FARM FAMILY HOLDINGS INC, POS AM, 1996-05-24

FARM FAMILY HOLDINGS INC
POS AM, 1996-05-24

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996
REGISTRATION NO. 333-4446
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------

POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------

FARM FAMILY HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 6719 14-1789227
(State or other
jurisdiction of
incorporation or
organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer
Identification Number)

FARM FAMILY HOLDINGS, INC.
P.O. BOX 656
ALBANY, NY 12201-0656
(518) 431-5000

(Address, including zip code, and telephone number, including area code, of
Registrant's principal offices)

------------

VICTORIA M. STANTON
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
FARM FAMILY HOLDINGS, INC.
P.O. BOX 656
ALBANY, NY 12201-0656
(518) 431-5000

(Name, address, including zip code, and telephone number, including area code,
of agents for service)
------------
Copies to:
LARS BANG-JENSEN PETER J. GORDON
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. SIMPSON THACHER & BARTLETT
125 WEST 55TH STREET 425 LEXINGTON AVENUE
NEW YORK, NY 10019 NEW YORK, NY 10017
(212) 424-8000 (212) 455-2000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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<PAGE>

FARM FAMILY HOLDINGS, INC.
(CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS IN FORM S-1)

<TABLE>
<CAPTION>
FORM S-1 ITEM LOCATION IN PROSPECTUS
------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of Facing Page; Cross Reference
Prospectus............................... Sheet; Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back
of Prospectus............................ Cover Pages of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Outside Front Cover Page of
Prospectus; Prospectus Summary;
Risk Factors; The Company;
Business
4. Use of Proceeds.......................... Prospectus Summary; Use of
Proceeds
5. Determination of Public Offering Price... Outside Front Cover Page of
Prospectus; Prospectus Summary;
The Reorganization;
Underwriting
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Outside Front Cover Page of
Prospectus; Prospectus Summary;
The Reorganization;
Underwriting
9. Description of Securities to be Prospectus Summary; Risk
Registered............................... Factors; The Reorganization;
Option to Acquire Life Company;
Description of Capital Stock;
Underwriting
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to the Outside Front Cover Page of
Registrant............................... Prospectus; Prospectus Summary;
Risk Factors; The Company; The
Reorganization; Option to
Acquire Life Company; Dividend
Policy; Capitalization;
Selected Consolidated Financial
Data; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business;
Management; Certain
Relationships and Related
Transactions; Stock Ownership
of Management; Description of
Capital Stock; Shares Eligible
for Future Sale; Schedules
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
</TABLE>

<PAGE>

SUBJECT TO COMPLETION

, 1996
PROSPECTUS

SHARES
FARM FAMILY HOLDINGS, INC.
COMMON STOCK
($.01 PAR VALUE)

All of the shares of Common Stock (the "Common Stock") of Farm Family Holdings,
Inc., a Delaware corporation (the "Holding Company"), offered hereby (the
"Shares") are being offered by the Holding Company (the "Public Offering"). The
Shares constitute some or, if the over-allotment option is exercised in full,
all of the shares of Common Stock that were not subscribed for in a
subscription offering that expired on June 12, 1996 (the "Subscription
Offering," and together with the Public Offering, the "Offerings"). The Holding
Company received subscriptions at $21.00 per share (the "Subscription Price")
for shares of Common Stock in the Subscription Offering (the
"Subscription Shares").

The Shares are being offered in connection with a plan of reorganization and
conversion (the "Plan") pursuant to which Farm Family Mutual Insurance Company
("Farm Family Mutual") will convert from a New York mutual property and
casualty insurance company to a New York stock property and casualty insurance
company and become a wholly owned subsidiary of the Holding Company (the
"Reorganization," as defined herein). In addition to the Shares and the
Subscription Shares, at least 2,244,044 shares of Common Stock will be issued
in the Reorganization to Subscription Policyholders and Participating Surplus
Note Holders (as such terms are defined herein) in exchange for certain of
their existing interests in Farm Family Mutual. The Subscription Shares were
offered to Subscription Policyholders and Participating Surplus Note Holders in
accordance with the preemptive rights provided to them under the Plan. See "The
Reorganization."

Prior to the earlier of (i) the Public Offering or (ii) the effective date of
the Reorganization (the "Effective Date"), there will be no public market for
the Common Stock of the Holding Company.

It is currently anticipated that the price to public in the Public Offering
(the "Public Offering Price") will be in the range of $ to $ per Share. See
"Underwriting" for information relating to the factors considered in
determining the Public Offering Price. Generally, if the Public Offering Price
is less than the Subscription Price, the number of Subscription Shares to be
issued to subscribers in the Subscription Offering will be increased, and if
the Public Offering Price is greater than the Subscription Price, subscribers
for Subscription Shares in the Subscription Offering will not be required to
pay any additional amounts for such shares, nor will there be any adjustment in
the number of Subscription Shares issued to them. As a result, the Public
Offering Price may be greater than the effective price per share for
subscribers in the Subscription Offering. See "The Reorganization--Subscription
Offering and Public Offering."

The Common Stock has been approved for listing on the New York Stock Exchange
under the symbol "FFH," subject to official notice of issuance.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
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<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(2)...................................... $ $ $
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</TABLE>

(1) Before deducting expenses of the Public Offering payable by the Holding
Company, estimated to be $ .

(2) The Holding Company has granted the Underwriters an option, exercisable
within 30 days after the date hereof, to purchase up to an aggregate of
additional shares of Common Stock at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discount and Proceeds to the Holding Company will be $ , $ and $ ,
respectively. See "Underwriting."

The Shares are offered subject to receipt and acceptance by the Underwriters,
to prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1996.

- -----------------------

SALOMON BROTHERS INC
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The date of this Prospectus is , 1996.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>

IN CONNECTION WITH THE PUBLIC OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

----------------

After the consummation of the Reorganization, the Holding Company will be
the holding company of a wholly owned New York insurance company subsidiary.
The laws of the State of New York will prohibit any person from acquiring
control of the Holding Company, and thus indirect control of such subsidiary,
without the prior approval of the New York Superintendent of Insurance (the
"Superintendent"). Control will be presumed to exist where any person,
directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing 10% or more of the outstanding voting stock of the
Holding Company, unless the Superintendent, upon application, determines
otherwise.

----------------

THE NEW YORK STATE INSURANCE DEPARTMENT RECOGNIZES ONLY STATUTORY ACCOUNTING
PRACTICES FOR DETERMINING AND REPORTING THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF AN INSURANCE COMPANY, FOR DETERMINING ITS SOLVENCY UNDER THE NEW
YORK INSURANCE LAW, AND FOR DETERMINING WHETHER ITS FINANCIAL CONDITION
WARRANTS THE PAYMENT OF A DIVIDEND TO ITS STOCKHOLDERS. NO CONSIDERATION IS
GIVEN BY THE DEPARTMENT TO FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN MAKING SUCH DETERMINATIONS.

----------------

FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.

----------------

AVAILABLE INFORMATION

The Holding Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations promulgated thereunder, with respect to
the shares of Common Stock offered in the Subscription Offering. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement. For
further information with respect to the Holding Company and the shares of
Common Stock offered hereby, reference is made to the Registration Statement.
Any interested party may inspect the Registration Statement, without charge,
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 at prescribed rates. The statements or descriptions herein
concerning any agreement or other document referred to herein are summaries
only. Where such agreement or other document is an exhibit to the Registration
Statement, reference is made to such exhibit for a full statement of the
provisions thereof.

The Holding Company is not currently subject to the information reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). As a result of the Reorganization, the Holding Company will become
subject to the information reporting requirements of the Exchange Act. The
Holding Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent
certified public accountants.

2
<PAGE>

PROSPECTUS SUMMARY

Pursuant to the Plan, Farm Family Mutual will convert from a New York mutual
property and casualty insurance company to a New York stock property and
casualty insurance company, Farm Family Casualty Insurance Company ("FFCIC"),
and become a wholly owned subsidiary of the Holding Company. Following the
Reorganization, the only significant assets of the Holding Company will be the
capital stock of FFCIC acquired in the Reorganization and the net proceeds of
the Offerings retained by the Holding Company and not contributed to FFCIC. See
"The Reorganization." The Holding Company has an option to acquire Farm Family
Life Insurance Company, a New York stock life insurance company (the "Life
Company"). See "Option to Acquire Life Company." For purposes of this
Prospectus, the terms "Farm Family" and the "Company" refer, at all times prior
to the Effective Date, to Farm Family Mutual and its subsidiaries, including
the Holding Company, and at all times on and after the Effective Date, to the
Holding Company and its subsidiaries, including FFCIC. The term "FFCIC" refers
to Farm Family Mutual before the Effective Date and FFCIC on and after the
Effective Date.

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. All financial information set forth
herein is presented in accordance with generally accepted accounting principles
("GAAP"), unless otherwise noted. See "Glossary of Selected Insurance Terms"
for definitions of certain items used in this Prospectus.

THE COMPANY

Farm Family is a specialized property and casualty insurer of farms, other
generally related businesses and residents of rural and suburban communities
principally in the Northeastern United States. Established in 1955 to meet
certain insurance needs of Farm Bureau(R) members in the Northeast, the Company
provides flexible, multi-line packages of insurance for those engaged in
agricultural pursuits, as well as automobile, commercial
general liability, workers' compensation, umbrella liability, businessowners,
homeowners and other insurance products to rural and suburban policyholders in
ten states. Life insurance products are also sold to many of these customers by
the Life Company, an affiliate of Farm Family owned by Farm Bureau
organizations.

The Company believes that the distinctive focus of Farm Family and its agents
on meeting the specialized insurance needs of rural communities has provided
the Company with the knowledge and experience to adapt to changes in the
demographics of its markets and in the nature of agricultural related
businesses. In addition to insuring those engaged in agricultural pursuits such
as dairy, vegetable and fruit farming, the Company insures a wide range of
other businesses related to agriculture, such as distributors of agricultural
products, horse breeding and training facilities, landscapers, nurseries,
florists, wineries and growers of specialty products. In recent years, the
Company has also introduced businessowners products for certain retail and
contractor businesses and for owners of apartment and office buildings, as well
as a homeowners product.

The Company markets its insurance products through more than 200 Farm Family
agents and field managers, who are located in the rural and suburban
communities served by the Company. These agents generally sell insurance
products only for the Company and the Life Company. The Company believes that
Farm Family's name recognition, policyholder loyalty and policyholder
satisfaction with agent relationships and claim service, as well as its Farm
Bureau relationship, are important considerations in new customer referrals,
cross-selling of additional insurance products and policyholder retention.

3
<PAGE>

to leverage its local reputation, agency force, knowledge and experience to
expand its product offerings to a wider variety of customers in rural and
suburban communities. In addition, the Company will continue to seek to
facilitate and expedite sales, underwriting and policy administration functions
through the expanded use of local service centers and computer networking
communications with the home office.

The Company believes that its ability to adapt to changes in its targeted
markets is demonstrated by the growth of its earned premiums over the past five
years from approximately $85.3 million in 1991 to $116.9 million in 1995, an
increase of $31.6 million, or 37.1%. Total assets and policyholders' equity as
of March 31, 1996 were $276.7 million and $71.1 million, respectively. As of
March 31, 1996, approximately 96.1% of the Company's cash and invested assets
consisted of investment grade securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Investments."

Farm Family is closely affiliated with the Farm Bureaus in the ten states in
which the Company operates (collectively, the "Farm Bureaus"). Farm Family has
the exclusive endorsement of the Farm Bureaus to market property and casualty
insurance in these states. Farm Family was originally organized through the
efforts of certain of these Farm Bureaus, and substantially all of the
directors of the Company are associated with Farm Bureau organizations in the
Northeast. The Farm Bureaus are non-profit agricultural organizations that are
affiliated with the American Farm Bureau Federation, the nation's largest
general farm organization with over four million members. The Farm Bureaus have
traditionally sought to advance the interests of the agricultural community. As
a matter of policy, which the Company plans to continue after the Effective
Date, and as set forth in FFCIC's bylaws, membership in state or county Farm
Bureau organizations is generally a prerequisite for the issuance or renewal of
any policy by FFCIC except in the case of policies issued in the residual
market or to employees of the Company and its affiliates. Potential
policyholders not engaged in agricultural businesses can generally purchase
associate memberships in the Farm Bureaus. As of March 31, 1996, approximately
70% of the over 70,000 Farm Bureau members in the ten states in which the
Company operates had policies issued by FFCIC. See "Risk Factors--Relationships
with Farm Bureaus and Life Company; Potential Conflicts of Interest,"
"Business--Relationship with Farm Bureaus" and "Certain Relationships and
Related Transactions."

THE REORGANIZATION

On February 14, 1996, the Board of Directors of FFCIC (the "FFCIC Board")
adopted the Plan, pursuant to Section 7307 of the New York Insurance Law,
whereby Farm Family Mutual will convert from a mutual property and casualty
insurance company to a stock property and casualty insurance company and become
a wholly owned subsidiary of the Holding Company (the "Reorganization"). The
Plan was amended by the FFCIC Board on April 23, 1996 to effect certain minor
modifications, primarily of a technical and clarifying nature. The principal
purposes of the Reorganization are to improve the Company's access to the
capital markets and to raise capital to permit FFCIC to expand and develop its
business in the rural and suburban areas in which FFCIC currently operates.
Under the Plan, Eligible Policyholders (as defined in the Plan) will receive
either shares of Common Stock of the Holding Company or cash based on the
amount of net premiums they have paid to Farm Family Mutual during the three-
year period preceding November 1, 1995. In addition, holders of Surplus Notes
(as defined herein) electing to surrender such notes in the Reorganization will
receive shares of Common Stock or cash in exchange for such notes based on the
principal amount of the Surplus Notes outstanding on the Effective Date plus
accrued and unpaid interest thereon. The Plan provides that if the Public
Offering closes on the Effective Date, Eligible Policyholders allocated fewer
than 25 shares of common stock of FFCIC ("FFCIC Common Stock") under the Plan
will receive cash in lieu of shares of Common Stock. The Plan also provides
that if the Public Offering does not close on the Effective Date, such Eligible
Policyholders may receive cash or shares of Common Stock at the election of the
Company. The Company may borrow funds from a bank or other unaffiliated lender
for the purpose of making such cash payments to Eligible Policyholders
allocated fewer than 25 shares of FFCIC Common Stock if the Public Offering
does not close on the Effective Date.

4
<PAGE>

Following a public hearing on the Plan on April 2, 1996, the Superintendent
issued an opinion and decision approving the Plan on May 1, 1996, upon finding
that the Plan does not violate the New York Insurance Law, is not inconsistent
with law, is fair and equitable and is in the best interests of the
policyholders of FFCIC and the public. On June 17, 1996, the Plan was approved
by the policyholders of Farm Family Mutual voting on the Plan at a special
meeting of policyholders (the "Special Meeting"). On the date hereof, the
effectiveness of the Plan is contingent upon (i) the FFCIC Board declaring the
Plan effective and (ii) the opinion of the Company's special tax counsel as
originally delivered in connection with the Plan being confirmed as of the
Effective Date. The Plan provides that the Effective Date shall be such date as
is determined by the FFCIC Board, which may not be later than 180 days after
the date of the Special Meeting without the approval of the Superintendent.

The Plan provides that each Eligible Policyholder that will be issued shares
of Common Stock in the Reorganization (a "Subscription Policyholder") and each
holder of a Surplus Note that elected to receive shares of Common Stock in the
Reorganization (a "Participating Surplus Note Holder") generally will have, for
a period of three years following the Effective Date, a preemptive right to
purchase a proportionate amount of any new issue of shares of Common Stock of
the Holding Company. Pursuant to the Plan, 3,000,000 shares of Common Stock
were offered to Subscription Policyholders and Participating Surplus Note
Holders in the Subscription Offering prior to the Public Offering made through
this Prospectus. The Subscription Offering expired on June 12, 1996.
Subscription Shares were subscribed for in the Subscription Offering at the
Subscription Price of $21.00 per share by Subscription Policyholders and
Participating Surplus Note Holders who exercised their preemptive rights under
the Plan. Generally, if the Public Offering Price is less than the Subscription
Price, the effective price per share paid by subscribers for Subscription
Shares in the Subscription Offering shall be the Public Offering Price and
additional shares of Common Stock will be issued to such subscribers to offset
the effect of such price difference, and if the Public Offering Price is
greater than the Subscription Price, subscribers for Subscription Shares in the
Subscription Offering will not be required to pay any additional amounts for
such shares, nor will there be any adjustment in the number of Subscription
Shares issued to them. shares of Common Stock not subscribed for in the
Subscription Offering are being offered to the public in the Public Offering
made through this Prospectus. The Board of Directors of the Holding Company
(the "Holding Company Board") may, at any time prior to the Effective Date,
elect to cancel or rescind the Subscription Offering, and consequently not to
hold the Public Offering, without withdrawing the Plan. See "The
Reorganization."

RELATIONSHIP WITH LIFE COMPANY; OPTION AGREEMENT

The Life Company was established in 1953 by certain Farm Bureaus to provide
life insurance products for Farm Bureau members principally in the Northeast.
All of the issued and outstanding shares of capital stock of the Life Company
are owned by Farm Bureau organizations and their affiliates in the Northeast.
Substantially all of the directors and executive officers of the Company are
also directors and executive officers of the Life Company. In addition, most of
the Company's agents and employees also perform similar functions for the Life
Company.

While Farm Family Mutual and the Life Company considered the possibility, as
part of the Reorganization, of bringing these two companies under a common
ownership structure, the achievement of such common ownership prior to the
Effective Date was not practical due, in part, to the difficulty of valuing the
Life Company. The Life Company's financial statements are currently prepared
only in accordance with statutory principles prescribed or permitted by the
Insurance Department of the State of New York (the "New York Insurance
Department"). The Company believes that such financial statements do not
provide an adequate basis to determine an appropriate fair market valuation for
the Life Company. Financial statements prepared according to GAAP for the Life
Company are not expected to be available until after the Effective Date. The
Holding Company has entered into the Option Purchase Agreement, dated February
14, 1996, with the shareholders of the Life Company (the "Option Purchase
Agreement"), pursuant to which the Holding Company has, for a two-

5
<PAGE>

year period commencing on the Effective Date, the option to acquire the Life
Company in exchange for shares of the Holding Company's capital stock, subject
to certain conditions, which include the approval by the stockholders of the
Holding Company and applicable regulatory authorities. The exercise price under
the Option Purchase Agreement will be payable by the Holding Company to the
Life Company shareholders in shares of Common Stock and, at the option of such
shareholders, in up to $6 million stated value of shares of Series A Preferred
Stock (as defined herein). There will be no preemptive rights with respect to
any shares of capital stock of the Holding Company issued to shareholders of
the Life Company upon exercise of the Option Purchase Agreement. If the Company
does not exercise its option under the Option Purchase Agreement to acquire the
Life Company, conflicts of interest may exist as it is anticipated that the
Company and the Life Company will continue to have separate ownership, while
maintaining substantially identical management and continuing to share the same
agency force, most employees and office facilities. See "Risk Factors--
Relationships with Farm Bureaus and Life Company; Potential Conflicts of
Interest" and "Option To Acquire Life Company."

The Life Company principally sells term, traditional whole life and universal
life products, in addition to single and flexible premium deferred annuities,
single premium immediate annuities, and disability income insurance products,
and operates in the same ten states as Farm Family through a common
distribution system. The Life Company's revenues and net income, calculated on
the basis of statutory accounting practices, for the year ended December 31,
1995 were $141.7 million and $12.0 million, respectively, and for the three
months ended March 31, 1996 were $31.6 million and $1.5 million, respectively.
At March 31, 1996, the Life Company's total assets and total capital and
surplus, calculated on the basis of statutory accounting practices, were $692.1
million and $63.4 million, respectively. As of March 31, 1996, approximately
$7.4 million of the Life Company's total surplus, as reflected on statutory
financial statements, constituted shareholders' surplus. In the year ended
December 31, 1995 and the three months ended March 31, 1996, net income
available to shareholders was $3.4 million and $0.6 million, respectively. The
Life Company requested that the New York Insurance Department approve the
reallocation of a portion of its unassigned surplus to shareholders' surplus.
The New York Insurance Department has advised the Life Company that it will not
object to the retroactive reallocation of "a portion of policyholders' surplus
to the shareholder account," provided such reallocation is carried out within
applicable statutory limitations and that the amount reallocated can be
demonstrated as not having any undue negative effect on participating
policyholders. As a result, a portion of the Life Company's unassigned surplus
may be reallocated to shareholders' surplus. The Life Company's determination
as to whether and to what extent it will retroactively reallocate a portion of
unassigned surplus to shareholders' surplus will depend upon, among other
factors, actuarial determinations and considerations, the decision of the Board
of Directors of the Life Company to make such reallocation, the approval of the
Life Company's shareholders and the review of such reallocation by the New York
Insurance Department. See "Option to Acquire Life Company."

