of the write down accounted for as a realized loss. “Realizable value” is defined for this purpose as the market price of the security. Write-down to a value other than the market price requires objective evidence in support of that value.

     In evaluating the potential impairment of fixed income securities, the Investment Committee will evaluate relevant factors, including but not limited to the following: the issuer’s current financial condition and ability to make future scheduled principal and interest payments, relevant rating history, analysis and guidance provided by rating agencies and analysts, the degree to which an issuer is current or in arrears in making principal and interest payments, and changes in price relative to the market.

     In evaluating the potential impairment of equity securities, the Investment Committee will evaluate certain factors, including but not limited to the following: the relationship of market price per share versus carrying value per share at the date of acquisition and the date of evaluation, the price-to-earnings ratio at the date of acquisition and the date of evaluation, any rating agency announcements, the issuer’s financial condition and near-term prospects, including any specific events that may influence the issuer’s operations, the independent auditor’s report on the issuer’s financial statements; and any buy/sell/hold recommendations or price projections by outside investment advisors.

7

     We have one significant non-traded equity security, a non-voting common stock in Excess Reinsurance Company, which is carried at $1.1 million. Its fair value is estimated at the statutory book value as reported to the National Association of Insurance Commissioners (NAIC). Other non-traded securities, which are not material in the aggregate, are carried at cost.

     Policy Acquisition Costs. We defer policy acquisition costs, such as commissions, premium taxes and certain other underwriting expenses that vary with and are primarily related to the production of business. These costs are amortized over the effective period of the related insurance policies. The method followed in computing deferred policy acquisition costs limits the amount of deferred costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, loss and loss adjustment expenses, and certain other costs expected to be incurred as the premium is earned. Future changes in estimates, the most significant of which is expected loss and loss adjustment expenses, may require acceleration of the amortization of deferred policy acquisition costs.

     Reinsurance. Amounts recoverable from property and casualty reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Amounts paid for reinsurance contracts are expensed over the contract period during which insured events are covered by the reinsurance contracts.

     Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid loss and loss adjustment expenses are reported separately as assets, instead of being netted with the appropriate liabilities, because reinsurance does not relieve us of our legal liability to our policyholders. Reinsurance balances recoverable are subject to credit risk associated with the particular reinsurer. Additionally, the same uncertainties associated with estimating unpaid loss and loss adjustment expenses affect the estimates for the ceded portion of these liabilities.

     We continually monitor the financial condition of our reinsurers.

     Income Taxes. We use the asset and liability method of accounting for income taxes. Deferred income taxes are provided and arise from the recognition of temporary differences between financial statement carrying amounts and the tax bases of our assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The effect of a change in tax rates is recognized in the period of the enactment date.

Results of Operations

     Our results of operations are influenced by factors affecting the property and casualty insurance industry in general, which include potentially significant variations due to competition, weather, catastrophic events, regulation, general economic conditions, judicial trends, fluctuations in interest rates and other changes in the investment environment.

     Our growth in premiums and underwriting results have been, and continue to be, influenced by market conditions. Pricing in the property and casualty insurance industry historically has been and remains cyclical. During a soft market cycle, price competition is prevalent, which makes it difficult to write and retain properly priced personal and commercial lines business. Our policy is to maintain our disciplined underwriting and pricing standards during soft markets to the greatest extent possible, declining business which is inadequately priced for its level of risk. The hard market and related pricing power of the early part of the current decade has given way to a much more competitive market recently, particularly in property exposures and package policies. This has resulted in slower premium growth than the Company has achieved in recent years.

8

Quarter ended March 31, 2005 compared to quarter ended March 31, 2004.

     The components of income for 2005 and 2004, and the change and percentage change from year to year, are shown in the charts below. The accompanying narrative refers to the statistical information displayed in the chart immediately above the narrative.

