<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MERCHANTS GROUP, INC.
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(Name of Issuer)
COMMON STOCK, $.01 par value
-----------------------------------------
(Title of Class of Securities)
588539-10-6
--------------
(CUSIP Number)
Robert M. Zak
Merchants Mutual Insurance Company
250 Main Street
Buffalo, New York 14202 (716) 849-3380
-----------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 25, 1998
---------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [X]
This Document contains 12 Pages.
<PAGE> 2
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CUSIP No. 588539-10-6 SCHEDULE 13D PAGE 2 OF 12 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Merchants Mutual Insurance Company (16-0550140)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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NUMBER OF 7 SOLE VOTING POWER
SHARES 255,000
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BENEFICIAL- 8 SHARED VOTING POWER
LY OWNED
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BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 255,000
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PERSON 10 SHARED DISPOSITIVE POWER
WITH
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
255,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW(11) EXCLUDES CERTAIN
SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW(11)
8.7%
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14 TYPE OF REPORTING PERSON*
IC
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<PAGE> 3
SCHEDULE 13D
MERCHANTS GROUP, INC.
---------------------
ITEM 1. SECURITY AND ISSUER.
This statement relates to the shares of Common Stock, $.01 par value
per share ("Shares"), of Merchants Group, Inc., a Delaware
corporation (the "Issuer"). The address of the Issuer's principal
executive offices is 250 Main Street, Buffalo, New York 14202.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is filed on behalf of Merchants Mutual Insurance
Company, a New York domiciled mutual property and casualty insurance
company ("Mutual"). The address of Mutual's principal office is 250
Main Street, Buffalo, New York 14202.
Mutual acquired its Shares of the Issuer prior to November 1986. In
November 1996 the Issuer completed its initial public offering.
Mutual filed a Schedule 13G with the Securities and Exchange
Commission ("SEC") on February 13, 1987, reporting its ownership of
1,155,000 Shares of Issuer, which represented 57.6% of Issuer's
issued and outstanding Shares as of December 31, 1986. As a result
of the sale by Mutual of 900,000 Shares and the sale by the Issuer
of an additional 950,000 Shares in a public offering in June 1993
which was registered with the SEC, Mutual filed Amendment No. 1 to
its Schedule 13G with the SEC on July 6, 1993, reporting its reduced
ownership of 255,000 Shares of Issuer, which represented 8.4% of
Issuer's issued and outstanding Shares at that time. Mutual has not
acquired or disposed of any Shares since the filing of Amendment No.
1 to its Schedule 13G on July 6, 1993. Mutual is filing this
Schedule 13D to update the information contained in Item 4 relating
to in the purpose for which it holds the Shares (see Item 4. Purpose
of Transaction).
Item 2 information with respect to the directors and executive
officers of Mutual is contained in Attachment A hereto, which is
incorporated herein by this reference. Mutual and its executive
officers and directors are sometimes hereinafter collectively re-
ferred to as the "Reporting Persons."
During the last five years, none of the Reporting Persons has (i)
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jur-
isdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Each of the individual Reporting Persons is a citizen of the United
States, except for Kurt Wiedenhaupt who is a German citizen.
<PAGE> 4
NOTE: Nothing in this Statement shall be construed as a statement
or admission that the Reporting Persons, or any of them, (i)
are acting as a group in the acquisition, disposition or
holding of Shares, (ii) collectively constitute a "person"
within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Act"), or (iii) for
the purposes of Section 13(d) of the Act, are the beneficial
owners of any Shares other than those Shares in which each
person is specifically identified in this Statement to have
a beneficial ownership.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Reference is made to Item 5 below.
ITEM 4. PURPOSE OF TRANSACTION.
The business and day-to-day operations of the Issuer and its
wholly-owned subsidiary, Merchants Insurance Company of New
Hampshire, Inc. ("MNH"), 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 Issuer and MNH. Prior to
November 1986 MNH was a wholly-owned subsidiary of Mutual.
Following the Issuer's initial public offering in November 1986
until a secondary stock offering in July 1993 the Issuer was a
majority-owned subsidiary of Mutual. Mutual currently owns 8.8% of
the Issuer. Under the Management Agreement dated September 29,
1986, Mutual provides the Issuer and MNH with all facilities and
personnel to operate their business. The only officers of the
Issuer or MNH who are paid full time employees are employees of the
Mutual whose services are provided to the Issuer and MNH by Mutual
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 close relationship among the companies.