See "Risk Factors--Relationships with Farm Bureaus and Life Company;
Potential Conflicts of Interest," "--Effect of Exercise of Option to Acquire
Life Company," "Option to Acquire Life Company," "Business--Relationship with
Farm Bureaus" and "Certain Relationships and Related Transactions."

6
<PAGE>

THE OFFERINGS

Common Stock offered by the Holding
Company in the Public Offering......

shares(/1/)

Common Stock to be distributed in
the Reorganization.............
shares(/2/)

Common Stock subscribed for in the
Subscription Offering..........

shares(/3/)

Common Stock to be outstanding after
the Effective Date..................

shares(/1/)(/2/)(/3/)

Use of proceeds to the Holding
Company from the Offerings.....
It is anticipated that the proceeds to
the Company from the Public Offering
together with the proceeds from the
Subscription Offering of $ will be
applied as follows: (i) approximately
$15.9 million will be used to make cash
payments to certain Eligible
Policyholders; (ii) $ million will be
used to make cash payments to certain
holders of Surplus Notes; (iii)
approximately $3.6 million will be used
to pay expenses incurred in the
Reorganization (including the expenses
of the Offerings); (iv) up to
approximately $ million will be
contributed to FFCIC to increase its
capital; and (v) the remainder will be
retained by the Holding Company for
general corporate purposes. See "Use of
Proceeds."

Dividend policy...................... The Holding Company does not intend to
pay dividends in the foreseeable future.
See "Dividend Policy."

Listing.............................. The Common Stock has been approved for
listing on the New York Stock Exchange,
subject to official notice of issuance.

New York Stock Exchange Symbol....... FFH

- --------

(1) Assumes that the Underwriters' over-allotment option is not exercised. See
"The Reorganization" and "Underwriting."

(2) Includes 2,244,044 shares of Common Stock to be issued in the
Reorganization to Eligible Policyholders allocated 25 or more allocable
shares in the Reorganization. Assumes that shares of Common Stock will
be issued to Participating Surplus Note Holders in the Reorganization in
exchange for their Surplus Notes and no shares will be issued in the
Reorganization to Eligible Policyholders allocated fewer than 25 allocable
shares. See "The Reorganization."

(3) The number of Subscription Shares to be issued in the Subscription Offering
may be increased if the Public Offering Price is less than the Subscription
Price. See "The Reorganization--Subscription Offering and Public Offering."

7
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth certain consolidated financial data for FFCIC
and its subsidiaries prior to the Reorganization. The consolidated statement of
income data set forth below for the years ended December 31, 1993, 1994 and
1995 and the consolidated balance sheet data at December 31, 1994 and 1995 are
derived from the consolidated financial statements of FFCIC appearing elsewhere
herein, which have been audited by Coopers & Lybrand L.L.P., independent
auditors, whose report thereon appears elsewhere herein. The consolidated
statement of income data for the years ended December 31, 1991 and 1992 and for
the three months ended March 31, 1995 and 1996 and the consolidated balance
sheet data at December 31, 1991, 1992 and 1993 and at March 31, 1995 and 1996
are derived from the unaudited consolidated financial statements of FFCIC. The
Company believes that such unaudited financial data fairly reflect the
consolidated results of operations and the consolidated financial condition of
FFCIC for such periods. This data should be read in conjunction with the
Consolidated Financial Statements, and notes thereto and other financial
information, as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere herein. See Note 11 in
"Notes to Consolidated Financial Statements" for a discussion of the principal
differences between GAAP and statutory accounting practices, and for a
reconciliation of consolidated net income and policyholders' equity, as
reported in conformity with GAAP, with consolidated statutory net income and
statutory capital and surplus, as determined in accordance with statutory
accounting practices, as prescribed or permitted by the New York Insurance
Department.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues:
Premiums.............. $ 85.3 $ 90.0 $ 96.7 $101.5 $116.9 $ 27.9 $ 31.7
Net investment income. 12.8 12.9 13.8 13.2 14.3 3.5 3.9
Net realized 1.0 1.0 (0.2) 1.3 0.9 -- --
investment gains
(losses)................
Other income.......... 0.2 0.5 0.7 0.7 0.9 0.2 0.2
------ ------ ------ ------ ------ ------- -------
Total revenues...... 99.3 104.4 111.0 116.7 133.0 31.6 35.8
------ ------ ------ ------ ------ ------- -------
Losses and Expenses:
Losses and loss 74.3 72.1 73.2 82.7 83.2 19.2 25.7
adjustment expenses.....
Underwriting expenses. 23.7 24.0 26.8 28.8 34.9 8.2 8.8
Interest and other 0.3 0.3 0.3 0.3 0.3 0.1 0.1
expense.................
------ ------ ------ ------ ------ ------- -------
Total losses and 98.3 96.4 100.3 111.8 118.4 27.5 34.6
expenses................
------ ------ ------ ------ ------ ------- -------
Income before federal 1.0 8.0 10.7 4.9 14.6 4.1 1.2
income taxes and
extraordinary item......
Federal income tax 0.4 1.8 3.1 1.4 5.0 1.2 0.4
expense.................
------ ------ ------ ------ ------ ------- -------
Income before 0.6 6.2 7.6 3.5 9.6 2.9 0.8
extraordinary item......
Extraordinary item-- -- -- -- -- -- -- 0.5
Reorganization expenses.
------ ------ ------ ------ ------ ------- -------
Net income............. $ 0.6 $ 6.2 $ 7.6 $ 3.5(/1/) $ 9.6 $ 2.9 $ 0.3(/1/)
====== ====== ====== ====== ====== ======= =======
BALANCE SHEET DATA (AT
PERIOD END):
Total investments(/2/). $150.2 $160.8 $177.7 $170.6 $207.9 $180.5 $202.3
Total assets........... 204.4 221.5 244.1 243.1 278.3 253.5 276.7
Long-term debt......... 2.8 2.8 2.8 2.7 2.7 2.7 2.7
Total liabilities...... 163.8 175.0 183.6 190.1 204.1 194.6 205.6
Total equity(/2/)...... 40.6 46.5 60.5 53.0 74.2 58.9 71.1
ANALYTICAL DATA
(UNAUDITED):
Net income per $ 0.21 $ 2.07 $ 2.53 $ 1.18 $ 3.20 $ 0.97 $ 0.10
share(/3/)..............
Book value per 13.54 15.48 20.17 17.66 24.72 19.63 23.70
share(/2/)(/3/).........
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
GAAP RATIOS:
Loss and Loss 87.1% 80.2% 75.7% 81.5% 71.1% 68.8% 81.2%
Adjustment Expense
Ratio(/4/)..............
Underwriting Expense 27.8% 26.6% 27.7% 28.4% 29.8% 29.5% 27.7%
Ratio(/5/)..............
Combined Ratio(/6/).... 114.9% 106.8% 103.4% 109.9% 100.9% 98.3% 108.9%
STATUTORY DATA (AT
PERIOD END):
Statutory Combined 115.2% 106.0% 104.2% 108.9% 101.0% 100.3% 107.2%
Ratio...................
Statutory Surplus...... $ 29.5 $ 33.5 $ 39.1 $ 42.9 $ 55.9 $ 45.2 $ 57.7
Ratio of annual
statutory net written
premiums to
statutory surplus..... 2.75x 2.73x 2.52x 2.46x 2.16x 2.45x 2.15x
</TABLE>
- --------

(1) While the Company regularly experiences losses from storm and weather
related events, net income for the year ended December 31, 1994 and the
three months ended March 31, 1996 was adversely affected by unusually high
losses and loss adjustment expenses believed to be storm and weather
related, which aggregated $7.9 million and $6.9 million, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

(2) Due to the adoption by the Company on December 31, 1993 of Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," total investments and
policyholders' equity were adjusted to reflect changes in market value,
which resulted in an increase of $6.8 million, a reduction of $11.1 million
and an increase of $11.7 million as of December 31, 1993, 1994 and 1995,
respectively, and an increase of $3.0 million and a decrease of $3.4
million as of March 31, 1995 and 1996, respectively.

(3) Gives effect in all periods to the allocation in the Reorganization of
3,000,000 shares of Common Stock to Eligible Policyholders.

(4) Calculated by dividing losses and loss adjustment expenses by premiums.

(5) Calculated by dividing underwriting expenses by premiums.

(6) The sum of the Loss and Loss Adjustment Expense Ratio and the Underwriting
Expense Ratio.

9
<PAGE>

RISK FACTORS

Prospective investors in the Shares offered hereby should consider carefully
the matters set forth below as well as other information set forth in this
Prospectus.

CATASTROPHE LOSS EXPOSURES

As an insurer of property risks, Farm Family's operating results and
financial condition may be significantly affected by the number and severity
of natural disasters and other events such as hurricanes, earthquakes,
tornadoes, wind, hail, fires, severe winter weather and explosions. The
geographic concentration of Farm Family's business may increase its exposure
to the risk of catastrophic losses. Farm Family markets its insurance products
primarily in the Northeast and writes significant amounts of property
coverages in areas exposed to the risk of losses from hurricanes (chiefly
southern New York, including Long Island, eastern New Jersey and southern
Connecticut) and severe winter storms. Farm Family maintains reinsurance
coverage to mitigate the effect of losses from catastrophes. Farm Family has
purchased reinsurance for catastrophic property losses for 1996, under which
Farm Family reinsures 95% of losses per occurrence over $6.0 million up to a
maximum of $51.0 million and approximately 79% of the losses between $3.0
million and $6.0 million per occurrence. To a limited extent, Farm Family is
also exposed to the risk of catastrophic losses on books of property business
reinsured by the Company in other geographic areas of the United States. As of
March 31, 1996, Farm Family's aggregate loss exposure for reinsurance assumed
was $11.2 million. The occurrence of catastrophic events from time to time
could have a material adverse effect on the Company's operating results and
financial condition. See "--Geographic Concentration of Business,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Reinsurance."

ADEQUACY OF LOSS RESERVES

Farm Family is required to maintain reserves to cover its estimated ultimate
liability for losses and loss adjustment expenses ("LAE") with respect to
reported and unreported claims incurred. Reserves are estimates involving
actuarial and statistical projections at a given time of what the Company
expects to be the cost of the ultimate settlement and administration of claims
based on facts and circumstances then known, predictions of future events,
estimates of future trends in claims severity and judicial theories of
liability, legislative activity and other variable factors, such as inflation.
The Company's overall reserve practice provides for ongoing claims evaluation
and adjustment (if necessary) based on the development of related data and
other relevant information pertaining to such claims. Loss and LAE reserves,
including reserves for claims which have been incurred but not yet reported,
are adjusted no less than quarterly, and in some instances more frequently.
The uncertainties of estimating insurance reserves are greater for certain
types of property and casualty insurance lines written by the Company,
particularly workers' compensation and other liability coverages, because a
longer period of time may elapse before a definitive determination of ultimate
liability may be made and because of the changing judicial and political
climates relating to these types of claims. In addition, the Company's
occurrence-based policies written before 1987 typically did not have an
exclusion for environmental losses. The Company believes, based on its
experience to date, that it has minimal exposure to such environmental losses
and, as such, it maintains de minimis reserves with respect to these losses.

The establishment of appropriate reserves is an inherently uncertain process
and there can be no assurance that ultimate losses will not materially exceed
Farm Family's loss reserves. To the extent that reserves prove to be
inadequate in the future, the Company would have to increase such reserves and
incur a charge to earnings in the period such reserves are increased, which
could have a material adverse effect on the Company's results of operations
and financial condition. See "Business--Loss and LAE Reserves."

A.M. BEST RATING

Ratings assigned by A.M. Best Company, Inc. ("A.M. Best") are an important
factor influencing the competitive position of insurance companies. A.M. Best
ratings are based upon factors of concern to

10
<PAGE>

policyholders and are not directed toward the protection of investors. As
such, the Company's A.M. Best rating is not intended to provide a basis for
the purchase of Shares hereunder. A.M. Best affirmed an "A-" (Excellent)
rating (its fourth highest out of 15 rating categories) for Farm Family Mutual
in April 1996. There can be no assurance that FFCIC will be able to maintain
the current rating. The Company believes that its business is sensitive to
ratings and that a rating downgrade may affect its ability to underwrite new
business and to assume reinsurance. As a result, if FFCIC were to experience a
rating downgrade, the Company's business and results of operations could be
materially adversely affected. See "Business--A.M. Best Rating."

VARIABILITY OF OPERATING RESULTS

The operating results of property and casualty insurers, including Farm
Family, are subject to significant variability due to a number of factors,
including extreme weather conditions and natural disasters, regulation,
competition, judicial trends, changes in the investment and interest rate
environment and general economic conditions. The Company's operating results
may also be affected by changes in supply and demand for property and casualty
insurance and reinsurance, which have historically been subject to significant
fluctuations. Because of these and other factors, historic results of
operations may not be indicative of future operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

GEOGRAPHIC CONCENTRATION OF BUSINESS

All premiums directly written by Farm Family are generated in Connecticut,
Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode
Island, Vermont and West Virginia. For the years ended December 31, 1993, 1994
and 1995 and for the three months ended March 31, 1996, 38.8%, 38.5%, 39.1%
and 37.5%, respectively, of the Company's direct written premiums were derived
from policies written in New York and, for the same periods, 19.0%, 19.6%,
20.8% and 21.5%, respectively, were derived from policies written in New
Jersey. For these periods, no other state accounted for more than 10.0% of the
Company's direct written premiums. The revenues and profitability of the
Company may be significantly affected by prevailing economic, regulatory,
demographic and other conditions in New York, New Jersey and the other states
in which the Company operates. See "--Catastrophe Loss Exposures" and
"Business--Marketing."

COMPETITION

RELATIONSHIPS WITH FARM BUREAUS AND LIFE COMPANY; POTENTIAL CONFLICTS OF
INTEREST

Farm Family is closely affiliated with the Farm Bureaus, and substantially
all of the Company's directors are associated with Farm Bureau organizations.
The Company has various financial arrangements and interrelationships with the
Farm Bureaus, including the membership list purchase agreements. See
"Business--Relationship with Farm Bureaus" and "Certain Relationships and
Related Transactions--Farm Bureaus." Because a substantial portion of the
Company's business is concentrated in a relatively small number of states, a
significant change in or the termination of the Company's relationship with
the Farm Bureaus in certain of these states could have a material adverse
effect on the Company's results of operations and financial condition. In
addition, the Farm Bureaus and their affiliates own all the outstanding shares
of common stock of the Life Company. Substantially all of the directors and
executive officers of the Company are also directors and executive officers of
the Life Company. The Company and the Life Company have substantially
identical management, share the same agency force and most employees, and
utilize common office facilities. Most administrative and operating expenses
are allocated between the two companies pursuant to an expense sharing

11
<PAGE>

agreement. If the Company does not exercise its option under the Option
Purchase Agreement to acquire the Life Company, it is anticipated that the
Company and the Life Company will continue to have separate ownership, while
maintaining substantially identical management and continuing to share the
same agency force, most employees and office facilities. In addition, the
Company places certain reinsurance coverages with United Farm Family Insurance
Company, a wholly owned subsidiary of the Life Company ("United"). See
"Certain Relationships and Related Transactions--Life Company" and "Option to
Acquire Life Company."

In view of the substantial relationships among the Company, the Farm
Bureaus, the Life Company and United, conflicts of interest are likely to
exist with respect to, including, without limitation, existing and future
business dealings, the Company's underwriting practices and policies, the
relative commitment of time and energy by the executive officers and other
employees to the respective businesses of the Company and the Life Company,
potential acquisitions of businesses or properties (including the exercise by
the Company of its option to acquire the Life Company), the issuance of
additional securities, the election of new or additional directors and the
payment of dividends by the Company. The Company has not instituted any formal
plan or arrangement to address potential conflicts of interest that may exist
with the Farm Bureaus or with the Life Company. There can be no assurance that
any conflicts of interest will be resolved in favor of the Company. Under
Delaware and New York law, a person who is a director of both the Company and
the Life Company owes fiduciary duties to both corporations and their
respective shareholders. As a result, persons who are directors of the Company
and the Life Company are required to exercise their fiduciary duties in light
of what they believe to be best for each of the companies and its
shareholders. See "Certain Relationships and Related Transactions."

EFFECT OF EXERCISE OF OPTION TO ACQUIRE LIFE COMPANY

Pursuant to the Option Purchase Agreement, the exercise price for the shares
of common stock of the Life Company is payable by the Holding Company in
shares of Common Stock and, at the option of the shareholders of the Life
Company, in up to $6 million stated value of shares of Series A Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), of the
Holding Company. Each share of Series A Preferred Stock will be entitled to
one vote per share and cumulative dividends will be payable quarterly in cash
on each share at a rate equal to 8% per annum. The Series A Preferred Stock
will be subject to mandatory redemption by the Company, on the date following
the twentieth anniversary of the issuance date, and optional redemption on and
after the tenth anniversary of the issuance date. Each share of Series A
Preferred Stock may be redeemed, at the option of the Holding Company, in cash
or in shares of Common Stock. The Holding Company's decision whether to redeem
shares of Series A Preferred Stock in cash or in shares will depend on its
financial condition and other circumstances at that time, including its
liquidity. Purchasers of Shares in the Public Offering may experience dilution
to the extent that the Holding Company issues new shares of Common Stock or
Series A Preferred Stock to the shareholders of the Life Company. The number
of shares of the Holding Company's capital stock that will be issued to
shareholders of the Life Company and the extent of dilution experienced by
shareholders of the Holding Company will depend on the valuation of the Life
Company. Such valuation may be significantly influenced by the possible
reallocation of a portion of unassigned surplus of the Life Company to
shareholders' surplus. Depending on the valuation of the Life Company,
including any such reallocation, certain shareholders of the Life Company may
become significant shareholders of the Holding Company upon the exercise of
the option to acquire the Life Company. In addition, the market price of the
Shares may be affected by the issuance of new shares of Common Stock or Series
A Preferred Stock to the shareholders of the Life Company. See "Option to
Acquire Life Company."

POTENTIAL LIABILITY FOR ENVIRONMENTAL AND POLLUTION RISKS

12
<PAGE>

and pollution related liabilities with respect to policies written either
before or after 1987. The Company does not believe that any pending claims or
administrative or judicial proceedings arising from environmental and
pollution related liabilities will have a material adverse effect on the
Company's financial condition, and is not aware of any material threatened
claims or administrative or judicial proceedings arising from such
liabilities. However, there can be no assurance that the Company's exposure to
environmental and pollution liabilities with respect to policies written
either before or after 1987 will not have a material adverse effect on the
Company's results of operations or financial condition.

EFFECT OF REGULATION

Farm Family is regulated by government agencies in the states in which it
does business. Such regulation usually includes (i) regulating premium rates
and policy forms, (ii) setting minimum capital and surplus requirements, (iii)
regulating guaranty fund assessments and residual markets, (iv) licensing
companies and agents, (v) approving accounting methods and methods of setting
loss and expense reserves, (vi) setting requirements for and limiting the
types and amounts of investments, (vii) establishing requirements for the
filing of annual statements and other financial reports, (viii) conducting
periodic statutory examinations of the affairs of insurance companies, (ix)
approving proposed changes in control and (x) limiting the amount of dividends
that may be paid without prior regulatory approval. Such regulation and
supervision are primarily for the benefit and protection of policyholders and
not for the benefit of investors. The insurance regulatory structure has been
subject to increased scrutiny in recent years by the National Association of
Insurance Commissioners (the "NAIC"), federal and state legislative bodies and
state regulatory authorities. Various new regulatory standards have been
adopted in recent years. No assurance can be given that future legislation or
regulatory changes will not adversely affect the business and results of
operations of Farm Family. "See "Business--Regulation."

Adverse legislative and regulatory activity constraining Farm Family's
ability adequately to price automobile, workers' compensation and other
insurance coverages may occur in the future. In recent years, insurers have
been under pressure from certain state regulators, legislators and special
interest groups to reduce, freeze or set rates at levels which may not
correspond with underlying costs. In addition, as a condition of its license
to do business in various states, the Company is required to participate in a
variety of mandatory residual market mechanisms (assigned risk plans and
mandatory pools) which provide certain insurance coverages (most notably
automobile insurance coverages) to consumers who are otherwise unable to
obtain such coverages from private insurers. The Company's participation in
such residual market mandatory pools resulted in the Company recognizing net
losses of $428,000 and $763,000 in 1993 and 1995, respectively, a net gain of
$275,000 in 1994, and net gains of $9,000 and $309,000 for the three months
ended March 31, 1995 and 1996, respectively. Residual market premium rates for
automobile insurance have generally been inadequate. The mandatory state
residual market automobile assigned risk plans in which the Company
participates resulted in the Company recognizing net losses of approximately
$1.1 million, $0.7 million and $2.5 million during the years ended December
31, 1993, 1994 and 1995, respectively, and net losses of $0.5 million and $0.6
million for the three months ended March 31, 1995 and 1996, respectively. The
amount of future losses or assessments from residual market mechanisms cannot
be predicted with certainty and could have a material adverse effect on the
Company's business and results of operations. In addition, the Company
generally markets its insurance products to customers in predominantly rural
and suburban areas, due in large part to its historical relationships with the
Farm Bureaus and the agricultural community. Political and regulatory
pressures could conceivably require the Company to write more insurance in
urban areas, which could adversely affect the Company's results of operations.
See "Business--Regulation."