2005 vs. 2004 Income										%
(Dollars in thousands)	2005			2004			Change			Change
Commercial lines underwriting income	$	639		$	2,242		$	(1,603	)		(71.5	)%
Personal lines underwriting loss		(106	)		(2,636	)		2,530			96.0	%
Total underwriting income (loss)		533			(394	)		927			235.3	%
Net investment income		743			668			75			11.2	%
Realized investment gains (losses)		18			(97	)		115			118.6	%
Other revenue		86			92			(6	)		(6.5	)%
Income before income taxes		1,380			269			1,111			413.0	%
Income taxes		387			40			347			867.5	%
Net income	$	993		$	229		$	764			333.6	%
Loss / LAE ratio (GAAP)		51.1	%		60.0	%		(8.9	)%
Underwriting expense ratio (GAAP)		45.4	%		42.8	%		2.6	%
Combined ratio (GAAP)		96.5	%		102.8	%		(6.3	)%
Loss / LAE ratio (Statutory)		51.1	%		60.1	%		(9.0	)%
Underwriting expense ratio (Statutory)		47.1	%		41.3	%		5.8	%
Combined ratio (Statutory)		98.3	%		101.4	%		(3.1	)%

     Charts and discussion relating to each of our reporting segments (commercial lines underwriting, personal lines underwriting, and the investments segment) follow below.

     Our personal lines underwriting performance improved significantly in the first quarter of 2005, as compared to the similar period in 2004, driven by the presence of moderate weather in our operating territories in the first quarter of 2005. In the similar period of 2004, the Company experienced a significant number of losses resulting from a sustained period of harsh winter, which manifested itself in a significantly higher number of claims in personal lines. In 2005, the number of new claims was down significantly, however the Company sustained a slightly elevated number of large fire losses, principally in the commercial lines segment. Our GAAP combined ratio improved to 96.5% in 2005 from 102.8%, and our statutory combined ratio improved in 2005 to 98.3% from 101.4%. Our net investment income increased 11.2% to $743,000, primarily as a result of increased yields in the fixed-income investment portfolio, a larger portion of which was held in cash equivalents in the first quarter of 2004. Realized investment gains amounted to a gain of $18,000 in 2005, versus a loss of $97,000 in 2004. Our other income, primarily service charges recorded on insurance premiums paid over the term of the policy instead of when the policy is issued, declined modestly in 2005.

     Net loss and loss adjustment expenses incurred decreased in the first quarter of 2005, as compared to 2004, by $600,000, or 7%, to $7.7 million, reflecting lower claims frequency in 2005 over 2004, despite growth in our net premium earned of 9%. The lower loss and loss adjustment expense ratio in 2005, as compared to 2004, resulted from lower claims frequency, offset by the increased severity of fire claims noted above.

9

2005 vs. 2004 Revenue									%
(Dollars in thousands)	2005		2004			Change			Change
Direct premiums written	$	14,240	$	14,333		$	(93	)		(0.6	)%
Net premiums written		13,161		12,919			242			1.9	%
Net premiums earned		15,113		13,862			1,251			9.0	%
Net investment income		743		668			75			11.2	%
Realized investment gains		18		(97	)		115			(118.6	)%
Other Revenue		86		92			(6	)		(6.5	)%
Total Revenue	$	15,960	$	14,525		$	1,435			9.9	%

     Total revenues for the first quarter of 2005 were $16.0 million, which was 9.9% greater than 2004 revenues of $14.5 million. This increase was due primarily to a $1.3 million increase in net premiums earned in 2005, and an 11.2% increase in net investment income to $743,000.

     Direct premiums written decreased 0.6% to $14.2 million in 2005, reflecting a more competitive pricing posture in the marketplace and the Company’s reluctance to accept underwriting risks which are priced inappropriately, as well as a seasonality in renewals normally experienced in the first quarter. Net premiums written increased 1.9% in 2005. Net premiums earned increased by 9.0% to $15.1 million in the first quarter of 2005.

     Growth in Net Investment Income is discussed below.