From time to time the Directors of the Issuer and Mutual have
discussed possible changes in the relationship among the three
companies for the purposes of improving their insurance operations
and reducing the instances where there might be conflicts between
MNH and Mutual. To date, none of these discussions has resulted in
any agreements or in any change in the relationship.
On March 25, 1998, Mutual informed the Issuer's Board of Directors
that Mutual is considering whether it would be in its best interest
to purchase all or substantially all of the stock of the Issuer or
MNH, and that Mutual has retained an investment banking firm and
independent legal counsel to assist it in determining whether such a
proposal is advisable and, if so, whether Mutual could obtain
regulatory approvals and financing for any such proposal. To date,
Mutual has not presented any such proposal to the Issuer, and there
can be no assurance that Mutual will present any proposal to
<PAGE> 5
the Issuer or as to whether Mutual would be able to secure the
financing and regulatory approvals necessary to complete any such
proposal.
Subject to the preceding paragraph, the Reporting Persons do not
have any present plans or proposals that relate to or would result
in: (i) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets
of the Issuer or any of its subsidiaries; (iii) any change in the
present Board of Directors or management of the Issuer, including
any plans or proposals to change the number or term of Directors or
to fill any existing vacancies on the Board; (iv) any material
change in the present capitalization or dividend policy of the
Issuer; (v) any other material change in the Issuer's business or
corporate structure; (vi) changes in the Issuer's Certificate of
Incorporation, By-Laws or instruments corresponding thereto or other
actions which may impede the acquisition of control of the Issuer by
any person; (vii) causing a class of securities of the Issuer to
cease to be listed on a national securities exchange; (viii) a class
of equity securities of the Issuer becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended; or (ix) any action similar to any
of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As of the date hereof, Mutual owns 255,000 Shares (8.7% of the
class), all of which were acquired prior the Issuer's initial public
offering in November 1986. Mutual has sole voting and sole
dispositive power with respect to all of those Shares. Mutual has
not acquired or disposed of any Shares during the past 60 days.
Mutual's cost basis in its Shares is $2,474,439.
The table below sets forth the number of Shares owned by each
Director and each executive officer of Mutual who own Shares and the
amount used to acquire their Shares. Each person acquired their
Shares with personal funds. No Director or executive officer of
Mutual has acquired or disposed of any Shares during the past 60
days. Each individual listed has sole voting and sole dispositive
power with respect to the Shares owned, unless otherwise indicated.
Mutual disclaims any beneficial interest in the Shares owned by
each individual listed below.
<TABLE>
<CAPTION>
Number of
Name Shares Owned %(1) Amount Paid
---- ------------ ---- -----------
Directors:
- ----------
<S> <C> <C> <C>
Randall L. Clark 1,000 .03% $10,500.00
Margaret N. Kafka 4,400(2) .15% 27,600.00
Ross B. Kenzie 2,526 .09% 25,399.00
Robert M. Zak 18,460(3) .63% 79,086.57
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Number of
Name Shares Owned %(1) Amount Paid
---- ------------ ---- -----------
Officers:
- ---------
<S> <C> <C> <C>
Kenneth J. Wilson 800 .03% 15,312.49
Fred A. Hildebrand 4,400(4) .15% 12,625.00
Edward M. Murphy 7,850(5) .27% 45,684.97
<FN>
(1) The percentages are based upon the number of Shares indicated as
outstanding in the Issuer's Form 10-Q for the quarter ended September 30,
1997 (2,908,202) plus any Shares such person has the right to acquire
within 60 days of the date of this Schedule 13D under the Merchants Group,
Inc. 1986 Stock Option Plan, as amended (the "Option Plan").
(2) Includes 2,000 Shares that Ms. Kafka has the right to acquire under the
Option Plan within 60 days of the date of this Schedule 13D.
(3) Includes 12,750 Shares that Mr. Zak has the right to acquire under the
Option Plan within 60 days of the date of this Schedule 13D and 1,110
Shares held by the Merchants Mutual Supplemental Executive Retirement Plan
for the benefit of Mr. Zak.
(4) Includes 3,750 Shares that Mr. Hildebrand has the right to acquire under
the Option Plan within 60 days of the date of this Schedule 13D.