EFFECT OF HOLDING COMPANY STRUCTURE

Because the operations of the Holding Company following the Reorganization
will be conducted through its subsidiary, FFCIC, the Holding Company will be
dependent upon dividends and other payments from FFCIC for funds to meet its
obligations. The New York Insurance Law regulates the distribution of
dividends and other payments by FFCIC to the Holding Company. See "Business--
Regulation--Restrictions on Dividends." Such

13
<PAGE>

restrictions or any subsequently imposed restrictions may in the future affect
the Holding Company's ability to pay debt, expenses and cash dividends to its
stockholders. See "Dividend Policy" and "Business--Regulation."

STATUS OF AGENTS AS INDEPENDENT CONTRACTORS

Farm Family regards its agents and agent field managers as independent
contractors rather than as employees of the Company and, as such, the Company
does not withhold federal or state income taxes, make federal or state
unemployment insurance payments (except as noted below) or provide workers'
compensation insurance with respect to such agents and agent field managers. A
determination by federal or state taxing authorities that the classification
of these agents and agent field managers as independent contractors is
improper for tax purposes could materially adversely affect the Company and
its results of operations. The Company's treatment of its agents and agent
field managers as independent contractors has not been challenged to date by
the Internal Revenue Service (the "Service") for federal tax purposes or by
state tax authorities. The classification of the Company's agents and agent
field managers as independent contractors for state unemployment insurance
purposes has been challenged by the New York State Department of Labor.
Following an initial unfavorable administrative determination as to its
liability for such state unemployment insurance in New York, the Company began
making payments for New York State unemployment insurance under protest and
made an administrative appeal of such determination.

PREEMPTIVE RIGHTS OF SUBSCRIPTION POLICYHOLDERS AND PARTICIPATING SURPLUS NOTE
HOLDERS

Pursuant to the Plan, for a period of three years from the Effective Date
Subscription Policyholders and Participating Surplus Note Holders have
preemptive rights to participate in any new issuance of Common Stock, other
than the issuance of Shares in the Public Offering and the issuance of shares
of Common Stock in connection with the Option Purchase Agreement. Purchasers
of Shares in the Public Offering who are not Subscription Policyholders or
Participating Surplus Note Holders will not have any preemptive rights.

REINSURANCE CONSIDERATIONS

Farm Family's insurance operations rely on the use of reinsurance
arrangements to limit and manage the amount of risk retained by the Company,
to stabilize its underwriting results and increase its underwriting capacity.
The availability and cost of reinsurance are subject to prevailing market
conditions and may vary significantly over time. No assurance can be given
that reinsurance will continue to be available to the Company in the future at
commercially reasonable rates. While the Company seeks to obtain reinsurance
with coverage limits that it believes are appropriate for the risk exposures
assumed, there can be no assurance that losses experienced by the Company will
be within the coverage limits of the Company's reinsurance treaties. The
Company also is subject to credit risk with respect to its reinsurers since
the ceding of risk to its reinsurers does not relieve the Company of its
liability to its insureds. The insolvency or inability of any reinsurer to
meet its obligations to the Company may have a material adverse effect on the
business and results of operations of the Company. See "Business--
Reinsurance."

OBSTACLES TO CHANGES IN CONTROL; CERTAIN ANTI-TAKEOVER EFFECTS

After the consummation of the Reorganization, the Holding Company will be
the holding company of FFCIC, a New York insurance company subsidiary. As a
result, New York insurance law will prohibit any person from acquiring control
of the Holding Company, and thus indirect control of its wholly owned
subsidiary, without the prior approval of the Superintendent. Control will be
presumed to exist where any person, directly or indirectly, owns, controls,
holds the power to vote, or holds proxies representing 10% or more of the
outstanding voting stock of the Holding Company, unless the Superintendent,
upon application, determines otherwise. Any person seeking to acquire a
controlling interest of the Holding Company would therefore face regulatory
obstacles which may delay, defer or prevent an acquisition that a stockholder
might consider to be in its best interest.

14
<PAGE>

The Holding Company, through certain provisions of its Certificate of
Incorporation (the "Certificate") and its bylaws (the "Bylaws"), has also
created obstacles which may delay, defer or prevent a takeover attempt. Such
provisions may also adversely affect prevailing market prices for the Common
Stock. These provisions, among other things, (i) divide the Holding Company
Board into three classes, which will serve for staggered three-year terms,
(ii) provide that a director of the Holding Company may be removed only for
cause and only by the affirmative vote of the holders of a majority of the
outstanding securities eligible to vote on such matters, (iii) provide that
only the Holding Company Board, its Chairman, or the President of the Holding
Company may call special meetings of the stockholders, (iv) eliminate the
ability of the stockholders to take any action without a meeting, and (v)
provide that the stockholders may amend or repeal the Bylaws or any of the
foregoing provisions of the Certificate only by a vote of two-thirds of the
votes of the holders of all outstanding securities eligible to vote on such
matters. In addition, the Bylaws establish certain advance notice procedures
for nomination of candidates for election as directors and for stockholder
proposals to be considered at stockholders' meetings. See "Description of
Capital Stock" and "Business--Regulation."

SHARES ELIGIBLE FOR FUTURE SALE

All shares of Common Stock distributed in the Reorganization, the
Subscription Offering or the Public Offering that are not held by affiliates
of Farm Family will be eligible for immediate resale in the public market
without restriction. As part of the Reorganization, over Farm Family
Mutual policyholders will receive a total of shares of Common Stock in
exchange for certain policyholder membership interests. The Company estimates
that less than 5% of its Common Stock will be held by affiliates of the
Company on the Effective Date (without taking into account any possible
purchases of Shares by affiliates in the Public Offering). There can be no
assurance that these policyholders and affiliates, or any other holders of
Common Stock, will not seek to sell their shares of Common Stock following the
Effective Date. Sales of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. See "The Reorganization" and "Shares
Eligible for Future Sale."

NO PRIOR MARKET FOR COMMON STOCK

Prior to the earlier of (i) the Public Offering or (ii) the Effective Date,
there will be no public market for the Common Stock. Although the Common Stock
has been approved for listing on the New York Stock Exchange, subject to
official notice of issuance, there can be no assurance that an active trading
market for the Common Stock will develop or be sustained. The Public Offering
Price will be determined through negotiations between the Company and the
representative of the Underwriters, and may not be indicative of the market
price for the Common Stock after the Effective Date. There can be no assurance
that purchasers of Shares in the Public Offering will be able to resell the
Shares at or above the Public Offering Price. See "Underwriting."

15
<PAGE>

THE COMPANY

Farm Family is a specialized property and casualty insurer of farms, other
generally related businesses and residents of rural and suburban communities
in Delaware, New Jersey, New York, West Virginia and all of the New England
states. Established in 1955 to meet certain insurance needs of Farm Bureau
members in the Northeast, the Company provides flexible, multi-line packages
of insurance for those engaged in agricultural pursuits, as well as
automobile, commercial general liability, workers' compensation, umbrella
liability, businessowners, homeowners and other insurance products to rural
and suburban policyholders in ten states. Life insurance products are also
sold to many of these customers by the Life Company, an affiliate of Farm
Family owned by Farm Bureau organizations.

The Company believes that the distinctive focus of Farm Family and its
agents on meeting the specialized insurance needs of rural communities has
provided the Company with the knowledge and experience to adapt to changes in
the demographics of its markets and in the nature of agricultural related
businesses. In addition to insuring those engaged in agricultural pursuits
such as dairy, vegetable and fruit farming, the Company insures a wide range
of other businesses related to agriculture, such as distributors of
agricultural products, horse breeding and training facilities, landscapers,
nurseries, florists, wineries and growers of specialty products. In recent
years, the Company has also introduced businessowners products for certain
retail and contractor businesses and for owners of apartment and office
buildings, as well as a homeowners product.

Farm Family is closely affiliated with the Farm Bureaus in the ten states in
which the Company operates. Farm Family has the exclusive endorsement of the
Farm Bureaus to market property and casualty insurance in these states. Farm
Family was originally organized through the efforts of certain of these Farm
Bureaus, and substantially all of the directors of the Company are associated
with Farm Bureau organizations in the Northeast. The Farm Bureaus are non-
profit agricultural organizations that are affiliated with the American Farm
Bureau Federation, the nation's largest general farm organization with over
four million members. The Farm Bureaus have traditionally sought to advance
the interests of the agricultural community. As a matter of policy, which the
Company plans to continue after the Effective Date, and as set forth in
FFCIC's bylaws, membership in state or county Farm Bureau organizations is a
prerequisite for the issuance or renewal of any policy by FFCIC except in the
case of policies issued in the residual market or to employees of the Company
and its affiliates. Potential policyholders not engaged in agricultural
businesses can generally become associate members of the Farm Bureaus. As of
March 31, 1996, approximately 70% of the over 70,000 Farm Bureau members in
the ten states in which the Company operates had policies issued by FFCIC. See
"Risk Factors--Relationships with Farm Bureaus and Life Company; Potential
Conflicts of Interest," "Business--Relationship with Farm Bureaus" and
"Certain Relationships and Related Transactions."

The Holding Company is a Delaware corporation which was formed in February
1996 solely for the purpose of becoming a holding company for FFCIC upon the
Effective Date. FFCIC is licensed as a property and casualty insurer in
Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New
York, Rhode Island, Vermont and West Virginia. FFCIC has three direct and
indirect subsidiaries engaged in insurance agency and brokerage businesses in
the Northeastern United States, including Rural Agency and Brokerage, Inc., a
New York corporation which is a wholly owned direct subsidiary of FFCIC, and
its subsidiaries (collectively, "Rural Agency"). The Company's principal
executive offices are located at 344 Route 9W, Glenmont, New York 12077; its
telephone number is (518) 431-5000.

16
<PAGE>

THE REORGANIZATION

The following summary description of the Reorganization, including the Plan,
is qualified in its entirety by reference to the Plan, a copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part.

THE PLAN

On February 14, 1996, the FFCIC Board adopted the Plan, pursuant to Section
7307 of the New York Insurance Law, whereby Farm Family Mutual will convert
from a mutual property and casualty insurance company to a stock property and
casualty insurance company and become a wholly owned subsidiary of the Holding
Company. The Plan was amended by the FFCIC Board on April 23, 1996 to effect
certain minor modifications, primarily of a technical and clarifying nature.
The Reorganization will involve principally the following actions: on the
Effective Date, Farm Family Mutual will convert from a mutual property and
casualty insurance company to a stock property and casualty insurance company
pursuant to Section 7307 of the New York Insurance Law; the Policyholder
Interests (as defined herein) in Farm Family Mutual will be extinguished (the
extinguishment of Policyholder Interests will not, however, affect the
insurance coverage under the Company's policies); Eligible Policyholders will
receive either shares of Common Stock of the Holding Company or cash as
compensation for the extinguishment of their Policyholder Interests in Farm
Family Mutual; holders of Surplus Notes electing to exchange such notes may
receive shares of Common Stock or cash in exchange for their Surplus Notes;
FFCIC will change its name from Farm Family Mutual Insurance Company to Farm
Family Casualty Insurance Company; subscribers for Subscription Shares in the
Subscription Offering will be entitled to receive such Subscription Shares;
purchasers of Shares in the Public Offering will be entitled to receive such
Shares.

Purpose

The principal purposes of the Reorganization are to improve the Company's
access to the capital markets and to raise capital to permit FFCIC to expand
and develop its business in the rural and suburban areas in which FFCIC
currently underwrites property and casualty risks. As part of the
Reorganization, the Holding Company will become the holding company of FFCIC
and its subsidiaries. This structure affords increased flexibility in raising
additional capital in the form of debt and equity financings and provides the
opportunity to pursue growth, either internally or through acquisitions. Such
capital will enable FFCIC to increase its statutory surplus and underwrite
additional business.

The conversion of Farm Family Mutual to a stock property and casualty
insurance company will provide Eligible Policyholders with shares of Common
Stock or cash as compensation for the extinguishment of their otherwise
illiquid Policyholder Interests in Farm Family Mutual and holders of Surplus
Notes electing to exchange such notes in the Reorganization, with shares of
Common Stock or cash in exchange for their Surplus Notes.

Approval of the Plan

On November 1, 1995, Farm Family Mutual submitted an application to the
Superintendent for permission to convert from a domestic mutual insurance
company into a domestic stock insurance company pursuant to Section 7307 of
the New York Insurance Law. Pursuant to the provisions of Section 7307 of the
New York Insurance Law, the Superintendent (i) ordered an examination of Farm
Family Mutual as of June 30, 1995, which was submitted to the Superintendent
and filed as a public document on February 9, 1996 (the "Examination Report")
and (ii) appointed an appraiser to appraise the value of Farm Family Mutual as
of June 30, 1995, as adjusted for any significant subsequent developments
through December 31, 1995, which appraisal was submitted to the Superintendent
and filed as a public document on February 14, 1996 (the "Appraisal Report").

17
<PAGE>

The Examination Report covered an examination of Farm Family Mutual for the
period January 1, 1990 through June 30, 1995 and, where deemed appropriate,
transactions subsequent to the current examination period were reviewed. The
Examination Report contains no material recommendations or comments.

After receiving the Examination Report and Appraisal Report, the
Superintendent granted permission to the board of directors of Farm Family
Mutual to submit the Plan to the Superintendent. The Superintendent held a
public hearing on the Plan on April 2, 1996 and on May 1, 1996, the
Superintendent issued an opinion and decision approving the Plan. In the
opinion and decision, the Superintendent found that the Plan does not violate
the New York Insurance Law, is not inconsistent with law, is fair and
equitable and is in the best interests of the policyholders of FFCIC and the
public. On June 17, 1996, the policyholders of Farm Family Mutual approved the
Plan at the Special Meeting.

Effective Date

As of the date hereof, the effectiveness of the Plan is contingent upon (i)
the FFCIC Board declaring the Plan effective and (ii) the opinion of the
Company's special tax counsel as originally delivered in connection with the
Plan being confirmed as of the Effective Date. The Plan provides that the
Effective Date shall be such date as is determined by the FFCIC Board. The
Effective Date may not be later than 180 days after the date of the Special
Meeting without the approval of the Superintendent. Currently, it is expected
that the Effective Date will occur concurrently with the closing of the Public
Offering. See "--Amendment or Withdrawal."

Payment of Consideration to Eligible Policyholders and Holders of Surplus
Notes

In exchange for Policyholder Interests in Farm Family Mutual, each Eligible
Policyholder will receive consideration based on the allocation to such
Eligible Policyholder of a number of allocable shares (rounded to the nearest
whole share) of FFCIC Common Stock based upon the amount of net premiums paid
to Farm Family Mutual by each Eligible Policyholder in respect of Eligible
Policies that are In Effect (each, as defined in the Plan) at any time from
(and including) November 1, 1992, to (but not including) November 1, 1995, in
relation to the total amount of net premiums paid to Farm Family Mutual by all
Eligible Policyholders in respect of Eligible Policies that are In Effect at
any time during such period. Under the Plan, Policyholder Interests are
defined as the rights of Policyholders (as defined in the Plan) of Farm Family
Mutual arising under its charter and by-laws, the New York Insurance Law and
otherwise, including, without limitation, the right to vote for directors and
on other matters and to participate in any distribution of surplus on
liquidation, but not including contractual rights arising under Policies (as
defined in the Plan), including, without limitation, the right to be paid
insurance benefits. Each holder of a note(s) issued by Farm Family Mutual
pursuant to Section 1307 of the New York Insurance Law that is outstanding on
both November 1, 1995 and on the Effective Date (each, a "Surplus Note")
shall, on the Effective Date, generally be entitled at its option to exchange
such Surplus Note(s), in whole but not in part, for an amount of cash or FFCIC
Common Stock equal to the principal amount of the Surplus Note(s) outstanding
on the Effective Date plus accrued and unpaid interest thereon (the
"Outstanding Note Amount"). The number of whole shares of FFCIC Common Stock
which a holder of a Surplus Note(s) will be entitled to receive upon such
exchange will be equal to the Outstanding Note Amount divided by the Initial
Stock Price (as defined herein) less any fraction thereof, which will be paid
in cash. In the event that any holder of a Surplus Note(s) does not elect to
exchange such note(s), such Surplus Note(s) will remain an obligation of
FFCIC.

On the Effective Date, the Plan provides that Farm Family Mutual shall issue
to The Bank of New York, as transfer agent (the "Transfer Agent"), for the
respective accounts of the Eligible Policyholders who are entitled to receive
shares of FFCIC Common Stock and holders of Surplus Notes that will be issued
shares of FFCIC Common Stock, a global certificate representing the aggregate
number of shares of FFCIC Common Stock allocated to such Eligible
Policyholders and Participating Surplus Note Holders in accordance with the
Plan. The Transfer Agent shall, on behalf of the Eligible Policyholders and
Participating Surplus Note Holders, transfer such shares to the Holding
Company in exchange for an equal number of shares of Common Stock to be issued

18
<PAGE>

by the Holding Company pursuant to the Plan. FFCIC shall surrender to the
Holding Company, and the Holding Company shall cancel, for no consideration,
all of the Common Stock previously issued by the Holding Company to Farm
Family Mutual.

The Plan provides that, as soon as reasonably practicable after the
Effective Date, each Eligible Policyholder will be issued the number of shares
of Common Stock allocated to such Eligible Policyholder or, under certain
circumstances, will instead be paid cash. Any Eligible Policyholder that is
not allocated at least one share of FFCIC Common Stock under the Plan will not
receive any consideration in the Reorganization. In the event that the Public
Offering does not close on the Effective Date, Eligible Policyholders
allocated fewer than 25 allocable shares of FFCIC Common Stock may receive
shares of Common Stock or cash, determined at the discretion of the FFCIC
Board. In the event that the Public Offering closes on the Effective Date,
Eligible Policyholders allocated fewer than 25 shares of FFCIC Common Stock,
will receive cash. Cash will also be paid (in lieu of Common Stock) to each
Eligible Policyholder, and to each holder of a Surplus Note(s) electing to
exchange such note(s) for cash or FFCIC Common Stock, whose mailing address is
located outside the United States or is an address at which mail is
undeliverable or who resides in a jurisdiction of the United States with
respect to which compliance with the securities laws would, in the opinion of
FFCIC, as applicable, be onerous and impractical for reasons of cost or
otherwise. The amount of consideration paid as cash to those Eligible
Policyholders receiving cash will equal the number of shares allocated to such
Eligible Policyholders multiplied by the Initial Stock Price. The Initial
Stock Price means (i) in the event the Public Offering closes on the Effective
Date, the Public Offering Price, (ii) in the event the Subscription Offering
closes but the Public Offering does not close on the Effective Date, the bona
fide determination of the price per share at which the Common Stock would
trade in the public market on the Effective Date, made by the Company after
consultation with its financial advisor, with the approval of the
Superintendent, or (iii) in the event the Subscription Offering and the Public
Offering do not close on the Effective Date, the bona fide determination of
the price per share at which the Common Stock would trade in the public market
on the Effective Date, made by the Company after consultation with its
financial advisor, with the approval of the Superintendent.

Preemptive Rights

The Plan provides that for a period of three years after the Effective Date,
each Subscription Policyholder and each Participating Surplus Note Holder will
have a preemptive right under Section 7307(s) of the New York Insurance Law to
purchase a proportionate amount of any new issue of shares of Common Stock of
the Holding Company. Subscription Policyholders and Participating Surplus Note
Holders may not transfer or assign the preemptive rights. Under the Plan,
however, no Person (as defined in the Plan) will have a preemptive right under
the Plan or Section 7307(s) of the New York Insurance Law to purchase any
shares of Common Stock or Series A Preferred Stock issuable upon exercise of
the option under the Option Purchase Agreement. See "Option to Acquire Life
Company."

Amendment or Withdrawal

The Plan may be amended at any time by FFCIC before or after the Effective
Date upon the affirmative vote of no less than a majority of the entire FFCIC
Board and with the approval of the Superintendent. The Plan provides that
FFCIC may withdraw the Plan at any time before the Effective Date upon the
affirmative vote of not less than a majority of the entire FFCIC Board. The
FFCIC Board currently intends to proceed with the Plan.