2005 vs. 2004 Investment income and
realized gains
(Dollars in thousands)	2005			2004			Change			% Change
Fixed income securities	$	946		$	781		$	165			21.1	%
Dividends		103			107			(4	)		(3.7	)%
Cash, cash equivalents & other		122			96			26			27.1	%
Gross investment income		1,171			984			187			19.0	%
Investment expenses		(428	)		(316	)		112			35.4	%
Net investment income	$	743		$	668		$	75			11.2	%
Realized gains (losses) on fixed income	$	14		$	(108	)	$	122			113.0	%
Realized gains on equities		4			11			(7	)		(63.6	)%
Net realized gains	$	18		$	(97	)	$	115			118.6	%

     Net investment income increased $75,000, or 11.2% in the first quarter of 2005, due principally to increased yields on the fixed income portfolio holdings. Effective January 1, 2004, the Company engaged a new investment management firm for its fixed income securities portfolio, whose responsibilities included investing the proceeds of the Conversion. Given a difficult interest rate environment and fixed income securities market, this was not largely

10

completed until the second quarter of 2004. Consequently, a portion of the Conversion proceeds earned a cash-equivalent yield during the first quarter of 2004.

     In implementing the investment policy guidelines and directions of the Investment Committee of the Board of Directors, the fixed income securities managers during 2004 changed the composition of the fixed income securities portfolio to be more heavily weighted in tax-exempt securities, industrial and miscellaneous fixed income securities, and mortgage-backed securities, and less heavily weighted towards U.S government and government agencies fixed income securities.

     Net realized gains for the first quarter of 2005 were $18,000, as compared to a loss of $97,000 in the similar period in 2004. In 2005, net realized investment gains of $18,000 included gains on securities sales of $52,000, offset by losses on securities sales of $34,000. The losses from securities sales were comprised of $8,000 from the sale of fixed income securities and $26,000 from the sale of equities.

     The following table summarizes the period of time that equity securities sold at a loss during 2005 had been in a continuous unrealized loss position:

	Fair
PERIOD OF TIME IN AN	Value on		Realized
UNREALIZED LOSS POSITION	Sale Date		Loss
	(In thousands)
0-6 months	$	339	$	26
7-12 months		—		—
More than 12 months		—		—
Total	$	339	$	26

     The equity securities sold at a loss had been expected to appreciate in value but after reevaluation were sold so that sale proceeds could be reinvested. Securities were sold due to a desire to reduce exposure to certain issuers and industries or in light of changing economic conditions.

     The following table summarizes the length of time equity securities with unrealized losses at March 31, 2005 have been in an unrealized loss position:

					Length of Unrealized Loss
	Fair		Unrealized		Less than		6 to 12		Over 12
March 31, 2005	Value		Losses		6 months		Months		Months
	(In thousands)
Equity securities:
Preferred stocks	$	1,308	$	167	$	167	$	0	$	0
Common stocks		1,703		101		83		18		0
Total	$	3,011	$	268	$	250	$	18	$	0

     The estimated fair value and unrealized loss for all fixed income and equity securities in a temporary unrealized loss position as of March 31, 2005 are as follows :

11

	Less than 12 Months				12 Months or Longer				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	11,036	$	194	$	5,293	$	220	$	16,329	$	414
Obligations of states and political subdivisions		20,308		370		11,872		344		32,180		714
Corporate securities		15,891		487		1,433		36		17,324		523
Mortgage-backed securities		16,494		248		6		268		16,500		516
Total fixed maturities		63,729		1,299		18,604		868		82,333		2,167
Preferred stocks		1,308		167		0		0		1,308		167
Common stocks		1,703		101		0		0		1,703		101
Total equity securities		3,011		268		0		0		3,011		268
Total securities in a temporary unrealized loss position	$	66,740	$	1,567	$	18,604	$	868	$	85,344	$	2,435

     The unrealized losses on fixed maturity investments were primarily due to changes in the interest rate environment. The Company has 33 fixed maturity securities which have been in an unrealized loss position for more than twelve months. Of the 33 fixed maturity securities with unrealized losses greater than twelve months, 29 have fair values greater than 96% of cost, with three greater than 92% and one greater than 78%. The Company has reviewed these securities and believes these declines are temporary.