(5) Includes 5,000 Shares that Mr. Murphy has the right to acquire under the
Option Plan within 60 days of the date of this Schedule 13D and 250 Shares
held by his spouse, in which he disclaims beneficial ownership.
</TABLE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Not applicable.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Not applicable.
<PAGE> 7
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
DATED: March 31, 1998
MERCHANTS MUTUAL INSURANCE COMPANY
By: /s/ ROBERT M. ZAK
-----------------------------------
Robert M. Zak
President
<PAGE> 8
ATTACHMENT A
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ITEM 2. IDENTITY AND BACKGROUND.
DIRECTORS AND EXECUTIVE OFFICERS OF
MERCHANTS MUTUAL INSURANCE COMPANY
I. DIRECTORS
<TABLE>
<CAPTION>
Principal Occupation and Business
Directors and Addresses Director Since Experience for Past Five Years
- ----------------------- -------------- ------------------------------
<S> <C> <C>
Franklyn S. Barry, Jr. November 17, 1982 President of Hemex, Inc. (a medical device
22 Penhurst Park company) from 1997 - present; Investor
Buffalo, NY 14222 from 1993-1997; Chairman and Chief
Executive Officer of Sheridan Infant
Products, Inc. (infant accessory manu-
facturing) from 1991 to 1993.
Randall L. Clark November 20, 1985 Chairman of the Board of Directors of
177 Halston Parkway Mutual since May 1997; Chairman, Dunn
East Amherst, NY 14051 Tire Corp. (retail auto/truck tire sales and
repair) since April 1996; Executive Vice-
President of Pratt & Lambert, Inc. (manu-
facturer of architectural finishes and
chemical specialties) from 1992 to February 1996.
Linda P. Duch December 17, 1997 An Executive Officer of KeyBank National
KeyBank National Association Association (a national banking association)
50 Fountain Plaza, 4th Floor from September 1992 to present.
Buffalo, NY 14202
John T. Hoskins May 15, 1996 Chairman and Chief Executive Officer of
Curtis Screw Co., Inc. Curtis Screw Co., Inc. (a manufacturer
1130 Niagara Street of custom components) for more than
Buffalo, NY 14213 five years.
Margaret N. Kafka July 26, 1995 Vice-President -- Corporate Services of
Merchants Mutual Mutual and MNH since 1989.
Insurance Company
250 Main Street
Buffalo, NY 14202
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Principal Occupation and Business
Directors and Addresses Director Since Experience for Past Five Years
- ----------------------- -------------- ------------------------------
<S> <C> <C>
Bernard J. Kennedy May 21, 1986 President of National Fuel Gas Company
National Fuel Gas Company since 1987.
10 Lafayette Square
Buffalo, NY 14203
Ross B. Kenzie July 20, 1982 Retired Chairman and Chief Executive
Cyclorama Building Officer of Goldome (a diversified banking
Suite 100 company) since 1989.
369 Franklin Street
Buffalo, NY 14202
Brian J. Lipke July 23, 1997 President and Chief Executive Officer of
Gibraltar Steel Corp. Gibraltar Steel Corp.(a processor of value
3556 Lake Shore Road added steel products) since 1983.
Buffalo, NY 14219
Frank J. McGuire August 22, 1984 Chairman of The McGuire Group (real
The McGuire Group estate and health care facility ownership,
1827 Seneca Street development and operation) since 1990.
Buffalo, NY 14210
Dr. Muriel A. Moore May 21, 1997 President of Buffalo State College since
Buffalo State College April 1996; Vice President - Public Service
1300 Elmwood Avenue and Urban Affairs of the State University
Buffalo, NY 14222 of New York at Buffalo from 1992 to 1996.
Bryant H. Prentice, III March 22, 1995 Chairman and Chief Executive Officer of
Bryant & Stratton Schools Bryant and Stratton Schools for more than
40 North Street, 2nd Floor five years.
Buffalo, NY 14202
Kurt Wiedenhaupt August 23, 1995 Chairman of the Board, President and Chief
American Precision Executive Officer of American Precision
Industries Inc. Industries Inc. (a diversified manufacturing
2777 Walden Avenue company which produces high quality
Buffalo, NY 14225 products for the heat transfer,
motion control and electronic components
industries) since 1992.