Limitations on Compensation of Directors and Executive Officers

For a period of five years after the Effective Date, FFCIC is prohibited
from entering into any agreement with any officer or director of FFCIC or with
any firm or corporation in which any such officer or director is pecuniarily
interested, under which agreement FFCIC agrees to pay, for the acquisition of
business, any commissions or other compensation which by the terms of such
agreement varies with the amount of such business or with the earnings of
FFCIC on such business. FFCIC shall, however, be permitted, during such five-
year period, to pay fees to the Farm Bureaus in such amounts as are approved
by the Superintendent. See "Business--Relationship with Farm Bureaus" and
"Certain Relationships and Related Transactions."

19
<PAGE>

SUBSCRIPTION OFFERING AND PUBLIC OFFERING

Prior to the Public Offering made through this Prospectus, 3,000,000 shares
of Common Stock were offered in the Subscription Offering in accordance with
the preemptive rights provided under the Plan to Subscription Policyholders
and Participating Surplus Note Holders. The Subscription Offering expired on
June 12, 1996. Subscription Policyholders and Participating Surplus Note
Holders subscribed for Subscription Shares in the Subscription Offering
at the Subscription Price of $21.00 per share.

If the Initial Stock Price is less than the Subscription Price, the
effective price per share paid by subscribers for Subscription Shares shall be
the Initial Stock Price, and additional whole shares of Common Stock will be
issued to such subscribers to offset the effect of such price difference. If
the Initial Stock Price is more than the Subscription Price, such subscribers
will not be required to pay any additional amounts for the Subscription
Shares, nor will there be any adjustment in the number of shares issued to
them.

The Shares, which constitute the Subscription Shares not subscribed for
in the Subscription Offering, are being offered to the public in the Public
Offering made through this Prospectus.

Under the Plan, on the Effective Date or as soon thereafter as reasonably
practicable, the Holding Company will: (i) in the event that the Subscription
Offering closes, issue the Subscription Shares subscribed for in the
Subscription Offering; (ii) in the event that the Public Offering closes,
issue and sell Shares pursuant to the Public Offering; (iii) issue shares of
Common Stock or pay cash to Eligible Policyholders, on behalf of FFCIC; and
(iv) issue shares of Common Stock or pay cash to the holders of Surplus Notes,
on behalf of FFCIC.

CANCELLATION OF THE SUBSCRIPTION OFFERING AND PUBLIC OFFERING

The Holding Company Board may, at any time prior to the Effective Date,
elect to cancel or rescind the Subscription Offering, and consequently not to
hold the Public Offering, without withdrawing the Plan. The Subscription
Offering will not be consummated in the event that (i) the Plan is withdrawn
by the FFCIC Board or (ii) the FFCIC Board elects to proceed with the Plan but
rescinds the Subscription Offering.

FEDERAL INCOME TAX CONSEQUENCES

General Discussion

In the opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. ("LeBoeuf, Lamb"),
special tax counsel to Farm Family, the following paragraph sets forth the
principal federal income tax consequences to Farm Family of the consummation
of the Reorganization under current federal income tax law and administrative
rulings of the Service. The opinion of special tax counsel is conditioned upon
certain assumptions set forth therein, the receipt of certain representations
from Farm Family, and certain other information, data and documents as
LeBoeuf, Lamb deems necessary. Neither this summary nor the opinion of special
tax counsel is binding on the Service and Farm Family has not sought a private
letter ruling from the Service. Consequently, there can be no assurance that
the Service will not challenge the conclusions set forth below.

Subject to the matters discussed under "Possible Policyholder Dividend
Treatment" below, the exchange by the Eligible Policyholders of their
Policyholder Interests and the Participating Surplus Note Holders of their
Surplus Notes for FFCIC Common Stock in connection with the conversion of Farm
Family Mutual from a mutual to a stock insurance company and the subsequent
transfer of the FFCIC Common Stock received by the Eligible Policyholders and
the Participating Surplus Note Holders in the demutualization to the Holding
Company in exchange for Common Stock and the sale of the shares of Common
Stock pursuant to the Offerings will be treated under Sections 351 and 368 of
the Code as tax-free transactions in which Farm Family will not realize any
significant income or loss for federal income tax purposes. As a result of the
Reorganization, the federal income tax attributes of FFCIC and the Holding
Company, including their basis and holding period in

20
<PAGE>

their assets, earnings and profits and tax accounting methods will not be
significantly affected by the Reorganization.

Possible Policyholder Dividend Treatment

UNUM Life Insurance Company, a Maine life insurance company that
demutualized in 1986 ("UNUM"), and UNUM Corporation, its holding company, have
claimed in a lawsuit currently pending in federal district court in the
District of Maine against the Service that UNUM's distribution to its
policyholders of stock and cash pursuant to its plan of demutualization should
be treated as a policyholder dividend distribution, rather than as part of an
exchange. If the distribution were treated for federal income tax purposes as
a dividend distribution, UNUM would be entitled to a policyholder dividend
deduction equal to the amount of cash and the fair market value of any stock
distributed, and each policyholder receiving stock or cash would likely be
treated for federal income tax purposes as if it had received a policyholder
dividend equal to the amount of cash or the fair market value of the stock it
received.

FFCIC plans to treat and report the demutualization as described above under
the caption "General Discussion." FFCIC, however, will continue to monitor the
progress of the UNUM case and any other developments regarding the proper
treatment of demutualization consideration for tax purposes. If FFCIC
determines, based on the decision of the federal district court in the UNUM
case that the distribution of consideration pursuant to the demutualization
may be characterized as a policyholder dividend or the advice of tax counsel,
that all or any portion of its distribution to the Eligible Policyholders
pursuant to the demutualization should be treated for federal income tax
purposes as a policyholder dividend, then it may claim a policyholder dividend
deduction equal to all or some part of the cash or the fair market value of
the FFCIC Common Stock distributed. The amount of this deduction for FFCIC
could be substantial and may create a large net operating loss for FFCIC,
thereby reducing the amount of federal income taxes payable by FFCIC. The
treatment of all or part of the consideration received by an Eligible
Policyholder in the demutualization as a dividend could also affect the tax
consequences of the demutualization to Eligible Policyholders. In determining
whether to claim a policyholder dividend deduction, FFCIC will take into
account the requirements of law, the interests of FFCIC and the interests of
the Eligible Policyholders. If FFCIC claims the policyholder dividend
deduction, it is likely that the Service would challenge this position. In
that event, the tax treatment of demutualization might not be resolved for a
number of years and FFCIC cannot predict whether the deduction will ultimately
be available or, if available, the amount thereof.

21
<PAGE>

OPTION TO ACQUIRE LIFE COMPANY

The following summary description of the Option Purchase Agreement is
qualified in its entirety by reference to the Option Purchase Agreement, a
copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.

The Life Company was established in 1953 by certain state Farm Bureaus to
provide life insurance products for Farm Bureau members in the Northeast. All
of the issued and outstanding capital stock of the Life Company is owned by
Farm Bureau organizations and their affiliates. Although not under common
ownership, Farm Family Mutual and the Life Company have substantially
identical management, share the same agency force and most employees, and
utilize common facilities. Substantially all of the directors and executive
officers of the Company are also directors and executive officers of the Life
Company. See "Risk Factors--Relationships with Farm Bureaus and Life Company;
Potential Conflicts of Interest," "Business--Relationship with Farm Bureaus,"
and "Certain Relationships and Related Transactions."

Farm Family Mutual and the Life Company considered the possibility, as part
of the Reorganization, of bringing these two companies under a common
ownership structure. The Life Company's financial statements are currently
prepared only in accordance with statutory principles prescribed or permitted
by the New York Insurance Department. The Company believes that such financial
statements do not provide an adequate basis to determine an appropriate fair
market valuation for the Life Company. Financial statements prepared according
to GAAP for the Life Company are not expected to be available until after the
Effective Date. The Holding Company has entered into the Option Purchase
Agreement, pursuant to which the Holding Company has the right to acquire the
Life Company in exchange for shares of the Holding Company's capital stock for
a two-year period commencing on the Effective Date, unless extended for an
additional year by agreement between the parties. The acquisition of the Life
Company is subject to certain conditions, including the approval by the
stockholders of the Holding Company and applicable regulatory authorities. The
Company believes that the acquisition of the Life Company and resulting common
ownership structure of Farm Family Mutual and the Life Company could be
beneficial to all parties by perpetuating the operating efficiencies which the
two companies currently enjoy, increased access to capital markets,
diversifying earnings and increasing product capabilities. However, there can
be no assurance that the Holding Company will exercise its option to acquire
the Life Company or that the closing conditions will be satisfied. If the
Company does not exercise its option under the Option Purchase Agreement to
acquire the Life Company, conflicts of interest may exist as it is anticipated
that the Company and the Life Company will continue to have separate
ownership, while maintaining substantially identical management and continuing
to share the same agency force, most employees and office facilities. See
"Risk Factors--Relationships with Farm Bureaus and Life Company; Potential
Conflicts of Interest."

The Holding Company has not made a final determination as to whether it will
exercise its option to acquire the Life Company under the Option Purchase
Agreement. The Holding Company's decision to exercise the option will depend
on, among other things, the exercise price for the Option Shares (as defined
herein), an evaluation of the financial statements prepared in accordance with
generally accepted accounting principles and prospects of the Life Company,
the outcome of a vote by the Holding Company's stockholders and the receipt of
applicable regulatory approvals. See Note 2 in "Notes to Consolidated
Financial Statements."

22
<PAGE>

The table below sets forth selected financial data for the Life Company for
the years ended December 31, 1993, 1994 and 1995, which data are derived from
the audited statutory financial statements of the Life Company for the years
ended December 31, 1993, 1994 and 1995. The selected financial data as of and
for the three months ended March 31, 1995 and 1996 are derived from the
unaudited statutory financial statements. All financial information of the
Life Company in this Prospectus, including the selected financial data in the
table below, has been prepared on the basis of statutory accounting practices
prescribed or permitted by insurance regulatory authorities. Statutory
accounting practices vary in certain material respects from GAAP applied to
stock life insurance companies. Statutory accounting practices are primarily
designed to reflect the ability of the insurer to satisfy its obligations to
policyholders, contractholders and beneficiaries, whereas GAAP is primarily
oriented toward the allocation of revenues, expenses and costs to financial
reporting periods.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATUTORY STATEMENT OF
INCOME DATA:
Premiums and annuity
considerations(/1/)..... $ 83.7 $ 77.1 $ 79.7 $ 23.6 $ 15.0
Net investment in-
come(/2/)............... 43.9 50.0 52.5(/3/) 12.4 13.8(/3/)
Total revenues(/1/).... 143.7 137.8 141.7 38.4 31.6
Net income(/4/)........ 8.3 6.5 9.3 (0.8) 1.5
Statutory net income
available to sharehold-
ers(/5/)................ -- -- 3.4 -- 0.6
STATUTORY BALANCE SHEET
DATA (AT PERIOD END):
Total investments(/6/). $ 564.4 $ 615.0 $ 665.9 $ 628.0 $ 670.0
Total assets(/2/)(/7/). 587.1 635.7 687.7(/8/) 649.7 692.1(/8/)
Total liabilities(/2/). 544.8 587.6 625.9 601.5 628.7
Capital and surplus:
Common Stock......... 3.0 3.0 3.0 3.0 3.0
Paid-in and contrib-
uted surplus............ 0.3 0.3 0.3 0.3 0.3
Unassigned funds or
surplus................. 39.0 44.8 58.5 44.8 60.1
------- ------- ------- ------- -------
Total capital and sur-
plus.................... $ 42.3 $ 48.1 $ 61.8 $ 48.1 $ 63.4
======= ======= ======= ======= =======
Portion of unassigned
surplus allocated to
shareholders............ $ 4.0 $ 4.0 $ 7.5(/9/) $ 4.0 $ 7.4(/1//0/)
</TABLE>
- --------
(1) Premiums received on annuity products without life contingencies and
certain universal life products are included in revenue for statutory
purposes but are not recognized as revenue under GAAP. For statutory
purposes, premiums and deposits are included as revenue when due. Under
GAAP, revenues, excluding deposits, are recognized on an accrual basis as
earned over the life of the policy.
(2) Under GAAP, the assets, liabilities and results of operations of the Life
Company's wholly owned subsidiary, United, would be consolidated with the
assets, liabilities and results of operations, respectively, of the Life
Company. However, under statutory accounting practices, the Life Company's
investment in United is reflected under the equity method of accounting.
As a result, the Life Company's assets reflect the net equity value of
United, and the Life Company's net investment income reflects the net
income or loss of United.
(3) For the year ended December 31, 1995 and the three months ended March 31,
1996, the Life Company's investment in United accounted for $2.4 million
and $0.5 million, respectively, of the Life Company's net investment
income. For the year ended December 31, 1995, United's total revenues and
net income were $11.3 million and $2.2 million, respectively. For the
three months ended March 31, 1996, United's total revenues and net income
were $2.8 million and $0.6 million, respectively. As of December 31, 1995
and March 31, 1996, United's total assets were $32.1 million and $28.8
million, respectively.
(4) For statutory purposes, commissions and other costs incurred in connection
with acquiring business (acquisition costs) are charged to operations in
the year incurred. Under GAAP, such acquisition costs are deferred and
amortized to match recognition of corresponding revenue and the
unamortized deferred acquisition costs are included in total assets.
Statutory accounting practices and GAAP use different assumptions in
calculating future policyholders' benefits and different methods for
calculating valuation allowances.
(5) Under New York Insurance Law, no profits on participating policies and
contracts in excess of the larger of ten percent of such profits, or fifty
cents per year per thousand dollars of participating life insurance, other
than group term insurance, in force at the end of the year, may inure to
the benefit of shareholders. As a result of the $4.0 million limit on
unassigned surplus allocated to shareholders, no income, in excess of
dividends paid, was available to shareholders in 1993 and 1994.
(6) For statutory purposes, fixed maturities are carried at amortized cost.
Under GAAP, certain fixed maturities are carried at market value.
(7) Deferred federal income taxes and statutory non-admitted assets are
recognized under GAAP while mandatory securities valuation reserves are
not.
(8) As of December 31, 1995 and March 31, 1996, the Life Company's investment
in United accounted for $15.8 million and $12.4 million, respectively, of
the Life Company's total assets.
(9) Includes $4.0 million allocated to shareholders' surplus as of January 1,
1995, $3.4 million of statutory net income available to shareholders for
the year ended December 31, 1995, and other adjustments which net to $0.1
million consisting primarily of adjustments to surplus in accordance with
statutory accounting practices. Does not reflect any retroactive
reallocation of a portion of unassigned surplus to shareholders' surplus.
(10) Includes $7.5 million allocated to shareholders' surplus as of January 1,
1996, $0.6 million of statutory net income available to shareholders for
the three months ended March 31, 1996, and other adjustments which net to
($0.7 million) consisting primarily of adjustments to surplus in
accordance with statutory accounting practices. Does not reflect any
retroactive reallocation of a portion of unassigned surplus to
shareholders' surplus.

23
<PAGE>

Under the Option Purchase Agreement, shareholders of the Life Company have
granted to the Holding Company the exclusive and irrevocable option to
purchase all of such shares (the "Option Shares"). Such option may be
exercised at any time up to the second anniversary of the Effective Date,
unless extended to the third anniversary of the Effective Date upon the
agreement of the parties to the Option Purchase Agreement. The exercise price
for each Option Share will be the fair market value thereof, as of the
exercise date, determined in accordance with specified valuation procedures
and assumptions set forth in the Option Purchase Agreement by an investment
banking firm of national standing selected by the Company and reasonably
acceptable to the shareholders of the Life Company. The valuation procedures
and assumptions set forth in the Option Purchase Agreement provide that the
fair market value per Option Share will be based on the fully distributed,
independent, public market value of the common stock of the Life Company as of
the exercise date of the Option Purchase Agreement including any reallocation
of participating policyholder surplus, without giving effect to the percentage
ownership represented by the common stock being valued (individually or in the
aggregate), the aggregate amount of the valuation of the Life Company or the
relationship between the Life Company and FFCIC, including the Life Company's
lack of stand-alone management, infrastructure or distribution system. In
determining such value, the procedures also provide that consideration may be
given to the trading value of the publicly traded common stock of comparable
companies as well as any other valuation methods or criteria that are deemed
relevant.

In 1979, the shareholders of the Life Company adopted a resolution limiting
the Life Company's unassigned surplus allocated to shareholders to $4.0
million. In 1995, the Life Company shareholders voted to remove the $4.0
million limit on unassigned surplus allocated to shareholders. The amount of
unassigned surplus allocated to shareholders as of March 31, 1996 was $7.4
million. The Life Company requested that the New York Insurance Department
approve the reallocation of a portion of its unassigned surplus to
shareholders' surplus. The New York Insurance Department has advised the Life
Company that it will not object to the retroactive reallocation of "a portion
of policyholders' surplus to the shareholder account," provided such
reallocation is carried out within applicable statutory limitations and that
the amount reallocated can be demonstrated as not having any undue negative
effect on participating policyholders. As a result, a portion of the Life
Company's unassigned surplus may be reallocated to shareholders' surplus. The
Life Company's determination as to whether and to what extent it will
retroactively reallocate a portion of unassigned surplus to shareholders'
surplus will depend upon, among other factors, actuarial determinations and
considerations, the decision of the Board of Directors of the Life Company to
make such reallocation, the approval of the Life Company's shareholders and
the review of such reallocation by the New York Insurance Department. Any
reallocation of unassigned surplus to shareholders' surplus will increase
shareholders' equity under GAAP, which, in turn, will increase the valuation
of the Life Company. Accordingly, the fair market value of the Life Company
and the number of shares of Common Stock issued in connection with the
acquisition if the option is exercised may increase significantly as a result
of an increase in the Life Company's shareholders' equity under GAAP. To the
extent that the Company issues additional shares of Common Stock as a result
of such change in the valuation of the Life Company, subscribers for Shares in
the Subscription Offering will experience additional dilution in their
ownership interest and voting power in the Company. See "Risk Factors--Effect
of Exercise of Option to Acquire Life Company." The decision by the New York
Insurance Department not to object to the retroactive reallocation of
unassigned surplus does not affect the Company's determination as to the
"probability" of the

24
<PAGE>

acquisition within the meaning of Rule 3.05 of Regulation S-X. See Note 2 in
"Notes to Consolidated Financial Statements."

The exercise price under the Option Purchase Agreement will be payable by
the Holding Company to the Life Company shareholders in shares of Common Stock
and, at the option of such shareholders, in up to $6 million stated value of
shares of Series A Preferred Stock. The number of shares of Common Stock
issued to the Life Company shareholders will be determined by the price of the
Common Stock based on the average closing price per share of the Common Stock
during the 20 trading days prior to the third business day preceding the
closing of the Option Purchase Agreement (the "Option Purchase Closing"). The
Series A Preferred Stock will have a stated value per share equal to the price
per share of the Common Stock, as calculated above. The fair market value of a
share of Series A Preferred Stock, as of the exercise date, will be determined
in accordance with the valuation assumptions set forth in the Option Purchase
Agreement by an investment banking firm of national standing mutually
acceptable to the Company and the shareholders of the Life Company. It is
anticipated that the Holding Company will use Salomon Brothers Inc to
determine the fair market value of the Series A Preferred Stock. Preferential
cumulative dividends will be payable quarterly in cash on each share of Series
A Preferred Stock at a rate equal to 8% per annum. The Series A Preferred
Stock will be subject to mandatory redemption by the Holding Company, on the
date following the twentieth anniversary of the issuance date, and optional
redemption by the Holding Company on and after the tenth anniversary of the
issuance date, at its stated value plus all accrued and unpaid dividends. Each
share of Series A Preferred Stock may be redeemed, at the option of the
Holding Company in cash or in shares of Common Stock. The Holding Company's
decision whether to redeem shares of Series A Preferred Stock in cash or in
shares will depend on its financial condition and other circumstances at that
time, including its liquidity. Each share of Series A Preferred Stock will be
entitled to one vote per share in the election of directors and on all matters
on which holders of Common Stock are entitled to vote. The Series A Preferred
Stock will be subject to a liquidation preference per share equal to the
stated value, plus all accrued and unpaid dividends. The Holding Company may,
at its election, acquire the Option Shares pursuant to the exercise of the
option for purposes of permitting the tax-free receipt by the Life Company
shareholders of the Common Stock and Series A Preferred Stock to be received
by them pursuant to the Option Purchase Agreement by either (i) a direct
exchange of the Option Shares for Common Stock and Series A Preferred Stock or
(ii) the merger of a wholly owned special purpose merger subsidiary of the
Holding Company with and into the Life Company, with the Life Company being
the surviving corporation. In the event of the enactment of a change to the
Code that would be reasonably likely to render the receipt of the Series A
Preferred Stock by the shareholders of the Life Company taxable, the Option
Purchase Agreement provides that the Holding Company and the shareholders will
negotiate in good faith to modify or amend the terms of the Series A Preferred
Stock or the Option Purchase Agreement, in either case, to permit the tax-free
receipt by the shareholders of the exercise price for the Option Shares.