     There are 12 equity securities that are in an unrealized loss position on March 31, 2005. Eleven of these securities have been in an unrealized loss position for less than six months. The remaining equity security has been in an unrealized loss position for less than twelve months. The Company has reviewed these securities and believes these declines are temporary.

     Results of our Commercial Lines segment were as follows:

2005 vs. 2004 Commercial lines (CL)
(Dollars in thousands)	2005			2004			Change			% Change
CL Direct premiums written	$	8,935		$	8,644		$	291			3.4	%
CL Net premiums written	$	7,955		$	7,708		$	247			3.2	%
CL Net premiums earned	$	9,181		$	8,025		$	1,156			14.4	%
CL Loss / LAE expense ratio (GAAP)		45.5	%		28.0	%		17.5	%
CL Expense ratio (GAAP)		47.5	%		44.1	%		3.4	%
CL Combined ratio (GAAP)		93.0	%		72.1	%		20.9	%

     Our commercial lines direct premiums written increased by $291,000, or 3.4% in the first quarter of 2005 as compared to the same period in 2004, and our commercial lines net written premiums increased $247,000, or 3.2%. Our premiums written growth rates reflect both a more competitive marketplace as well as the seasonality inherent in our renewals. We continue to focus our growth goals on the commercial lines book, working with our agents to target classes of business within our underwriting appetite, which includes certain types of religious institution risks, small business risks and property risks.

12

     In the commercial lines segment for the first quarter of 2005, we had an underwriting gain of $639,000, a GAAP combined ratio of 93.0%, a GAAP loss and loss adjustment expense ratio of 45.5% and a GAAP underwriting expense ratio of 47.5%, compared to an underwriting gain of $2.2 million, a GAAP combined ratio of 72.1%, a GAAP loss and loss adjustment expense ratio of 28.0% and an underwriting expense ratio of 44.1% for the same period in 2004. Our commercial lines loss ratio for the first quarter of 2005 was impacted adversely by a modestly higher amount of large fire losses as compared to the first quarter of 2004.

     Results of our Personal Lines segment were as follows:

2005 vs. 2004 Personal lines (PL)
(Dollars in thousands)	2005			2004			Change			% Change
PL Direct premiums written	$	5,305		$	5,689		$	(384	)		(6.7	)%
PL Net premiums written	$	5,206		$	5,211		$	(5	)		(0.1	)%
PL Net premiums earned	$	5,932		$	5,837		$	95			1.6	%
PL Loss / LAE expense ratio (GAAP)		59.7	%		104.1	%		(44.4	)%
PL Expense ratio (GAAP)		42.1	%		41.1	%		1.0	%
PL Combined ratio (GAAP)		101.8	%		145.2	%		(43.4	)%

     In the personal lines segment for the first quarter of 2005, we had an underwriting loss of $106,000, a GAAP combined ratio of 101.8%, a GAAP loss and loss adjustment expense ratio of 59.7% and a GAAP underwriting expense ratio of 42.1%, compared to an underwriting loss of $2.6 million, a GAAP combined ratio of 145.2%, a GAAP loss and loss adjustment expense ratio of 104.1% and a GAAP underwriting expense ratio of 41.1% for the first quarter of 2004.

     The personal lines performance in the first quarter of 2005 was impacted by a significantly lower frequency of losses and by a lower severity of losses as compared to the first quarter of 2004. The 2004 losses were significantly higher than usual, and were attributable to harsh weather conditions which resulted in a high number of losses from frozen pipes, structural collapses, more frequent automobile losses and accidents, and other losses of the type caused by an extended period of harsh weather.

     Besides the more moderate weather in the first quarter of 2005, the personal lines book benefited from the underwriting initiatives undertaken in both the homeowners and Pennsylvania personal automobile lines in the last two years. These initiatives included the reclassification of certain homeowners risks from our preferred program to our standard program, resulting in a higher premium, as well as modified underwriting standards related to the types of Pennsylvania personal automobile risks the Company will write. The Company is seeking a rate increase for the homeowners line in New Jersey, based on an MSO form, which, if approved, will result in an increase in premiums written for this line.