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Principal Occupation and Business
Directors and Addresses Director Since Experience for Past Five Years
- ----------------------- -------------- ------------------------------
<S> <C> <C>
Robert M. Zak December 31, 1990 President and Chief Executive Officer of
Merchants Insurance Group Mutual and MNH since November 1, 1995;
250 Main Street Chief Operating Officer of Mutual and MNH
Buffalo, NY 14202 from June 30, 1995 to October 31, 1995;
Chief Operating Officer of MGI since
June 30, 1995; Chief Financial Officer of
Mutual, MNH and MGI from 1991 through 1996
Senior Vice-President of Mutual and MNH
from 1992 to 1995; Senior Vice-President of
MGI since 1992; Secretary from 1990 to
1995 and Treasurer from 1988 to 1996 of
Mutual and MNH; Secretary since 1990
and Treasurer from 1988 to 1996 of .
MGI.
</TABLE>
<PAGE> 11
II. EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name, Position and Principal Occupation and Business Experience
Tenure with Mutual for Past Five Years
- ------------------ -------------------
<S> <C>
Randall L. Clark Chairman of the Board of Mutual since May 1997;
Chairman of the Board Chairman, Dunn Tire Corp. (retail auto/truck tire sales and
1997 repair) since April 1996; Executive Vice President of Pratt
& Lambert, Inc. (manufacturer of architectural finishes and
chemical specialties) from 1992 to February 1996.
Robert M. Zak President and Chief Executive Officer of Mutual and
President, Chief Executive MNH since November 1, 1995; Chief Operating Officer of
Officer and Treasurer Mutual and MNH from June 30, 1995 to October 31,
1985 1995; Chief Operating Officer of MGI since June 30, 1995;
Chief Financial Officer of Mutual, MNH and MGI
from 1991 to 1996; Senior Vice-President of Mutual
and MNH from 1992 to 1995; Senior Vice-President of
MGI since 1992; Secretary from 1990 to 1995 and
Treasurer from 1988 to 1996 of Mutual and MNH; Secretary
since 1990 and Treasurer from 1988 to 1996 of Issuer.
Kenneth J. Wilson Chief Financial Officer and Vice President of Mutual,
Chief Financial Officer and MNH and MGI since December 30, 1996; President and
Vice President Chief Executive Officer of Empire of America Realty
1996 Credit Corp. (mortgage banking) from January 1995 to
December 1996; Chief Financial Officer of Empire of
America Realty Credit Corp. from November 1992 to
November 1995.
Fred A. Hildebrand Senior Vice-President -- Regional Operations of the
Senior Vice-President -- Registrant and MNH since 1996; Vice-President -- Sales
Regional Operations and Marketing of Northwestern National Insurance Group
1996 (property and casualty insurance) from 1989 to 1996.
Margaret N. Kafka Vice-President -- Corporate Services of Mutual and MNH
Vice-President -- since January 1989.
Corporate Services
1968
Edward M. Murphy Secretary of Mutual and MNH since November 1,
Vice-President -- 1995; Vice-President -- Investments of Mutual, MGI
Investments, Secretary and MNH since 1991.
1985
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
Name, Position and Principal Occupation and Business Experience
Tenure with Mutual for Past Five Years
- ------------------ -------------------
<S> <C>
William J. Nagy Vice-President -- Process Improvement of Mutual
Vice-President -- and MNH since April 1997; Vice-President -- Claims
Process Improvement Operations of Mutual and MNH from 1995 to 1997;
1995 Director, Field Operations, AAA Michigan Auto Club
Insurance Association from 1992 to 1994.
Robert H. Fagerburg Vice-President -- Claims Operations of Mutual and
Vice-President -- MNH since April 1997; Vice-President -- Claims of the
Claims Operations Silvey Companies from 1990 to 1997.
1997
Thomas B. Harris Vice-President -- Underwriting of Mutual and MNH
Vice-President -- since May 1997; Vice-President -- Underwriting and
Underwriting Product Development of Universal Underwriters Group
1997 from 1993 to 1996.
Clark M. Sykes Vice-President -- Information Technology of Mutual and
Vice-President -- MNH since 1993; Senior Project Executive of IBM
Information Technology Corporation from 1992 to 1993.
1993
</TABLE>
Each of the executive officers of Mutual has a business address at 250 Main
Street, Buffalo, NY. 14202.