Pursuant to the Plan, no Person will have the preemptive right under the
Plan or Section 7307(s) of the New York Insurance Law to purchase any shares
of Common Stock or Series A Preferred Stock issuable to the shareholders of
the Life Company upon exercise of the Option Purchase Agreement.

The Option Purchase Closing is subject to certain conditions, including,
among others, the conditions that: (i) the transactions contemplated thereby
will have been approved by the affirmative vote of the holders of at least a
majority of the outstanding shares of Common Stock; (ii) all required consents
and approvals of governmental authorities, including any insurance regulatory
authority, will have been obtained; (iii) the Holding Company shall have
received an opinion, in form and substance reasonably acceptable to the
Holding Company, from an investment banking firm of national standing as to
the fairness, from a financial point of view, to the Holding Company of the
transactions contemplated by the Option Purchase Agreement; (iv) following the
exercise date, there shall not occur any event that has or is reasonably
likely to have a material adverse effect on the Life Company and United taken
as a whole; and (v) the bylaws of the Life Company shall have been amended to
permit the Holding Company to acquire the Option Shares. The Option Purchase
Agreement may be terminated at any time prior to the Option Purchase Closing
by mutual agreement of the parties, or generally by either the Holding Company
or a majority of the shareholders of the Life Company, if (a) the Effective
Date has not occurred by December 31, 1997, or (b) the Option Purchase Closing
has not occurred by the first anniversary of the date of exercise of the
option.

25
<PAGE>

USE OF PROCEEDS

The proceeds to Farm Family from the sale of the Shares in the Public
Offering (assuming a Public Offering Price of $ per Share) are expected to
be $ ($ if the Underwriters' over-allotment option is exercised in full)
after deducting estimated underwriting discounts. In addition to the proceeds
of the Public Offering, the Company received proceeds of $ in the
Subscription Offering.

The Company expects to apply the proceeds of the Offerings as follows: (i)
approximately $15.9 million of such proceeds will be used to make cash
payments to certain Eligible Policyholders as part of the Reorganization; (ii)
$ million of such proceeds will be used to make cash payments to certain
holders of Surplus Notes; (iii) approximately $3.6 million of such proceeds
will be used to pay expenses incurred in the Reorganization (including the
expenses of the Offerings); (iv) approximately $ million of such proceeds
will be contributed to FFCIC to increase its capital, which will permit FFCIC
to expand and develop its business in rural and suburban communities; and (v)
the remainder of such proceeds will be retained by the Holding Company for
general corporate purposes.

DIVIDEND POLICY

Following the Effective Date, the Company currently intends to retain any
earnings in order to develop its business and support the operations of FFCIC,
and, as such, does not anticipate that it will pay any dividends to
stockholders in the foreseeable future.

The declaration and payment of dividends in the future are at the discretion
of the Board of Directors of the Company, are subject to certain regulatory
constraints and will depend upon, among other things, FFCIC's results of
operations, financial condition, cash requirements, future prospects and other
factors. The Holding Company will have no sources of funds for the payment of
dividends other than net proceeds retained from the Offerings, if any, by the
Holding Company and not contributed to FFCIC, dividends paid to it by FFCIC
and any funds borrowed by the Holding Company. See "Business--Regulation--
Restrictions on Dividends."

26
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization of Farm
Family and its subsidiaries at March 31, 1996 (i) on an actual basis, (ii) as
adjusted to reflect the Reorganization, and (iii) as adjusted further to
reflect the sale of shares of Common Stock in the Offerings, after deducting
the estimated expenses of the Offerings and the initial application of the
proceeds therefrom. The following table does not assume or reflect the
exercise by the Company, after the Effective Date, of its option to acquire
the Life Company. See "Use of Proceeds," "The Reorganization" and "Description
of Capital Stock."

<TABLE>
<CAPTION>
AT MARCH 31, 1996
----------------------------------------------------
AS ADJUSTED AS ADJUSTED
FOR THE FURTHER FOR THE
ACTUAL REORGANIZATION(/1/) OFFERINGS(/2/)
--------- ------------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Surplus Notes............. $ 2,698.0 $ $
Line of Credit............ -- -- --
--------- -------- ---------
Total Debt.............. 2,698.0
--------- -------- ---------
Equity:
Preferred stock, $.01
par value, 1,000,000
shares authorized and
no shares issued and
outstanding............ -- -- --
Common stock, $.01 par
value, 10,000,000
shares authorized,
1,000 shares, 3,000,000
and shares issued
and outstanding,
actual, as adjusted and
as adjusted further for
the Offerings.......... -- 30.0
Additional paid-in
capital................... -- 62,456.0(/3/) 109,564.3(/3/)
Unrealized investment
gains..................... 5,627.0 5,627.0 5,627.0
Minimum pension
liability................. (118.0) (118.0) (118.0)
Retained earnings....... 65,586.0 -- --
--------- -------- ---------
Total equity............ 71,095.0 67,995.0
--------- -------- ---------
Total capitalization.... $73,793.0 $ $
========= ======== =========
</TABLE>
- --------

(1) Assumes that Eligible Policyholders who are allocated less than 25 shares
in the Reorganization will receive shares of Common Stock and not cash
payments from the Company as part of the Reorganization.

(2) Gives effect to the sale of Subscription Shares at the Subscription
Price of $21. Assumes shares are sold in the Public Offering at an
assumed offering price of $21 per Share. Reflects cash payments of $
million to holders of Surplus Notes who elected to redeem such Surplus
Notes for cash and cash payments of $15.9 million to Eligible
Policyholders who are allocated less than 25 shares of Common Stock.

(3) Reflects estimated expenses of the Reorganization of $3.1 million expected
to be incurred after March 31, 1996.

27
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth certain consolidated financial data for FFCIC
and its subsidiaries prior to the Reorganization. The consolidated statement
of income data set forth below for the years ended December 31, 1993, 1994 and
1995 and the consolidated balance sheet data at December 31, 1994 and 1995 are
derived from the consolidated financial statements of FFCIC appearing
elsewhere herein, which have been audited by Coopers & Lybrand L.L.P.,
independent auditors, whose report thereon appears elsewhere herein. The
consolidated statement of income data for the years ended December 31, 1991
and 1992 and for the three months ended March 31, 1995 and 1996 and the
consolidated balance sheet data at December 31, 1991, 1992 and 1993 and at
March 31, 1995 and 1996 are derived from the unaudited consolidated financial
statements of FFCIC. The Company believes that such unaudited financial data
fairly reflect the consolidated results of operations and the consolidated
financial condition of FFCIC for such periods. This data should be read in
conjunction with the Consolidated Financial Statements, and notes thereto and
other financial information, as well as "Management's Discussion and Analysis
of Financial Condition and Results of Operations," included elsewhere herein.
See Note 11 in "Notes to Consolidated Financial Statements" for a discussion
of the principal differences between GAAP and statutory accounting practices,
and for a reconciliation of consolidated net income and policyholders' equity,
as reported in conformity with GAAP, with consolidated statutory net income
and statutory capital and surplus, as determined in accordance with statutory
accounting practices, as prescribed or permitted by the New York Insurance
Department.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues:
Premiums............. $ 85.3 $ 90.0 $ 96.7 $101.5 $116.9 $ 27.9 $ 31.7
Net investment
income.................. 12.8 12.9 13.8 13.2 14.3 3.5 3.9
Net realized
investment gains
(losses)................ 1.0 1.0 (0.2) 1.3 0.9 -- --
Other income......... 0.2 0.5 0.7 0.7 0.9 0.2 0.2
------ ------ ------ ------ ------ ------- -------
Total revenues...... 99.3 104.4 111.0 116.7 133.0 31.6 35.8
------ ------ ------ ------ ------ ------- -------
Losses and Expenses:
Losses and loss
adjustment expenses..... 74.3 72.1 73.2 82.7 83.2 19.2 25.7
Underwriting
expenses................ 23.7 24.0 26.8 28.8 34.9 8.2 8.8
Interest and other
expense................. 0.3 0.3 0.3 0.3 0.3 0.1 0.1
------ ------ ------ ------ ------ ------- -------
Total losses and
expenses................ 98.3 96.4 100.3 111.8 118.4 27.5 34.6
------ ------ ------ ------ ------ ------- -------
Income before federal
income taxes and
extraordinary
item................. 1.0 8.0 10.7 4.9 14.6 4.1 1.2
Federal income tax
expense................. 0.4 1.8 3.1 1.4 5.0 1.2 0.4
------ ------ ------ ------ ------ ------- -------
Income before
extraordinary item...... 0.6 6.2 7.6 3.5 9.6 2.9 0.8
Extraordinary item--
Reorganization expenses. -- -- -- -- -- -- 0.5
------ ------ ------ ------ ------ ------- -------
Net income............ $ 0.6 $ 6.2 $ 7.6 $ 3.5(/1/) $ 9.6 $ 2.9 $ 0.3(/1/)
====== ====== ====== ====== ====== ======= =======
BALANCE SHEET DATA (AT
PERIOD END):
Total
investments(/2/)........ $150.2 $160.8 $177.7 $170.6 $207.9 $ 180.5 $ 202.3
Total assets.......... 204.4 221.5 244.1 243.1 278.3 253.5 276.7
Long-term debt........ 2.8 2.8 2.8 2.7 2.7 2.7 2.7
Total liabilities..... 163.8 175.0 183.6 190.1 204.1 194.6 205.6
Total equity(/2/)..... 40.6 46.5 60.5 53.0 74.2 58.9 71.1
ANALYTICAL DATA
(UNAUDITED):
Net income per
share(/3/).............. $ 0.21 $ 2.07 $ 2.53 $ 1.18 $ 3.20 $ 0.97 $ 0.10
Book value per
share(/2/)(/3/)......... 13.54 15.48 20.17 17.66 24.72 19.63 23.70
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
----- ----- ----- ----- ----- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
GAAP RATIOS:
Loss and Loss Adjustment
Expense Ratio(/4/)........ 87.1% 80.2% 75.7% 81.5% 71.1% 68.8% 81.2%
Underwriting Expense
Ratio(/5/)................ 27.8% 26.6% 27.7% 28.4% 29.8% 29.5% 27.7%
Combined Ratio(/6/)..... 114.9% 106.8% 103.4% 109.9% 100.9% 98.3% 108.9%
STATUTORY DATA (AT PERIOD
END):
Statutory Combined
Ratio..................... 115.2% 106.0% 104.2% 108.9% 101.0% 100.3% 107.2%
Statutory Surplus....... $29.5 $33.5 $39.1 $42.9 $55.9 $ 45.2 $ 57.7
Ratio of annual
statutory net written
premiums to
statutory surplus...... 2.75x 2.73x 2.52x 2.46x 2.16x 2.45x 2.15x
</TABLE>
- --------

(2) Due to the adoption by the Company on December 31, 1993 of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," total
investments and policyholders' equity were adjusted to reflect changes in
market value, which resulted in an increase of $6.8 million, a reduction
of $11.1 million and an increase of $11.7 million as of December 31, 1993,
1994 and 1995, respectively, and an increase of $3.0 million and a
decrease of $3.4 million as of March 31, 1995 and 1996, respectively.

(3) Gives effect in all periods to the allocation of 3,000,000 shares of
Common Stock to Eligible Policyholders in the Reorganization.

(4) Calculated by dividing losses and loss adjustment expenses by premiums.

(5) Calculated by dividing underwriting expenses by premiums.

(6) The sum of the Loss and Loss Adjustment Expense Ratio and the Underwriting
Expense Ratio.

29
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following analysis of the consolidated results of operations and
financial condition of the Company should be read in conjunction with
"Selected Consolidated Financial Data," the Consolidated Financial Statements
and the accompanying notes to the Consolidated Financial Statements included
elsewhere herein.

GENERAL

Farm Family is a specialized property and casualty insurer of farms, other
generally related businesses and residents of rural and suburban communities
principally in the Northeastern United States. The Company provides property
and casualty insurance coverages to members of the state Farm Bureau
organizations in Delaware, New Jersey, New York, West Virginia and all of the
New England states. In addition, the Company's wholly owned subsidiary, Rural
Agency, places insurance coverages not underwritten by the Company for the
Company's policyholders. The operations of the Company are also closely
related with those of its affiliates, the Life Company and the Life Company's
wholly owned subsidiary, United.

The Company's premium revenue is a function of changes in average premium
per policy and the growth in the number of policies. Premium rates are
regulated by the state insurance departments in the states in which the
Company operates. See "Business--Regulation." Membership in the state Farm
Bureau organizations is a prerequisite for voluntary insurance coverage
(except for employees of the Company and its affiliates). Associate Farm
Bureau memberships are generally available for an annual fee to persons not
engaged in agricultural businesses. All of the Company's insurance policies
are currently written on a participating basis, although for several years the
Company has paid dividends only on certain of its workers' compensation
policies. Subsequent to the Effective Date, only these workers' compensation
policies will continue to be written on a participating basis.

The operating results of companies in the property and casualty insurance
industry have historically been subject to fluctuations due to competition,
economic conditions and various other factors. Factors affecting results of
operations of the industry include price competition and aggressive marketing
which historically have resulted in higher combined loss and expense ratios.
Because of the nature of the property and casualty industry, it is difficult
to predict future trends in the industry's overall combined losses and
profitability.

The Company's operating results are subject to significant fluctuations from
period to period depending upon, among other factors, the frequency and
severity of losses from weather related and other catastrophic events, the
effect of competition and regulation on the pricing of products, changes in
interest rates, general economic conditions, tax laws and the regulatory
environment. As a condition of its license to do business in various states,
the Company is required to participate in a variety of mandatory residual
market mechanisms (including mandatory pools) which provide certain insurance
(most notably automobile insurance) to consumers who are otherwise unable to
obtain such coverages from private insurers. In all such states, residual
market premium rates are subject to the approval of the state insurance
department. Residual market premium rates for automobile insurance have
generally been inadequate. The amount of future losses or assessments from
residual market mechanisms cannot be predicted with certainty and could have a
material adverse effect on the Company's results of operations.

For the years ended December 31, 1993, 1994 and 1995 and for the three
months ended March 31, 1996, 38.8%, 38.5%, 39.1% and 37.5%, respectively, of
the Company's direct written premiums were derived from policies written in
New York and, for the same periods, 19.0%, 19.6%, 20.8% and 21.5%,
respectively, were derived from policies written in New Jersey. For these
periods, no other state accounted for more than 10.0% of the Company's direct
written premiums. As a result of the concentration of the Company's business
in New York and New Jersey and, more generally, in the Northeastern United
States, the Company's results of operations may be significantly affected by
weather conditions, catastrophic events and regulatory developments in these
two states and in the Northeastern United States generally.

30
<PAGE>

The Special Farm Package is a flexible, multi-line package of insurance
coverage which the Company regards as its "flagship" product. For the year
ended December 31, 1995, approximately 25% of the Company's total direct
premiums written were derived from the Special Farm Package product. The
Company concentrates on the Special Farm Package and its other established
major product lines and, increasingly, on its businessowners and homeowners
products. It generally does not pursue the development of products with risk
profiles with which it is not familiar, nor does it, typically, actively
market its automobile, workers' compensation or general liability policies
except to policyholders who may also purchase its Special Farm Package,
businessowners or homeowners products. The Company underwrites its commercial
and personal lines risks by evaluating historical loss experience, current
prevailing market conditions and product profitability with consistently
applied standards. The adequacy of premium rates is affected mainly by the
severity and frequency of claims and changes in the competitive, legal and
regulatory environments in which the Company operates.

Since 1987, the Company has implemented a standard environmental and
pollution exclusion in some of its commercial liability and property policies,
including its Special Farm Package product. However, the Special Farm Package
contains a limited coverage endorsement for above-ground environmental and
pollution liabilities. The industry standard personal and commercial
automobile and homeowners policies do not contain an exclusion from
environmental and pollution risks. The Company also writes a small number of
claims made pollution liability policies. The Company does not believe that
any pending claims or administrative or judicial proceedings arising from
environmental and pollution related liabilities will have a material adverse
effect on the Company's financial condition, and is not aware of any material
threatened claims or administrative or judicial proceedings arising from such
liabilities. See "Risk Factors--Potential Liability for Environmental and
Pollution Risks."

RESULTS OF OPERATIONS

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995

Premiums. Premium revenue increased $3.8 million, or 13.7%, during the three
months ended March 31, 1996 to $31.7 million from $27.9 million for the same
period in 1995. The increase in premium revenue in 1996 resulted from an
increase of $3.1 million in earned premiums on additional business directly
written by the Company and an increase of $0.8 million in earned premiums
retained by the Company and not ceded to reinsurers, which were partially
offset by a decrease of $0.1 million in earned premiums assumed. The $3.1
million increase in earned premiums on additional business directly written by
the Company was primarily attributable to an increase of $2.2 million, or
8.8%, in earned premiums from the Company's primary products (personal and
commercial automobile products other than assigned risk business, the Special
Farm Package, businessowners products, homeowners products and the Special
Home Package) and to an increase of $0.4 million in earned premiums on
assigned risk business. The number of policies in force related to the
Company's primary products increased by 7.6% to approximately 106,000 as of
March 31, 1996 from approximately 99,000 as of March 31, 1995 and the average
premium earned for each such policy increased by 1.1% during the three months
ended March 31, 1996 compared to the same period in 1995. The $0.8 million
increase in earned premiums retained by the Company was primarily the result
of a change in the terms of certain of the Company's reinsurance agreements
pursuant to which the amount of earned premiums ceded by the Company were
reduced without a change in the terms of the coverages provided by such
agreements.

Net Investment Income. Net investment income increased $0.4 million, or
10.1%, to $3.9 million for the three months ended March 31, 1996 from $3.5
million for the same period in 1995. The increase in net investment income was
primarily the result of an increase in cash and invested assets (at amortized
cost) of approximately $13.4 million, or 7.3%. The return realized on the
Company's cash and invested assets was 7.8% for the three months ended March
31, 1996 and 7.7% for the same period in 1995.

Net Realized Investment Gains. Net realized investment gains were $63,000
for the three months ended March 31, 1996 and $61,000 for the same period in
1995.

31
<PAGE>

Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
increased $6.6 million, or 34.3%, to $25.7 million for the three months ended
March 31, 1996 from $19.1 million for the same period in 1995. Loss and loss
adjustment expenses were 81.2% of premium revenue for the three months ended
March 31, 1996 compared to 68.8% of premium revenue for the same period in
1995. The increase in the loss and loss adjustment expense ratio was primarily
attributable to the severity and frequency of weather-related losses
experienced in the Northeastern United States during the three months ended
March 31, 1996. Losses and loss adjustment expenses believed to be storm and
weather related aggregated $6.9 million for the three months ended March 31,
1996 compared to $0.9 million for the same period in 1995.

Underwriting Expenses. Underwriting expenses increased $0.6 million, or
7.0%, to $8.8 million for the three months ended March 31, 1996 from $8.2
million for the same period in 1995. For the three months ended March 31,
1996, underwriting expenses were 27.7% of premium revenue compared to 29.5%
for the same period in 1995. The reduction in the Company's underwriting
expense ratio for the three months ended March 31, 1996 was primarily
attributable to a smaller relative increase in overhead expenses than in
premium revenue for the period.

Federal Income Tax Expense. Federal income tax expense decreased $0.8
million to $0.4 million for the three months ended March 31, 1996 from $1.2
million for the same period in 1995. Federal income tax expense was 32.5% of
income before federal income tax expense for the three months ended March 31,
1996 compared to 29.0% for the same period in 1995. The increase in the
Company's effective federal income tax rate was primarily attributable to
reductions in tax exempt interest income and dividend income during the three
months ended March 31, 1996.

Net Income. Net income decreased $2.6 million to $0.3 million for the three
months ended March 31, 1996 from $2.9 million for the same period in 1995
primarily as a result of the foregoing factors and the impact of $0.5 million
of expenses related to the Reorganization which the Company has identified as
an extraordinary item.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Premiums. Premium revenue increased $15.5 million, or 15.2%, during the year
ended December 31, 1995 to $116.9 million from $101.5 million in 1994. The
increase in premium revenue in 1995 resulted from an increase of $14.3 million
in earned premiums on additional business directly written by the Company
(principally in New York and New Jersey) and an increase of $2.3 million in
earned premiums retained by the Company and not ceded to reinsurers, which
were partially offset by a decrease of $1.1 million in earned premiums
assumed. The $14.3 million increase in earned premiums on additional business
directly written by the Company was primarily attributable to an increase of
$10.8 million, or 11.1%, in earned premiums from the Company's primary
products (personal and commercial automobile products other than assigned risk
business, the Special Farm Package, businessowners products, homeowners
products, and the Special Home Package) and to an increase of $1.8 million in
earned premiums on assigned risk business. The number of policies in force
related to the Company's primary products increased by 8.4% to approximately
105,000 in 1995 from approximately 97,000 in 1994 and the average premium
earned for each such policy increased by 2.5% in 1995. The $2.3 million
increase in earned premiums retained by the Company was primarily the result
of a change in the terms of certain of the Company's reinsurance agreements
pursuant to which both the amount of earned premiums ceded by the Company and
the ceding commissions received by the Company were reduced. The $1.1 million
decrease in earned premiums assumed was attributable to a reduction in
premiums assumed from mandatory pools as a result of the depopulation of such
pools.