     Although the Company expects to continue growing its personal lines book, it will continue to devote greater focus to growth in the commercial lines book.

13

2005 vs. 2004 Expenses and expense ratio
(Dollars in thousands)	2005			2004			Change			% Change
Amortization of DAC	$	3,899		$	3,863		$	36			0.9	%
As a % of net premiums earned		25.8	%		27.9	%		(2.1	)%
Other underwriting expenses		2,958			2,070			888			42.9	%
Total expenses excluding losses/LAE	$	6,857		$	5,933		$	924			15.6	%
Underwriting expense ratio		45.4	%		42.8	%		2.6	%		N/M
(N/M means “not meaningful”)

     Underwriting expenses increased by $924,000, or 15.6%, to $6.9 million for the first quarter of 2005, as compared to the same period in 2004. This increase was principally attributable to an increase in other underwriting expenses, growth in commissions resulting from higher earned premium volume, and increased charges relating to corporate expenses and compensation expenses, including bonuses and agents profit-sharing, which were at higher levels than the first quarter of 2004. In 2005, the Company had pre-tax costs associated with Sarbanes – Oxley compliance of $242,000, and pre-tax costs of $159,000 associated with grants of restricted stock, for both of which there were no costs in the first quarter of 2004.

     The Company maintains Agency Profit Sharing plans, which, in addition to base commissions, annually rewards agents for the growth and profitability of the business they produce while representing the Company. The additional commission is computed only on the aggregate growth and profitability of the book of business they produce each year. The Company does not have any marketing services agreements, placement services agreements, or similar arrangements.

     We are currently in the process of converting our information system. When completed, we expect some costs to moderate as implementation costs and costs associated with operating dual systems end. These reduced costs will be offset by some higher staffing costs, but we also should be positioned to expand premium volume in the near term without material incremental expense because of increased processing capacity.

     In the first quarter of 2004, a disputed retaliatory tax assessment was paid, leaving an unneeded accrual of $300,000 which was then reversed and served to reduce premium tax expense accordingly. This reversal, when offset against otherwise accruing retaliatory tax, resulted in a negative retaliatory expense of $139,000 in the first quarter of 2004.

     In the third quarter of 2004, we began renewing most of our New Jersey policies in our Mercer Insurance Company of New Jersey, Inc. subsidiary, thus eliminating the Company’s liability for retaliatory premium taxes. Accordingly, the results for the first quarter of 2005 do not reflect any expense for retaliatory taxes, as compared to the negative expense described above which was included in the results for the first quarter of 2004. See the Liquidity and Capital Resources section for additional information regarding the retaliatory tax matter.

2005 vs. 2004 Income taxes
(Dollars in thousands)	2005			2004			Change			% Change
Income before income taxes	$	1,380		$	269		$	1,111			N/M
Income taxes		387			40			347			N/M
Net income	$	993		$	229		$	764			N/M
Effective tax rate		28.0	%		14.9	%		13.1	%
(N/M means “not meaningful”)

14

Federal income tax expense was $387,000 for the first quarter of 2005, an effective rate of 28.0%, compared to $40,000, or an effective rate of 14.9%, in the same period in 2004. The increase in the effective tax rate in 2005 is primarily attributable to the fact that tax-exempt investment income and dividend income (which reduce the effective tax rate) represented a smaller percentage of net income in 2005 than in 2004, with ordinary income taxed at the higher regular rates representing a larger portion of the 2005 income.

LIQUIDITY AND CAPITAL RESOURCES

     Our insurance companies generate sufficient funds from their operations to meet their obligations and to maintain a high degree of liquidity in their investment portfolios. The primary source of funds to meet the demands of claim settlements and operating expenses are premium collections, investment earnings and maturing investments. Mercer Insurance Company in 2004 completed an expansion of its facilities in Pennington, New Jersey, at a cost of at $2.9 million. These improvements are fully paid for and will not require any further use of operating cash flow.