Net Investment Income. Net investment income increased $1.1 million, or
8.6%, to $14.3 million for the year ended December 31, 1995 from $13.2 million
in 1994. The increase in net investment income was primarily the result of an
increase in cash and invested assets (at amortized cost) of approximately
$17.2 million, or 9.6%. The return realized on the Company's cash and invested
assets was 7.6% in both 1995 and 1994.

32
<PAGE>

Net Realized Investment Gains. Net realized investment gains were $0.9
million for the year ended December 31, 1995 compared to $1.3 million in 1994.

Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
increased $0.5 million, or 0.6%, to $83.2 million for the year ended December
31, 1995 from $82.7 million in 1994. The increase in losses and loss
adjustment expenses was primarily attributable to the overall growth in the
Company's business and was significantly offset by a reduction in the loss and
LAE ratio. Loss and loss adjustment expenses were 71.1% of premium revenue in
1995 compared to 81.5% of premium revenue in 1994. The decrease in the loss
and LAE ratio in 1995 was primarily attributable to improved loss ratios on
the Company's personal and commercial automobile lines and to a decline in the
frequency and severity of weather related property losses in 1995 as compared
with 1994. Losses and loss adjustment expenses believed to be storm and
weather related aggregated $5.2 million in 1995 compared to $7.9 million in
1994. To a much lesser extent, a decrease in the loss and LAE ratio on assumed
reinsurance also contributed to the decrease in the Company's overall loss and
LAE ratio during 1995.

Underwriting Expenses. Underwriting expenses increased $6.1 million, or
21.0%, to $34.9 million for the year ended December 31, 1995 from $28.8
million in 1994. For the year ended December 31, 1995, underwriting expenses
were 29.8% of premium revenue compared to 28.4% in 1994. A reduction in 1994
of $2.2 million in amounts accrued for the Company's share of the deficit of
the New Jersey Market Transition Facility, a residual market mandatory pool,
had a favorable impact on the Company's underwriting expense ratio in that
year. Without taking into account the effect of this reduction, underwriting
expenses in 1994 would have been 30.5% of premium revenue.

Federal Income Tax Expense. Federal income tax expense increased $3.6
million to $5.0 million in 1995 from $1.4 million in 1994. Federal income tax
expense was 34.2% of income before federal income tax expense in 1995 compared
to 29.1% in 1994. The increase in the Company's effective federal income tax
rate was primarily attributable to the increase in income before federal
income tax expense, certain expenses related to the Reorganization and
reductions in tax exempt interest income in 1995.

Net Income. Net income increased $6.1 million to $9.6 million in 1995 from
$3.5 million in 1994 primarily as a result of the foregoing factors.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

Premiums. Premium revenue increased $4.8 million, or 5.0%, during the year
ended December 31, 1994 to $101.5 million from $96.7 million in 1993. The
increase in premium revenue in 1994 resulted from an increase of $8.5 million
in earned premiums on additional business directly written by the Company,
which was offset by a decrease of $2.0 million in earned premiums assumed from
mandatory pools as a result of the depopulation of such pools and by an
increase of $1.7 million in earned premiums ceded to reinsurers (related to
the increase in direct written premiums). The $8.5 million increase in earned
premiums on additional business directly written by the Company was primarily
attributable to an increase of $8.4 million, or 9.4%, in earned premiums from
the sale of the Company's primary products. The number of policies in force
related to the Company's primary products increased by 8.5% to approximately
97,000 in 1994 and the average premium earned for each such policy increased
by 1.0% in 1994.

Net Investment Income. Net investment income decreased $0.6 million, or
4.8%, to $13.2 million for the year ended December 31, 1994 from $13.8 million
in 1993. The decrease in net investment income was primarily the result of
losses of $0.5 million (primarily related to certain limited partnership
investments) recognized by the Company during 1994. The return realized on
cash and invested assets (at amortized cost) declined to 7.5% in 1994 from
8.4% in 1993, the effect of which was offset in part by an increase in cash
and invested assets of $10.6 million or 6.3%.

33
<PAGE>

Net Realized Investment Gains. Net realized investment gains (losses) were
$1.3 million for the year ended December 31, 1994 compared to ($0.2 million)
in 1993. The net realized investment losses in 1993 were primarily the result
of an approximately $1.9 million realized loss recognized by the Company in
1993 on a non-investment grade fixed maturity security which was deemed to be
permanently impaired, offset in part by realized investment gains on the sale
of other investments.

Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
increased $9.5 million, or 12.9%, to $82.7 million for the year ended December
31, 1994 from $73.2 million in 1993, primarily as a result of the overall
growth in the Company's business and an increase in the loss and LAE ratio.
The loss and LAE ratio increased to 81.5% in 1994 from 75.7% in 1993. The
increase in the loss and LAE ratio was primarily attributable to an increase
in property losses as a result of wind and ice storms in the Northeast during
1994. Losses and loss adjustment expenses believed to be storm and weather
related aggregated $7.9 million in 1994 compared to $4.6 million in 1993.

Underwriting Expenses. Underwriting expenses increased $2.0 million, or
7.3%, to $28.8 million for the year ended December 31, 1994 from $26.8 million
in 1993. For the year ended December 31, 1994, underwriting expenses were
28.4% of premium revenue compared to 27.7% in 1993. The increase in the
Company's underwriting expense ratio in 1994 was primarily attributable to a
change in the Company's casualty reinsurance agreement with United and, to a
lesser extent, increases in certain overhead expenses related to the overall
increase in the Company's business, which was offset in part by the $2.2
million reduction in 1994 in amounts accrued for the Company's share of the
deficit of the New Jersey Market Transition Facility.

Federal Income Tax Expense. Federal income tax expense decreased $1.7
million to $1.4 million in 1994 from $3.1 million in 1993 due primarily to the
decline in income before federal income tax expense. Federal income tax
expense as a percentage of income before federal income tax expense was
relatively unchanged in 1994 from 1993 at approximately 29.0%.

Net Income. Net income decreased $4.1 million to $3.5 million in 1994 from
$7.6 million in 1993 primarily as a result of the foregoing factors.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the principal sources of the Company's cash flow have been
premiums, investment income, maturing investments and proceeds from sales of
invested assets. In addition to the need for cash flow to meet operating
expenses, the liquidity requirements of the Company relate primarily to the
payment of losses and loss adjustment expenses. The short- and long-term
liquidity requirements of the Company vary because of the uncertainties
regarding the settlement dates for liabilities for unpaid claims and because
of the potential for large losses, either individually or in the aggregate.

During 1995, the Company reduced its holdings of non-investment grade fixed
maturities to improve the overall quality of its investment portfolio and in
response to recommendations by A.M. Best. The aggregate carrying value of
fixed maturity securities rated as non-investment grade by the NAIC was
reduced from $17.3 million, or 10.8% of its fixed maturity portfolio, at
December 31, 1994 to $10.8 million, or 5.6% of it fixed maturity portfolio, at
December 31, 1995. High yield corporate bonds constituted most of the non-
investment grade securities held by the Company as of December 31, 1995. As a
result of the reduction in holdings of certain non-investment grade
securities, the Company anticipates that future investment yields may be lower
than they otherwise would be. Less than 1.0% of the Company's investment
portfolio consists of investments in mortgage-backed securities. The average
duration and average stated maturity of the Company's fixed maturity
investment portfolio is approximately seven and eleven years, respectively.
The mortgage-backed securities held by the Company as of December 31, 1995
were primarily U.S. Government agency or agency-backed pass-through
securities. The Company currently has no investments in such derivative
financial instruments as futures, forwards, swaps or options contracts, or
other financial instruments with similar characteristics. The market value of
the Company's fixed maturity investments is subject to fluctuations directly
attributable to prevailing rates of

34
<PAGE>

interest as well as other factors. As of December 31, 1995, the aggregate
market value of the Company's fixed maturity investments exceeded the
aggregate amortized cost of such investments by $10.2 million. As of December
31, 1994, the aggregate amortized cost of the Company's fixed maturity
investments exceeded the aggregate market value of such investments by $8.1
million. See "Business--Investments."

The Company has in place an unsecured line of credit with Key Bank of New
York under which it may borrow up to $2.0 million. At April 15, 1996, no
amounts were outstanding on this line of credit, which has an annual interest
rate equal to the bank's prime rate. In addition, at April 15, 1996, the
Company had $2.7 million principal amount of Surplus Notes outstanding. The
Surplus Notes bear interest at the rate of eight percent per annum and have no
maturity date. The principal and interest on the Surplus Notes are repayable
only with the approval of the Superintendent. Pursuant to the Plan, the
holders of the Surplus Notes will generally have the option to exchange the
Surplus Notes for cash or shares of Common Stock in the Holding Company, or
they may elect to continue to hold such Surplus Notes.

Net cash provided by operating activities was $0.9 million and $4.8 million
during the three months ended March 31, 1996 and 1995, respectively, and was
$16.4 million, $8.6 million, and $5.6 million during the years ended December
31, 1995, 1994, and 1993, respectively. The decrease in net cash provided by
operating activities during the three months ended March 31, 1996 compared to
the same period in 1995 was primarily attributable to the decrease in net
income and an increase in payments for losses and loss adjustment expenses and
certain expenses related to the Reorganization. The increase in net cash
provided by operating activities in 1995 was primarily attributable to the
increase in net income and a decrease in payments for losses and loss
adjustment expenses during 1995 compared to 1994. The increase in net cash
provided by operating activities in 1994 was primarily attributable to a
reduction in reinsurance receivables during 1994 compared to 1993.

Net cash provided by investing activities was $0.5 million during the three
months ended March 31, 1996 and net cash used in investing activities was $5.3
million during the three months ended March 31, 1995. Net cash used in
investing activities was $18.5 million, $7.7 million, and $7.2 million during
the years ended December 31, 1995, 1994 and 1993, respectively. The increase
in net cash provided by investing activities during the three months ended
March 31, 1996 compared to the same period in 1995 primarily resulted from the
net decrease in the Company's short-term investments. The increase in net cash
used in investing activities in 1995 as compared to 1994 resulted from the net
increase in cash available from the Company's operations during 1995 and a
corresponding increase in investments in short-term investments and fixed
maturities.

The Company purchases reinsurance in part to mitigate the effect of large or
unusual losses and loss expense activity. See "Business--Reinsurance." As a
condition of writing business in certain states, the Company participates in a
number of mandatory pools and the Company may incur losses to the extent such
pools experience deficits in the future. See "Business--Regulation."

The principal source of liquidity for the Holding Company will be dividend
payments received from FFCIC. The New York Insurance Law regulates the
distribution of dividends and other payments to the Holding Company by the
Company. See "Business--Regulation." Such restrictions or any subsequently
imposed restrictions may in the future affect the Holding Company's liquidity.
Depending on the amount of proceeds from the Offerings and loan terms
available to the Holding Company, the Holding Company may borrow additional
funds in undetermined amounts to make cash payments to certain Eligible
Policyholders and certain holders of Surplus Notes as part of the
Reorganization, to pay Holding Company expenses and to make a capital
contribution to FFCIC. It is anticipated that the Holding Company will have in
place a line of credit with an unaffiliated lender prior to the Effective Date
under which the Company could borrow such funds. Any net proceeds of the
Offerings retained by the Holding Company will be used for general corporate
purposes.

35
<PAGE>

BUSINESS

OVERVIEW

Farm Family is a specialized property and casualty insurer of farms, other
generally related businesses and residents of rural and suburban communities
in Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New
York, Rhode Island, Vermont and West Virginia. Established in 1955 to meet
certain insurance needs of Farm Bureau members in the Northeast, the Company
provides flexible, multi-line packages of insurance for those engaged in
agricultural pursuits, as well as automobile, commercial general liability,
workers' compensation, umbrella liability, businessowners, homeowners and
other insurance products to rural and suburban policyholders in ten states.
Life insurance products are also sold to many of these customers by the Life
Company.

The Company markets its insurance products through more than 200 Farm Family
agents and field managers who are located in the rural and suburban
communities served by the Company. These agents generally sell insurance
products only for the Company and the Life Company. The Company believes that
the distinctive focus of Farm Family and its agents on meeting the specialized
insurance needs of rural communities has provided the Company with the
knowledge and experience to adapt to changes in the demographics of its
markets and in the nature of agricultural related businesses. In addition to
insuring those engaged in agricultural pursuits such as dairy, vegetable and
fruit farming, the Company insures a wide range of other businesses related to
agriculture, such as distributors of agricultural products, horse breeding and
training facilities, landscapers, nurseries, florists, wineries and growers of
specialty products. In recent years, the Company has also introduced
businessowners products for certain retail and contractor businesses and for
owners of apartment and office buildings, as well as a homeowners product.

The Company's principal strategy is to maintain its focus on meeting many of
the specialized insurance needs of Northeastern rural and suburban
communities. The Company's flagship product, the Special Farm Package, is a
flexible product that can be adapted to meet the needs of a variety of
agricultural and agricultural related businesses. As evidenced by its
introduction of businessowners products in 1990, the Company also seeks to
leverage its local reputation, agency force, knowledge and experience to
expand its product offerings to a wider variety of customers in rural and
suburban communities. In addition, the Company will continue to seek to
facilitate and expedite sales, underwriting and policy administration
functions through the expanded use of local service centers and computer
networking communications with the home office.

LINES OF BUSINESS

The following table sets forth by line of business the direct premiums
written by Farm Family for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- ---------------
% OF % OF % OF % OF
1993 TOTAL 1994 TOTAL 1995 TOTAL 1996 TOTAL
------ ----- ------ ----- ------ ----- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Automobile
Liability(/1/).......... $ 37.3 33.5% $ 41.6 34.1% $ 47.5 35.0% $ 12.6 35.5%
Fire & Allied Lines..... 21.6 19.5 22.7 18.7 23.4 17.1 5.6 15.7
Automobile Physical
Damage(/1/)............. 17.7 15.9 18.9 15.5 21.7 15.9 5.7 16.1
Other Liability......... 12.9 11.6 14.3 11.7 15.5 11.4 3.8 10.7
Workers' Compensation... 8.3 7.5 8.1 6.7 9.1 6.7 3.0 8.4
Inland Marine........... 6.4 5.7 6.8 5.5 6.9 5.1 1.7 4.8
Commercial Multi-peril.. 3.8 3.4 5.3 4.3 6.6 4.9 1.8 5.1
Homeowners Multi-peril.. 3.0 2.7 4.1 3.3 5.1 3.8 1.3 3.7
Products Liability...... 0.2 0.2 0.2 0.2 0.2 0.1 0.0 0.0
------ ----- ------ ----- ------ ----- ------- -------
Total................. $111.2 100.0% $122.0 100.0% $136.0 100.0% $ 35.5 100.0%
====== ===== ====== ===== ====== ===== ======= =======
</TABLE>
- --------
(1) Premium data for automobile liability include $3.8 million, $4.3 million,
$6.0 million and $1.4 million and for auto physical damage include $0.6
million, $0.5 million, $0.6 million and $0.1 million, in each case, of
direct premiums written by Farm Family under certain mandatory state
residual market assigned risk plans for the years ended December 31, 1993,
1994 and 1995 and the three months ended March 31, 1996, respectively,
which represented, in the aggregate, approximately 3.9%, 4.0%, 4.9% and
4.2%, respectively, of Farm Family's total direct premiums written for
such periods. See "--Regulation" and "Risk Factors--Effect of Regulation."

36
<PAGE>

Automobile Liability and Automobile Physical Damage. Automobile liability
coverage insures individuals and businesses against claims resulting from
bodily injury and property damage. Automobile physical damage coverage insures
individuals and businesses against claims resulting from property damage to an
insured's vehicle.

Fire & Allied Lines. Fire and allied lines cover first party losses arising
from fire and related perils, including extended perils coverage, vandalism
and malicious mischief. These coverages are usually written under the Special
Farm Package, and provide fire and extended perils coverage to farm residences
and outbuildings, machinery, tools, animals and other personal and business
property. Farm Family also writes a small number of standard fire policies.

Other Liability. The other liability line primarily includes Farm Family's
liability coverages other than automobile, workers' compensation, commercial
multi-peril, homeowners multi-peril and products liability. Other liability
coverage generally includes personal, farm and business liability coverage
under Farm Family's Special Farm Package, Special Home Package, commercial
general liability, umbrella liability and pollution liability products. See
"--Products."

Workers' Compensation. Workers' compensation coverage insures employers
against employee medical and indemnity claims resulting from injuries related
to work as well as third party employer's liability. Of the ten states in
which the Company operates, Farm Family's workers' compensation policy is not
presently sold in Maine, Massachusetts, Rhode Island and West Virginia.
Workers' compensation is viewed by the Company as an accommodation line, which
generally is sold in conjunction with a Special Farm Package or a
businessowners policy.

Inland Marine. Inland marine coverage insures business and personal
property, such as machines, equipment and farm produce. The Company's
coverages in this line of business are principally related to large equipment,
farm produce in general and farm produce while in storage.

Commercial Multi-peril. Commercial multi-peril coverage insures businesses
for damages arising from property and liability claims, including third party
liability from accidents occurring on their premises or arising out of their
operations or from the sale of products. It also insures business property for
damage, such as that caused by fire, wind, hail, water damage, theft and
vandalism. Most of Farm Family's commercial multi-peril policies are written
under the Company's businessowners product for artisan contractors.

Homeowners Multi-peril. Homeowners multi-peril coverage insures individuals
for losses to their residences and personal property, such as those caused by
fire, wind, hail, water damage, theft and vandalism, and against third party
liability claims. Farm Family's homeowners policy is an industry standard
policy for the rural and suburban homeowner, which provides for several
optional endorsements.

Products Liability. Farm Family also writes a small amount of a products
liability line as part of its commercial general liability product.

PRODUCTS

Farm Family offers a variety of property and casualty insurance products
primarily designed to meet the unique insurance needs of its agricultural
clients and the general insurance needs of the rural and suburban communities
in which it does business. Many policyholders have more than one policy with
the Company, most commonly a property policy (such as a Special Farm Package
or homeowners policy) and an automobile policy.

37
<PAGE>

The following table sets forth by product the direct premiums written by
Farm Family for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------- ----------------
% OF % OF % OF % OF
1993 TOTAL 1994 TOTAL 1995 TOTAL 1996 TOTAL
------ ----- ------ ------ ------ ----- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Personal Automobile..... $ 36.8 33.1% $ 40.3 33.0% $ 46.6 34.2% $ 12.2 34.5%
Special Farm Package.... 30.8 27.7 32.7 26.8 34.0 25.0 8.3 23.4
Commercial Automobile... 18.2 16.4 20.2 16.6 22.7 16.7 6.1 17.2
Workers' Compensation... 8.3 7.5 8.1 6.6 9.1 6.7 3.0 8.5
Businessowners.......... 3.8 3.4 5.3 4.3 6.6 4.9 1.8 5.1
Homeowners.............. 3.0 2.7 4.1 3.4 5.1 3.8 1.3 3.7
Umbrella................ 3.4 3.1 4.2 3.4 4.4 3.2 1.1 3.1
Commercial General
Liability............... 2.8 2.5 3.0 2.5 3.4 2.5 0.8 2.1
Special Home Package.... 2.9 2.6 2.8 2.3 2.8 2.1 0.7 1.8
Fire, Allied, Inland
Marine.................. 0.9 0.8 1.0 0.8 1.0 0.7 0.2 0.6
Products Liability...... 0.2 0.2 0.2 0.2 0.2 0.1 -- --
Pollution............... 0.1 0.1 0.1 0.1 0.1 0.1 -- --
------ ----- ------ ----- ------ ----- ------- -------
Total................. $111.2 100.0% $122.0 100.0% $136.0 100.0% $ 35.5 100.0%
====== ===== ====== ===== ====== ===== ======= =======
</TABLE>

Personal Automobile. Personal automobile is Farm Family's largest product.
The Company's industry standard policies are generally marketed in conjunction
with Farm Family's other products, such as the Special Farm Package, the
businessowners policy or the homeowners policy. As of March 31, 1996, Farm
Family had approximately 41,300 personal automobile policies in force.