     We are also in the process of building an information system platform that will allow our producers to conduct their business through the Internet. As of March 31, 2005, we have spent $3.2 million on the development of this platform, which includes license fees for software used in the platform. It is anticipated to be completed in mid 2006, at an additional cost of $1.0 million. Mercer Insurance Company possesses sufficient resources for these future expenditures without incurring any debt.

     Our insurance companies maintain investment and reinsurance programs that are intended to provide sufficient funds to meet their obligations without forced sales of investments. They ladder the maturity of their portfolios and thereby maintain a portion of their investment portfolio in relatively short-term and highly liquid assets to ensure the availability of funds.

     The principal source of liquidity for Mercer Insurance Group is the net proceeds it retained from the Conversion stock offering, and dividend payments (when allowed by regulators) and other fees received from Mercer Insurance Company or other subsidiaries (but see below the description of the proposed acquisition) . For a period of three years after the Conversion (which took place on December 15, 2003), Mercer Insurance Company may not declare or pay any dividend to Mercer Insurance Group without the approval of the Pennsylvania Insurance Department. After this three-year period, Mercer Insurance Company will be restricted by the insurance laws of Pennsylvania as to the amount of dividends or other distributions it may pay to its holding company. Under Pennsylvania law, there is a maximum amount that may be paid by Mercer Insurance Company during any twelve-month period after notice to, but without prior approval of, the Pennsylvania Insurance Department. This limit is the greater of 10% of Mercer Insurance Company’s statutory surplus as reported on its most recent annual statement filed with the Pennsylvania Insurance Department, or the net income of Mercer Insurance Company for the period covered by such annual statement.

     If the dividend restrictions imposed on Mercer Insurance Company related to the Conversion were not in effect, then as of December 31, 2004, the amounts available for payment of dividends from Mercer Insurance Company in 2005, without the prior approval of the Pennsylvania Insurance Department would have been approximately $6.2 million. Similar restrictions apply to the insurance subsidiaries of Mercer Insurance Company and their ability to pay dividends upstream to it.

     Total assets decreased 4.6%, or $8.4 million to $172.9 million, at March 31, 2005 from December 31, 2004. Cash balances were reduced $5.9 million from December 31, 2004 amounts, to $10.4 million, due to the payment of seasonally higher obligations due in the first quarter, including agent’s profit sharing, reinsurance premiums, employees retirement and bonus plan funding, and other similar items, as well as the repurchase of Company stock during the quarter for $3.2 million. Decreased premium volume (as compared to the fourth quarter of 2004) drove

15

decreases in premium receivables of $1.8 million, or 15.6%, deferred policy acquisition costs of $268,000, or 3.3%, and prepaid reinsurance premiums of $119,000, or 7.6%. Reinsurance receivables increased $953,000, or 37.6%, due principally to a decrease in ceded balances payable. Investments decreased $1.3 million, or 1.0%, to $123.8 million, principally as a result of market value changes. Other assets increased $203,000, or 18.3%, to $1.3 million, principally due to receivables in connection with the sale of investment securities.

     Total liabilities decreased 16.2%, or $5.0 million, in the first quarter of 2005, to $75.8 million. Decreased premium volume is primarily responsible for the decrease in unearned premium reserves of $2.1 million, or 6.1% and the decrease in other reinsurance balances of 203,000 or 23.6%. Loss and loss expense reserves were relatively unchanged from December 31, 2004.

     Total stockholders’ equity decreased by $3.4 million, or 3.4%, due principally to the purchase of treasury stock during the first quarter in the amount of $3.2 million. Unrealized gains on the investment portfolio decreased $1.5 million (after tax), due principally to changes in the value of the Company’s equities portfolio, and retained earnings grew by the amount of net income, or $993,000.