Special Farm Package. The Special Farm Package, developed in 1980, is a
flexible, multi-line package of insurance coverages which Farm Family regards
as its "flagship" product. As a result of its flexible features, this product
can be adapted to meet the needs of a variety of agricultural and related
businesses. The Special Farm Package policy combines personal, farm and
business property and liability insurance for the farm owner, as well as
owners of other agricultural related businesses, such as horse breeding and
training facilities, nurseries, wineries and greenhouses. The largest number
of Special Farm Package policies written by Farm Family are for dairy, beef,
horse, general farming and vegetable risks. Policyholders may select property
damage coverages for specific peril groups, such as fire, wind, hail, water
damage, theft and vandalism. Business and personal liability coverage insures
policyholders against third party liability from accidents occurring on their
premises or arising out of their operations or from their products. The
Special Farm Package policy contains a limited liability extension of
pollution-type coverage for damages caused to third persons or their crops
resulting from above-ground, off-premises contamination, such as overspray of
fertilizers and pesticides. For the three months ended March 31, 1996,
approximately 90%, 91% and 47% of Farm Family's fire and allied lines, inland
marine and other liability premiums, respectively, were written under the
Special Farm Package policy. As of March 31, 1996, Farm Family had
approximately 25,000 Special Farm Package policies in force.

Commercial Automobile. Commercial automobile is Farm Family's third largest
product. The Company's industry standard policies are generally marketed in
conjunction with the Special Farm Package or the businessowners policy. As of
March 31, 1996, Farm Family had approximately 16,000 commercial automobile
insurance policies in force.

Workers' Compensation. Farm Family generally does not seek to market or
write its workers' compensation policy apart from a Special Farm Package or a
businessowners policy. As of March 31, 1996, approximately 87.5% of Farm
Family's in force workers' compensation policies were written in connection
with Special Farm Package, businessowners, commercial multi-peril or
homeowners policies.

38
<PAGE>

Businessowners. Farm Family introduced a businessowners product (based on
the industry standard policy form) in 1990 to meet the needs of small
businesses within its rural and suburban markets. Direct written premiums for
this product have grown from $0.1 million in 1991 to $6.6 million in 1995.
This product is marketed to two distinct groups: (i) "mercantile
businessowners" with property based risks, including apartment and office
building owners and small to medium-sized retail businesses, such as florists
and farm markets and (ii) small, established artisan contractors principally
serving the agricultural community. Farm Family also issues a small number of
industry standard commercial multi-peril policies to selected risks that do
not meet the eligibility requirements for the businessowners product. As of
March 31, 1996, approximately 63% of the approximately 5,100 in force
businessowners policies were issued to contractors and 37% were issued to
property based mercantile risks.

Special Home Package and Homeowners Policy. The Special Home Package was
developed in 1980 as a companion product for the Special Farm Package policy.
Farm Family's homeowners policy, introduced in 1989, is a standard homeowners
multi-peril policy for the rural and suburban homeowner. Increasingly, the
homeowners policy is being sold to provide coverage for the insured's
principal residence, while the Special Home Package is used by Farm Family to
insure rural-based, tenant occupied residences. Like the Special Farm Package,
the Special Home Package combines personal and commercial property and
liability coverages, and contains flexible features which also allow it to be
adapted to meet the needs of a variety of customers. As of March 31, 1996,
Farm Family had approximately 7,400 Special Home Package policies in force and
approximately 15,800 homeowners policies in force.

Umbrella Liability. Farm Family writes commercial and personal line excess
liability policies covering business, farm and personal liabilities of Farm
Family's policyholders in excess of amounts covered under Special Farm
Package, homeowners, businessowners and automobile policies. Such policies are
available with limits of $1.0 million to $5.0 million. Farm Family does not
generally seek to market its excess liability policies unless it also writes
an underlying liability policy.

Commercial General Liability. Farm Family writes an industry standard
commercial general liability policy which is generally marketed in connection
with the Special Farm Package or, as an accommodation to policyholders in
connection with the commercial automobile policy. The commercial general
liability policy is generally not written apart from these other policies. The
policy is usually written by Farm Family for unique business situations, such
as horse breeding and training facilities and certain landscaper risks, which
do not meet the criteria for liability coverage under a businessowners or
Special Farm Package policy. The policy insures businesses against third party
liability from accidents occurring on their premises or arising out of their
operations or products. Most of Farm Family's products liability line is
written as part of the commercial general liability product.

Pollution. Farm Family writes a small number of pollution liability policies
covering specified farm risks on a "claims-made" basis. The policy insures
against losses incurred from third party liability, including bodily injury
and property damages, for pollution incidents, such as those caused from
pesticides, fertilizers, herbicides and manure piles. An "extended reporting
period" option is available under certain circumstances which allows for claim
reporting after the policy expiration. As of March 31, 1996, Farm Family had
approximately 300 pollution policies in force.

39
<PAGE>

MARKETING

The following table sets forth Farm Family's direct written premiums by
state for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- ----------------
% OF % OF % OF % OF
1993 TOTAL 1994 TOTAL 1995 TOTAL 1996 TOTAL
------ ----- ------ ----- ------ ----- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New York................ $ 43.1 38.8% $ 47.0 38.5% $ 53.2 39.1% $ 13.3 37.5%
New Jersey.............. 21.2 19.0 23.9 19.6 28.3 20.8 7.6 21.5
Massachusetts........... 9.2 8.3 10.1 8.3 10.5 7.7 3.4 9.5
Connecticut............. 7.5 6.7 8.2 6.7 9.1 6.7 2.4 6.7
West Virginia........... 6.7 6.0 7.3 6.0 7.8 5.7 1.9 5.2
Maine................... 6.6 5.9 6.7 5.5 6.9 5.1 1.5 4.3
New Hampshire........... 6.7 6.0 6.7 5.5 6.8 5.0 1.6 4.5
Vermont................. 4.5 4.1 5.0 4.1 5.3 3.9 1.4 4.1
Delaware................ 3.5 3.2 4.1 3.4 4.4 3.3 1.4 3.8
Rhode Island............ 2.2 2.0 3.0 2.4 3.7 2.7 1.0 2.9
------ ----- ------ ----- ------ ----- ------- -------
Total................. $111.2 100.0% $122.0 100.0% $136.0 100.0% $ 35.5 100.0%
====== ===== ====== ===== ====== ===== ======= =======
</TABLE>

As of May 31, 1996, Farm Family marketed its property and casualty insurance
products in its ten-state region through approximately 187 full-time agents,
13 field managers and ten associate field managers. Many of Farm Family's
agents are established residents of the rural and suburban communities in
which they operate and often have specific prior experience in agricultural
related businesses. Farm Family's agents generally market and write the full
range of Farm Family's products. In addition to marketing Farm Family's
property and casualty insurance products, the Company's agency force also
markets life insurance products for the Life Company and may also act as
brokers for Rural Agency. The Company believes that the breadth of products
available to its agents through Farm Family, the Life Company and Rural Agency
is important in allowing the agents to meet all of the unique insurance needs
of rural and suburban communities. Agents generally place insurance
exclusively for the Company, the Life Company and Rural Agency.

Farm Family emphasizes personal contact between its agents and the
policyholders. The Company believes that Farm Family's name recognition,
policyholder loyalty and policyholder satisfaction with agent and claims
relationships are the principal sources of new customer referrals, cross-
selling of additional insurance products and policyholder retention. In
addition, the Company believes that Farm Family's relationship with the Farm
Bureaus in its target markets promotes Farm Family name recognition and new
customer referrals among Farm Bureau members. See "--Relationship with Farm
Bureaus."

Farm Family's policies are marketed exclusively through its agency force.
The Company depends upon its agency force to produce new business and to
provide customer service. The agency force also serves as an important source
of information about the needs of the rural and suburban communities served by
Farm Family. This information is utilized by Farm Family to develop new
products and new product features.

Agent compensation is comprised entirely of fixed commissions, office
expense allowances and incentive bonuses. Commissions as a percentage of
premiums written for new and renewal business range from 3.0% to 13.5%
depending upon the type of insurance product sold. An office expense allowance
program enables agents whose premium writings of certain products exceed
$200,000 to earn additional compensation intended to assist in paying office
expenses. Incentive bonuses are based upon the loss ratio on an agent's book
of business. Incentive bonuses paid in 1995 constituted up to 13.7%, and
averaged 3.1%, of an agent's compensation paid in 1995.

As of May 31, 1996, Farm Family's agents were supervised and supported by a
network of 13 field managers and ten associate field managers, who also have
principal responsibility for recruiting and training new

40
<PAGE>

agents. Field managers are compensated in accordance with commission overwrite
formulas based on the commissions received by their agents. Farm Family and
the field managers have instituted training programs which provide both
technical training about the products and sales training on how to market
insurance products. Field managers seek to recruit agents with some prior
knowledge of agricultural and related businesses. Farm Family generally does
not recruit agents with previous insurance experience. The average length of
agent service with the Company for Farm Family agents as of March 31, 1996 was
7.95 years.

The following table sets forth certain information with respect to Farm
Family's agency force for each of the periods indicated:

<TABLE>
<CAPTION>
AVERAGE
NUMBER OF
NUMBER OF YEARS OF
TOTAL NUMBER NEW AGENTS' SERVICE
PERIOD OF AGENTS(/1/) AGENTS(/1/) WITH COMPANY(/2/)
- ------ -------------- ----------- -----------------
<S> <C> <C> <C>
As of Year Ended December 31,
1990.............................. 175 21 8.36
As of Year Ended December 31,
1991.............................. 184 32 7.92
As of Year Ended December 31,
1992.............................. 169 23 7.98
As of Year Ended December 31,
1993.............................. 186 26 8.12
As of Year Ended December 31,
1994.............................. 179 32 7.93
As of Year Ended December 31,
1995.............................. 189 31 8.05
As of Three Months Ended March 31,
1996.............................. 187 6 7.95
</TABLE>
- --------
(1) Does not include associate agents, field managers and associate field
managers.

(2) Calculated based upon the length of relationship with the Company for all
agents as of the end of each period.

In 1993, Farm Family began to convert several local agency offices into
service centers in order to increase its local market presence and to expedite
policy administration functions by allowing agents to provide certain
application and policy modification processing directly from the field. As of
May 6, 1996, Farm Family had established or begun developing 23 service
centers within its ten-state region. As of the same date, 20 service centers
process policy modifications for personal and commercial automobile products
and 11 of these service centers process new personal and commercial automobile
and homeowners policy applications. Agents are permitted to rent space and
utilize a computer network and secretarial support teams in the service
center. The Company believes that its service centers will aid its marketing
efforts and enable agents to provide more efficient services to policyholders.
Increasingly, field managers maintain local offices at the service centers.

Farm Family's agents may also serve as brokers for Rural Agency, which
represents other unaffiliated insurance companies. Rural Agency was
established in 1970 by Farm Family to provide policyholders with access to
products not written by Farm Family. Business placed through Rural Agency is
principally comprised of specialty business not written by Farm Family, such
as motorcycle, snowmobile, animal mortality, boiler and machinery, bond and
crop insurance.

All agents can access the Company's data networks from their personal
computers. This connection enables Farm Family's agents, among other things,
to access policy and claim information for each customer. Agents use the
network to direct their service activities and assess account profitability.
In addition, Farm Family provides personal computer software which allows
agents to rate and illustrate each of the Company's major lines of business.

RELATIONSHIP WITH FARM BUREAUS

Farm Family was organized through the efforts of certain Farm Bureaus, and
the Company's relationship with the Farm Bureaus in its ten-state region
continues to be a fundamental aspect of its business. These Farm Bureaus are
affiliated with the American Farm Bureau Federation, the nation's largest
general farm organization

41
<PAGE>

with over four million members, which has traditionally sought to advance the
interests of the agricultural community.

It has historically been the practice of the Farm Bureau organizations to
establish or sponsor farm-oriented and member-controlled insurance companies
to provide insurance for their members. Farm Family was established in 1955
through the efforts of certain Farm Bureaus to provide property and casualty
insurance for Farm Bureau members in the Northeast. Substantially all of the
directors of Farm Family are associated with Farm Bureau organizations in the
Northeast. Farm Family has the exclusive endorsement of the Farm Bureaus to
market property and casualty insurance in the ten states in which it operates.

The endorsement of the Farm Bureaus generally means that the Farm Bureaus
provide the Company with the right to utilize their membership lists and
authorize the use of their name and service marks in connection with the
marketing of Farm Family's products. In exchange for these rights, Farm Family
pays to each of the Farm Bureaus an annual fee of $7.50 per Farm Bureau
member, pursuant to agreements with each Farm Bureau (the "Membership List
Purchase Agreements"). The current term of each Membership List Purchase
Agreement is six years, commencing on January 1, 1996. Pursuant to the
Membership List Purchase Agreements, the Farm Bureaus may not endorse the
products of other property and casualty insurers within Farm Family's ten-
state region. See "Certain Relationships and Related Transactions." The Life
Company has entered into similar membership list purchase agreements with each
of the Farm Bureaus.

Farm Family advertises its products in state and local Farm Bureau
publications, for which it pays advertising fees to the Farm Bureaus, and
participates in meetings and shows sponsored by Farm Bureau organizations.
Such participation typically consists of purchasing booth space at such
meetings and shows to market Farm Family's products.

In general, Farm Family will not issue a policy in the voluntary market to
anyone (other than an employee) who is not a member of a county or state Farm
Bureau organization. Policyholders are also required to maintain such
membership to renew a policy. Annual Farm Bureau membership fees generally
range from $40 to $300, depending upon the county and state in which the
member resides and the type of membership. Annual associate membership fees
for members not engaged in agricultural pursuits generally range from $40 to
$100. There can be no assurance that Farm Family's policy of generally
providing new and renewal insurance policies in the voluntary market
exclusively to Farm Bureau members will not be subject to challenge in the
future by state insurance departments or other regulatory authorities.

Substantially all of Farm Family's directors are officers and/or directors
of the Farm Bureaus. Following the Offerings, it is expected that
substantially all of the members of the FFCIC Board and of the Holding Company
Board will continue to be affiliated with Farm Bureau organizations. The
Company believes that this affiliation provides management with the
opportunity to better assess the present and future needs of its target market
and to cultivate better relations with Farm Bureau leaders and members. See
"Risk Factors--Relationships with Farm Bureaus and Life Company; Potential
Conflicts of Interest."

UNDERWRITING

Farm Family seeks to write its commercial and personal lines risks by
evaluating loss experience and underwriting profitability with consistently
applied standards. Farm Family maintains information on all aspects of its
business which is routinely reviewed by the Company's staff of 14 underwriters
in relationship to product line profitability. Farm Family's underwriters
generally specialize by agency territory. Specific information is monitored
with regard to individual insureds which is used to assist Farm Family in
making decisions about policy renewals or modifications. The Company's
underwriters have an average of over ten years of experience as underwriters.

Farm Family concentrates on its established major product lines and,
increasingly, on its businessowners and homeowners policies. It generally does
not pursue the development of products with risk profiles with which

42
<PAGE>

it is not familiar, nor does it, typically, actively market its automobile,
workers' compensation or general liability policies except to policyholders
who may also purchase its Special Farm Package, businessowners or homeowners
products. Farm Family believes its extensive knowledge of local markets in its
region is a key element in its underwriting process. Farm Family has developed
an approach to underwriting new and renewal business which allows for more
limited intervention by the Company's underwriters for certain lines of
business, such as personal automobile, which fall within pre-established
guidelines. Risks falling outside of such preestablished guidelines are
referred to a staff underwriter.

Farm Family relies on information provided by its local agents, who, subject
to certain guidelines, also act as field underwriters and pre-screen policy
applicants. The agents have the authority to sell and bind insurance coverages
in accordance with pre-established guidelines. Agents' underwriting results
are monitored and on occasion agents with historically poor loss ratios have
had their binding authority removed until more profitable underwriting results
were achieved.

CLAIMS

Claims on insurance policies written by Farm Family are usually investigated
and settled by one of the Company's staff claims adjusters, located in nine
field offices. As of March 31, 1996, the Company's claim staff included 54
claims adjusters and managers. Farm Family's claims philosophy emphasizes
timely investigation, evaluation and settlement of claims, while maintaining
adequate reserves and controlling claim adjustment expenses. The claims
philosophy is designed to support Farm Family's marketing efforts by providing
agents and policyholders with prompt service.

Claims settlement authority levels are established for each adjuster and
claims manager based upon the employee's ability and level of experience.
Claims are reported directly to the claims department, located at a field
office or through the central claim reporting unit at the home office.
Liability claims reserved at $25,000 or above, property claims reserved at
$50,000 or above and, generally, other litigated and serious claims are
reported to the home office for supervision. In high volume areas, claims for
certain lines of business will be assigned to field claim staff who specialize
by line of business. Specialized units exist at the home office for no-fault
automobile and workers' compensation claims, as well as subrogation. Farm
Family also has on staff a special investigator to investigate suspected
insurance fraud, including arson. The claims department is responsible for
reviewing all claims, obtaining necessary documentation, estimating the loss
reserves and resolving the claims.

Farm Family engages independent appraisers and adjusters to evaluate and
settle claims as claims volume or specialized needs require. Farm Family
contracts with an outside claims administration firm to administer all claims
with respect to its New York assigned risk personal automobile policies which
the Company is required to write. See "--Regulation--Assigned Risks and
Mandatory Pools."

Recently, Farm Family has attempted to minimize claims costs by encouraging
the use of alternative dispute resolution procedures, principally arbitration
and mediation, for disputed claims or claim amounts. Litigated claims are
assigned to outside counsel, which counsel are monitored by staff claims
personnel.

REINSURANCE

Reinsurance Ceded

In accordance with insurance industry practice, Farm Family reinsures a
portion of its exposure and pays to the reinsurers a portion of the premiums
received on all policies reinsured. Insurance is ceded principally to reduce
net liability on individual risks, to mitigate the effect of individual loss
occurrences (including catastrophic losses), to stabilize underwriting results
and to increase Farm Family's underwriting capacity. Although reinsurance does
not legally discharge the ceding insurer from primary liability for the full
amount of the policies ceded, the assuming reinsurer is liable to the extent
of the coverage ceded. Farm Family determines

43
<PAGE>

the amount and scope of reinsurance coverage to purchase each year based upon
Farm Family's evaluation of the risks accepted, consultations with reinsurance
brokers and on market conditions, including the availability and pricing of
reinsurance. For the year ended December 31, 1995, Farm Family ceded to
reinsurers $21.4 million of earned premiums, $9.2 million of which was ceded
to United. For the three months ended March 31, 1996, Farm Family ceded to
reinsurers $4.3 million of earned premiums, $2.3 million of which was ceded to
United.

Farm Family's reinsurance arrangements are generally placed directly with
non-affiliated reinsurers through reinsurance brokers, principally E.W. Blanch
& Co., Inc. In addition, certain reinsurance coverages are also placed
directly with United, a wholly owned subsidiary of the Life Company. See
"Certain Relationships and Related Transactions." The largest net per risk
exposure retained by Farm Family on any one individual property or casualty
risk is $100,000. Property and casualty risks in excess of $100,000 are
covered on an excess of loss basis up to $250,000 and $300,000, respectively,
per risk by United. Per risk property losses in excess of $250,000 but less
than $4 million are reinsured on an excess of loss basis by unaffiliated
reinsurers. Facultative coverage is available for certain property risks in
excess of $4 million per risk. Casualty losses per risk in excess of $300,000
but less than $1 million (which is generally the limit of liability under all
of the Company's casualty insurance policies, other than workers' compensation
and umbrella liability policies) are covered on an excess of loss basis by
unaffiliated reinsurers. Clash coverage provided by unaffiliated reinsurers
covers casualty losses, including workers' compensation, in excess of $1
million but less than $5 million. In addition, workers' compensation claims,
on a per occurrence basis with a $600,000 per person limit, in excess of $3
million but less than $10 million are separately reinsured on an excess of
loss basis by an unaffiliated reinsurer. Farm Family reinsures 95% of its
umbrella liability losses (including a 5% quota share participation by United)
under $1 million per loss on a quota share basis and 100% of umbrella
liability losses in excess of $1 million up to $5 million per loss by
unaffiliated reinsurers.

Catastrophic reinsurance serves to protect the ceding insurer from
significant aggregate loss exposure arising from a single event such as
windstorm, hail, tornado, hurricane, earthquake, riot, freezing temperatures
or other extraordinary events. Farm Family has purchased reinsurance for
catastrophic property losses for 1996, under which Farm Family reinsures 95%
of losses per occurrence over $6 million up to a maximum of $51 million and
approximately 79% of the losses between $3 million and $6 million per
occurrence. Farm Family retains the first $3 million of losses per occurrence
under its property catastrophe program. United is a participant in Farm
Family's property catastrophe reinsurance program and assumes 2% of losses per
occurrence between $11 million and $51 million and approximately 16% of losses
between $3 million and $6 million.