     The Company maintains an ESOP, which purchased 626,111 shares from the Company at the time of the Conversion in return for a note bearing interest at 4% on the principal amount of $6,261,110. Mercer Insurance Company makes annual contributions to the ESOP sufficient for it to make its required annual payment under the terms of the loan from the Company. It is anticipated that approximately 10% of the original ESOP shares will be allocated annually to employee participants of the ESOP. An expense charge will be booked ratably during each year for the shares committed to be allocated to participants that year, determined with reference to the fair market value of the Company’s stock at the time the commitment to allocate the shares is accrued and recognized. The issuance of the shares to the ESOP was fully recognized in the Additional Paid-in Capital account at Conversion, with a contra account entitled Unearned ESOP Shares established in the Stockholders’ Equity section of the balance sheet for the unallocated shares at an amount equal to their original per-share purchase price.

     Mercer Insurance Group, Inc. adopted a stock-based incentive plan at its 2004 annual meeting of shareholders. Pursuant to that plan, Mercer Insurance Group may issue a total of 876,555 shares, which amount will increase automatically each year by 1% of the number of shares outstanding at the end of the preceding year. The fair market value of any common stock used for restricted stock awards will initially represent unearned compensation, and will be amortized ratably. As Mercer Insurance Group accrues compensation expense to reflect the vesting of such shares, unearned compensation will be reduced accordingly. This compensation expense will be deductible for federal income tax purposes upon vesting under current law. During 2004, the Company made grants of 215,000 shares of restricted stock, grants of 173,000 Incentive Stock Options, and grants of 364,700 non-qualified stock options. In 2005, 7,500 shares of restricted stock and 18,500 stock options were forfeited.

     On October 20, 2004, the Company’s Board of Directors authorized the repurchase of up to 250,000 additional shares of its common stock (in addition to the 250,000 share repurchase authorized June 16, 2004 and previously completed). The repurchase of the additional 250,000 shares was completed on March 2, 2005. The repurchased shares will be held as treasury shares available for issuance in connection with Mercer Insurance Group’s 2004 Stock Incentive Plan. In the aggregate, 500,000 shares have been repurchased since the Conversion, at an aggregate cost of $6.3 million, or $12.53 per share, with 2005 purchases totaling $3.2 million, or $13.18 per share.

In connection with a continuing retaliatory tax controversy, in 2003 and 2004 the Company paid an aggregate of $3.2 million, plus interest, to the New Jersey Division of Taxation (the “Division”) in retaliatory tax. The retaliatory tax generally is imposed on foreign insurers when the foreign company’s home state (i.e., its state of incorporation or domicile) has a higher rate of premium tax than the state imposing the tax, in this case New Jersey. The payments were made in response to notices of deficiency issued by the Division to the Company.

16

In conjunction with making such payments, the Company filed notices of protest with the Division with respect to the retaliatory tax imposed. The basis for the protests was that the Division’s imposition of the retaliatory tax was unconstitutional and based on an incorrect interpretation of the law which denied the Company the ability to take advantage of New Jersey’s premium tax cap, which limits the premiums tax to the lesser of the Company’s New Jersey premiums or 12.5 percent of the Company’s total premiums received from both New Jersey and out-of-state policyholders. The protests currently are pending with the Division’s Conferences and Appeals branch.

Concurrent with the processing of the Company’s protests of the retaliatory tax, other foreign insurers have been litigating virtually identical issues in New Jersey courts. On March 9, 2005, the Appellate Division of the New Jersey Superior Court reversed a decision of the New Jersey Tax Court that had sustained the Division’s imposition of the retaliatory tax against a foreign insurer. The Division has since appealed the decision of the Appellate Division to the New Jersey Supreme Court, which must decide whether it will grant the Division’s request to take the case before it decides the substantive issues. The Company expects that the Division’s ruling on the Company’s protest will be based on the ultimate resolution of the case now being appealed to the New Jersey Supreme Court. It is not known how the New Jersey Supreme Court will address this case, and therefore the Company is unable to determine whether all, or any portion, of the retaliatory tax will be refunded. Any such refund would be reduced by related Federal Income Tax. Due to the contingencies involved, the Company has not accrued any refund of the retaliatory tax.

SUBSEQUENT EVENTS

The Company announced on May 2, 2005 that it has signed an Agreement and Plan of Merger for Mercer to acquire all the outstanding stock of Financial Pacific Insurance Group, Inc. for approximately $40.4 million in cash (the press release and agreement were filed on a Form 8-K on May 3, 2005). The transaction will be effected through a merger of a wholly owned subsidiary of Mercer into Financial Pacific. Consummation of the transaction between Mercer and Financial Pacific is subject to regulatory approval.

The acquisition will allow the Company to continue growing its commercial lines segment and to achieve product and geographic diversification through the acquisition of a specialty writer of commercial lines. Financial Pacific currently focuses on four western states and is licensed in another fifteen states outside the Company’s present focus areas.

As of and for the year ended December 31, 2004, Financial Pacific reported GAAP stockholders’ equity of $35.4 million, operating income of $4.6 million and net income of $5.9 million. In 2004, Financial Pacific generated approximately $107 million of direct premiums primarily in California, Nevada, Oregon and Arizona through approximately 300 independent agents.

IMPACT OF INFLATION

     Inflation increases an insured’s need for property and casualty insurance coverage. Inflation also increases the cost of claims incurred by property and casualty insurers as property repairs, replacements and medical expenses increase. These cost increases reduce profit margins to the extent that rate increases are not implemented on an adequate and timely basis. We establish property and casualty insurance premiums levels before the amount of losses and loss expenses, or the extent to which inflation may affect these expenses, are known. Therefore, our insurance companies attempt to anticipate the potential impact of inflation when establishing rates. Because inflation has remained relatively low in recent years, financial results have not been significantly affected by inflation.

17

     Inflation also often results in increases in the general level of interest rates, and, consequently, generally results in increased levels of investment income derived from our investments portfolio, although increases in investment income will generally lag behind increases in loss costs caused by inflation.

OFF BALANCE SHEET COMMITMENTS AND CONTRACTUAL OBLIGATIONS

     The Company was not a party to any unconsolidated arrangement or financial instrument with special purpose entities or other vehicles at March 31, 2005 which would give rise to previously undisclosed market, credit or financing risk.

     The Company and its subsidiaries have no significant contractual obligations at March 31, 2005, other than its insurance obligations under its policies of insurance. Projected cash disbursements pertaining to these insurance obligations have not materially changed since December 31, 2004, and the Company expects to have the cash to pay these obligations as they come due.

18

Item 6. Exhibits

     Exhibits

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

SIGNATURES

     In accordance with the requirements of the Exchange Act, the Registrant caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized.

	MERCER INSURANCE GROUP, INC. (Registrant)
Dated: January 11, 2006	By:	/s/ Andrew R. Speaker
		Andrew R. Speaker,
		President and Chief Executive Officer

Dated: January 11, 2006	By:	/s/ David B. Merclean
		David B. Merclean,
		Chief Financial Officer

19

EX-31.1

Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

CERTIFICATION

I, Andrew R. Speaker, President and Chief Executive Officer of Mercer Insurance Group, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mercer Insurance Group, Inc., as amended;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

20

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   January 11, 2006	/s/ Andrew R. Speaker
	Andrew R. Speaker
	President and Chief Executive Officer

21

EX-31.2

Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

CERTIFICATION

I, David B. Merclean, Senior Vice President and Chief Financial Officer of Mercer Insurance Group, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mercer Insurance Group, Inc., as amended;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   January 11, 2006	/s/ David B. Merclean
	David B. Merclean
	Senior Vice President and Chief Financial Officer

22

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Mercer Insurance Group, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission and amended on the date hereof (the “Report”), I, Andrew R. Speaker, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   January 11, 2006	/s/ Andrew R. Speaker
	Andrew R. Speaker
	President and Chief Executive Officer

23

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Mercer Insurance Group, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission and amended on the date hereof (the “Report”), I, David B. Merclean, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   January 11, 2006	/s/ David B. Merclean
	David B. Merclean
	Senior Vice President and Chief Financial Officer

24