The availability and cost of reinsurance are subject to prevailing market
conditions and may vary significantly over time. In the event that reinsurance
is not available to Farm Family on reasonable terms, Farm Family may be
required to increase the amount of its net exposure to losses or reduce its
premium writings.

The following table sets forth certain information relating to Farm Family's
six largest reinsurers for the year ended December 31, 1995:

<TABLE>
<CAPTION>
PERCENTAGE OF
EARNED TOTAL
PREMIUMS A.M. BEST REINSURANCE
REINSURER CEDED RATING PREMIUMS CEDED
- --------- ---------- --------- --------------
<S> <C> <C> <C>
United Farm Family Insurance Company........ $9,237,325 A- 43.2%
Signet Star Reinsurance Company............. 2,791,034 A 13.0
Kemper Reinsurance Company.................. 2,789,777 A- 13.0
Continental Casualty Company................ 2,569,853 A 12.0
Folksamerica Reinsurance Company............ 1,150,089 A 5.4
Vesta Fire Insurance Corporation............ 276,670 A 1.3
</TABLE>

The insolvency or inability of any reinsurer to meet its obligations to the
Company could have a material adverse effect on the results of operations or
financial condition of Farm Family. As of December 31, 1995,

44
<PAGE>

approximately 96.1% of the Company's reinsurance program (excluding mandatory
pools) was provided by reinsurers which were rated "A-" (Excellent) or above
by A.M. Best.

In June 1995, Farm Family terminated its excess casualty reinsurance
agreement with American Agricultural Insurance Company to reduce
administrative and financial costs associated with the reinsurance
arrangement. The reinsurance arrangement was commuted for casualty and
workers' compensation risks for accident years 1980 to 1988 and prior to 1975.
As a result of the termination of this arrangement, Farm Family does not have
reinsurance in effect for any casualty and workers' compensation losses for
accident years 1980 to 1988 and prior to 1975. The Company received
approximately $1.8 million in cash as a result of the termination of this
arrangement and established additional net loss reserves of approximately $1.7
million for any casualty and worker's compensation losses for accident years
1980 to 1988 and prior to 1975. Also, separate reinsurance agreements with
American Agricultural Insurance Company continue to remain in effect for
property and umbrella risks for those accident years.

Reinsurance Assumed

Farm Family assumes voluntary reinsurance covering primarily property,
property catastrophe and casualty risks located outside of the Northeast. The
Company believes that, among other benefits, its assumed reinsurance
arrangements balance to a limited extent the geographic concentration of its
risks in the Northeast. Farm Family also assumes an insignificant amount of
reinsurance covering substandard automobile policies from United. For the year
ended December 31, 1995 and the three months ended March 31, 1996, Farm Family
earned premiums of $1.3 million and $0.4 million, respectively, under various
excess of loss and pro rata reinsurance agreements. Farm Family generally
retrocedes 50% of all assumed reinsurance to United. As of March 31, 1996,
Farm Family's aggregate loss exposure for reinsurance assumed was $11.2
million. For the years ended December 31, 1994 and 1995, Farm Family incurred
losses of $758,000 and $318,000, respectively, and for the three months ended
March 31, 1995 and 1996 incurred losses of $63,000 and $208,000, respectively,
from companies which it reinsures under its assumed reinsurance programs
agreements.

Farm Family's assumed reinsurance includes both mandatory and voluntary
business. The mandatory reinsurance assumed consists of automobile and
workers' compensation residual market mandatory pools. Participation in
mandatory pools is required as a condition of licensing in the states. The
amount of reinsurance assumed from these mandatory pools is determined by the
Company's share of the voluntary market for the line of business written by
these pools. Generally, the mandatory pools produce an operating loss from
year to year, which will vary based on the market conditions for the lines of
business in each of the states where the pools operate. The mandatory pools
produced net losses of $428,000 and $763,000 for the years ended December 31,
1993 and 1995, respectively, and net gains of $275,000 for the year ended
December 31, 1994 and $9,000 and $309,000 for the three months ended March 31,
1995 and 1996, respectively.

LOSS AND LAE RESERVES

Loss reserves are estimates of what an insurer expects to pay claimants. LAE
reserves are estimates of an insurer's expenses to settle claims incurred,
including legal and other fees, and the general expenses of administering the
claims adjustment process. Farm Family is required to maintain reserves for
payment of estimated loss and LAE for both reported claims ("Case Reserves")
and claims which have been incurred but not yet reported ("IBNR"). The
ultimate liability incurred by Farm Family may be different from current
reserve estimates.

Reserves for reported losses are established on either a judgment or formula
basis, depending on the type of the loss. The judgment reserve amounts are set
on a per case basis by the claims staff based on the facts and circumstances
of each case, the type of claim and the expectation of damages. Farm Family's
claim staff regularly monitors the adequacy of judgment reserves on a case by
case basis and changes the amount of such reserves as necessary. The formula
reserves, determined by the actuarial staff, are based on historical paid loss

45
<PAGE>

data for similar claims with provisions for trend changes, such as those
caused by inflation. The formula reserve is a fixed amount for each claim of a
given type.

Loss and LAE reserves for claims that have been incurred but not reported
are estimated by the Company's actuarial staff based on many variables
including historical and statistical information, inflation, legal
developments, economic conditions, general trends in claim severity and
frequency and other factors that could affect the adequacy of loss reserves.
IBNR reserves provide for the late reporting of claims, reopened claims and
inadequate case reserves. The Company's overall reserve practice provides for
ongoing claims evaluation and adjustment (if necessary) based on the
development of related data and other relevant information pertaining to such
claims. Loss and LAE reserves, including IBNR reserves, are adjusted no less
than quarterly, and in some instances more frequently. Farm Family employs an
actuary who is a fellow of the Casualty Actuarial Society to supervise the
Company's actuarial staff in the determination of reserves. In addition, Farm
Family's reserves are certified on an annual basis by an outside actuary, as
required by insurance regulatory authorities.

Adjustments in aggregate reserves, if any, are reflected in the operating
results of the period during which such adjustments are made. Although claims
for which reserves are established may not be paid for several years, reserves
for losses and LAE are not discounted, except for certain lifetime workers'
compensation indemnity reserves where the reserves are discounted at 3.5%.

The following table provides a reconciliation of beginning and ending loss
and LAE reserve balances of Farm Family for the years ended December 31, 1993,
1994 and 1995 and for the three months ended March 31, 1996 as computed in
accordance with GAAP.

RECONCILIATION OF LIABILITY FOR LOSS AND LOSS ADJUSTMENT EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
--------------------------- ENDED MARCH 31,
1993 1994 1995 1996
-------- -------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Reserves for losses and loss ad-
justment
expenses at the beginning of pe-
riod............................. $117,497 $123,477 $127,954 $137,978
Less: Reinsurance recoverables and
receivables...................... 24,463 28,761 28,230 28,655
-------- -------- -------- --------
Net reserves for losses and loss
adjustment
expenses at beginning of period.. 93,034 94,716 99,724 109,323
-------- -------- -------- --------
Add: Provision for losses and loss
adjustment
expenses for claims occurring in:
The current year............... 73,114 86,370 88,366 32,010
Prior years.................... 99 (3,690) (5,182) (6,288)
-------- -------- -------- --------
Total incurred losses and loss
adjustment expenses.............. 73,213 82,680 83,184 25,722
-------- -------- -------- --------
Less: Loss and loss adjustment ex-
penses
payments for claims occurring in:
The current year............... 34,839 43,232 40,519 7,013
Prior years.................... 36,692 34,440 33,066 15,449
-------- -------- -------- --------
Total.......................... 71,531 77,672 73,585 22,462
-------- -------- -------- --------
Net reserves for losses and loss
adjustment
expenses at end of period........ 94,716 99,724 109,323 112,583
Add: Reinsurance recoverables and
receivables...................... 28,761 28,230 28,655 27,736
-------- -------- -------- --------
Reserves for losses and loss ad-
justment
expenses at end of period........ $123,477 $127,954 $137,978 $140,319
======== ======== ======== ========
</TABLE>

The following table reflects the development of losses and loss adjustment
expenses for the periods indicated at the end of that year and each subsequent
year. Each calendar year-end reserve includes the estimated unpaid liabilities
for that accident year and for all prior accident years. The data presented
under the caption

46
<PAGE>

"Cumulative Amount of Reserves Paid Through" show the cumulative amounts paid
related to the reserve as of the end of each subsequent year. The data
presented under the caption "Reserves, Net, Reestimated as of" show the
original recorded reserve as adjusted as of the end of each subsequent year to
reflect the cumulative amounts paid and all other facts and circumstances
discovered during each such year. The line "Cumulative Redundancy
(Deficiency)" reflects the difference between the latest reestimated reserve
amount and the reserve amount as originally established.

In evaluating the information in the table below, it should be noted that
each amount includes the effects of all changes in amounts of prior periods.
For example, if a loss determined in 1993 to be $150,000 was first reserved in
1985 at $100,000, the $50,000 deficiency (actual loss minus original estimate)
would be included in the cumulative deficiency in each of the years 1985
through 1992 shown below. This table presents development data by calendar
year and does not relate the data to the year in which the accident actually
occurred. Conditions and trends that have affected the development of these
reserves in the past may not necessarily recur in the future.

The following table sets forth the development of loss and loss adjustment
expense reserves of Farm Family for the ten-year period ended December 31,
1995:

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- ----------- ------ ------ ------- ------ ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserves for Losses
and Loss Adjustment
Expenses............ 32,960 41,718 53,126 65,543 78,339 94,135 110,135 117,497 123,477 127,954 137,978
Reinsurance
Recoverable on
Unpaid Losses....... (4,957) (5,053) (5,468) (7,126) (11,784) (22,123) (25,048) (24,463) (28,761) (28,230) (28,655)
------ ------ ------- ------ ------- ------- ------- ------- ------- ------- -------
Reserves for Losses
and Loss Adjustment
Expenses, Net....... 28,003 36,665 47,658 58,417 66,555 72,012 85,087 93,034 94,716 99,724 109,323
------ ------ ------- ------ ------- ------- ------- ------- ------- ------- -------
Reserves, Net,
Reestimated as of:
One year later...... 30,240 37,961 50,145 57,932 69,036 76,786 84,514 91,561 88,296 94,542
Two years later..... 30,718 38,047 50,572 63,348 72,478 76,442 84,305 89,666 82,876
Three years later... 30,242 39,057 53,540 65,399 72,926 76,832 83,960 86,876
Four years later.... 30,922 39,981 55,303 65,842 73,130 77,879 82,752
Five years later.... 30,467 41,097 55,445 66,289 74,599 77,375
Six years later..... 30,885 41,088 56,018 68,298 74,391
Seven years later... 31,272 41,072 57,751 68,370
Eight years later... 31,390 42,622 58,323
Nine years later.... 32,318 42,759
Ten years later..... 32,317
Cumulative Redundancy
(Deficiency)........ (4,314) (6,094) (10,665) (9,953) (7,836) (5,363) 2,335 6,158 11,840 5,182
------ ------ ------- ------ ------- ------- ------- ------- ------- -------
Cumulative Amount of
Reserves Paid
Through:
One year later...... 13,918 16,621 21,931 23,852 29,587 29,446 32,708 36,692 34,439 33,066
Two years later..... 20,647 26,294 33,879 40,454 46,469 47,392 53,455 57,236 49,867
Three years later... 25,709 31,636 42,838 51,147 57,838 60,737 65,951 66,127
Four years later.... 28,008 35,838 48,480 57,239 65,803 67,401 70,176
Five years later.... 29,810 38,588 51,216 62,168 68,950 68,634
Six years later..... 30,590 39,836 54,644 64,423 68,652
Seven years later... 31,527 40,920 55,794 63,815
Eight years later... 32,217 41,693 55,313
Nine years later.... 32,663 41,116
Ten years later..... 32,269
</TABLE>

47
<PAGE>

Prior to 1990, Farm Family had a history of cumulative deficiencies in
reserving for losses and LAE. These deficiencies were primarily caused by the
underestimation of reserves for workers' compensation, automobile and other
liability claims. In 1991, Farm Family reviewed and revised its process for
estimating reserves for losses and LAE, and in recent years Farm Family has
generally experienced overall redundancies. The redundancies at December 31,
1995 of $6.2 million, $11.8 million and $5.2 million for the December 31,
1993, 1994 and 1995 loss reserves, respectively, were primarily attributable
to favorable development of IBNR and case reserves for personal automobile,
commercial automobile, automobile physical damage, and workers' compensation
claims.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Reserve for unpaid losses and loss adjustment
expenses:
Gross liability.................................. $123,477 $127,954 $137,978
Reinsurance recoverable.......................... 28,761 28,230 28,655
-------- -------- --------
Net liability.................................... $ 94,716 $ 99,724 $109,323
======== ======== ========
One year later:
Gross reestimated liability...................... $106,175 $112,245
Reestimated reinsurance recoverable.............. 17,879 17,703
-------- --------
Net reestimated liability........................ $ 88,296 $ 94,542
======== ========
Two years later:
Gross reestimated liability...................... $ 94,587
Reestimated reinsurance recoverable.............. 11,711
--------
Net reestimated liability........................ $ 82,876
========
</TABLE>

Since 1987, Farm Family has implemented a standard environmental and
pollution exclusion in some of its commercial liability and property policies,
including the Special Farm Package. However, the Special Farm Package contains
a limited coverage endorsement for above-ground environmental and pollution
liabilities. Also, the industry standard personal and commercial automobile
and homeowners policies do not contain an exclusion from environmental and
pollution risks. Farm Family also writes a small number of claims made
pollution liability policies. Farm Family has paid no material claims arising
from environmental and pollution related liabilities with respect to policies
written either before or after 1987. See "Risk Factors--Potential Liability
for Environmental and Pollution Risks."

The Company believes that Farm Family's reserves at December 31, 1995 are
adequate. Conditions and trends that have historically affected Farm Family's
claims may not necessarily occur in the future. Accordingly, it would not be
appropriate to extrapolate future deficiencies or redundancies based on the
results set forth above. Future adjustments to loss reserves and LAE that are
unanticipated by the Company could have a material adverse impact upon Farm
Family's financial condition and results of operations.

INVESTMENTS

An important component of the operating results of Farm Family has been the
return on invested assets. Farm Family's investment objective is to maximize
current yield while maintaining safety of capital together with adequate
liquidity for its insurance operations. In an effort to improve the quality
and safety of its investments, Farm Family embarked on a plan in 1995 to
reduce significantly its holdings of non-investment grade fixed maturity
securities.

Farm Family manages all of its investments internally and does not employ an
investment manager or advisor. Investment decisions and guidelines are made
and implemented by the Company's investment department under the supervision
of an investment committee comprised of members of the board of directors.

48
<PAGE>

In addition, Farm Family maintains a Credit Watch Committee comprised of the
Chief Executive Officer, the Chief Financial Officer and the Senior Vice
President for Investments in order to monitor securities which have
experienced late payments, adverse changes in credit rating or financial
condition of the borrower or any modifications of terms. At March 31, 1996,
Farm Family had four investments totalling $6.9 million on the Credit Watch
Report, of which none were considered non-performing or in default.

Farm Family reduced its holdings of NAIC Class 3 through 6 bonds, generally
considered non-investment grade, from $17.3 million, or 10.8% of its fixed
maturity portfolio, as of December 31, 1994 to $7.7 million, or 4.0% of its
fixed maturity portfolio, as of March 31, 1996. Due to uncertainties in the
economic environment, however, it is possible that the quality of investments
currently held in Farm Family's investment portfolio may change.

The following table sets forth certain information concerning Farm Family's
investments:

<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 AT DECEMBER 31, 1995 AT MARCH 31, 1996
-------------------- -------------------- --------------------
AMORTIZED MARKET AMORTIZED MARKET AMORTIZED MARKET
TYPE OF INVESTMENT COST VALUE(/3/) COST VALUE(/3/) COST VALUE(/3/)
- ------------------ --------- ---------- --------- ---------- --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE
PORTFOLIO:
Fixed Maturities(/1/)
United States
government and
government agencies
and authorities.... $ 20.2 $ 20.2 $ 22.7 $ 24.2 $ 19.4 $ 20.3
States, municipalities
and political
subdivisions....... 19.6 18.9 21.9 23.5 22.3 22.9
Public utilities...... 15.6 15.0 21.9 23.1 27.5 27.8
All other corporate
bonds................... 99.3 92.8 104.1 109.2 107.4 109.4
Mortgage-backed
securities.............. 1.9 2.0 1.1 1.2 1.0 1.1
------ ------ ------ ------ ------ ------
Total Fixed
Maturities.............. 156.6 148.9 171.7 181.2 177.6 181.5
------ ------ ------ ------ ------ ------
Equity securities....... 0.3 3.9 0.3 4.7 0.3 5.1
Mortgage loans.......... 1.9 1.9 1.8 1.8 1.8 1.8
Cash and short-term
investments............. 7.5 7.5 8.9 8.9 4.4 4.4
Other Invested Assets... 1.6 1.6 1.2 1.2 1.0 1.0
------ ------ ------ ------ ------ ------
Total Available for
Sale.................... 167.9 163.8 183.9 197.8 185.1 193.8
------ ====== ------ ------ ------ ------
HELD TO MATURITY
PORTFOLIO:
Fixed Maturities(/2/)
States, municipalities
and political
subdivisions....... 4.7 4.7 5.9 6.3 5.8 5.9
All other corporate
bonds................... 6.6 6.2 6.5 6.8 6.4 6.4
------ ------ ------ ------ ------ ------
Total Held to
Maturity................ 11.3 10.9 12.4 13.1 12.2 12.3
====== ====== ====== ====== ====== ======
Total Investments... $179.2 $174.7 $196.3 $210.9 $197.3 $206.1
====== ====== ====== ====== ====== ======
</TABLE>
- --------
(1) Fixed maturities (bonds, redeemable preferred stocks and mortgage-backed
securities) and equity securities in the Available for Sale Portfolio are
carried at market value in the consolidated financial statements of the
Company. Mortgage loans, cash and short-term investments and other
invested assets are carried at cost, which approximates market value.

(2) Fixed maturities in the Held to Maturity Portfolio are carried at
amortized cost.

(3) The Company primarily obtains market value information through the pricing
service offered by Interactive Data Corporation. Market values are also
obtained, to a lesser extent, from various brokers who provide price
quotes.

49
<PAGE>

The Company's investments in fixed maturity securities are composed
primarily of intermediate-term, investment grade securities. The table below
contains additional information concerning the investment ratings of Farm
Family's fixed maturity investments at March 31, 1996:

<TABLE>
<CAPTION>
AMORTIZED MARKET
TYPE/RATINGS OF INVESTMENT(/1/) COST VALUE PERCENTAGE(/4/)
- ------------------------------- --------- ------ ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
AVAILABLE FOR SALE PORTFOLIO:(/2/)
U.S. Government and Agencies................... $ 19.4 $ 20.3 11.2%
AAA............................................ 12.0 12.6 6.9
AA............................................. 21.0 20.9 11.5
A.............................................. 53.9 55.8 30.8
BBB............................................ 64.2 65.2 35.9
------ ------ -----
Total BBB or Better.......................... 170.5 174.8 96.3
------ ------ -----
BB............................................. 4.1 4.0 2.2
B and Below.................................... 3.0 2.7 1.5
------ ------ -----
Total Available for Sale..................... $177.6 $181.5 100.0%
====== ====== =====
HELD TO MATURITY PORTFOLIO:(/3/)
U.S. Government and Agencies................... -- -- --
AAA............................................ $ 3.1 $ 3.2 26.0%
AA............................................. 1.5 1.6 13.0
A.............................................. 6.3 6.3 51.2
BBB............................................ -- -- --
------ ------ -----
Total BBB or Better.......................... 10.9 11.1 90.2
------ ------ -----
BB............................................. 1.3 1.2 9.8
B and Below.................................... -- -- --
------ ------ -----
Total Held to Maturity....................... $ 12.2 $ 12.3 100.0%
====== ====== =====
</TABLE>
- --------
(1) The ratings set forth in this table are based on the ratings, if any,
assigned by Standard & Poor's Corporation ("S&P"). If S&P's ratings were
unavailable, the equivalent ratings supplied by Moody's Investors
Services, Inc., Fitch Investors Service, Inc. or the NAIC were used where
available. The percentage of securities that were not assigned a rating by
S&P at March 31, 1996 was 6.3%.

(2) Fixed maturities in the Available for Sale Portfolio are carried at market
value in the consolidated financial statements of the Company.

(3) Fixed maturities in the Held to Maturity Portfolio are carried at
amortized cost.

(4) Represents percent of market value for classification as a percent of
total for each portfolio.

50
<PAGE>

The table below sets forth the maturity profile of Farm Family's fixed
maturity investments as of March 31, 1996 (substituting average life for
mortgage-backed securities):

<TABLE>
<CAPTION>
MATURITY AMORTIZED COST(/1/) MARKET VALUE(/2/) PERCENTAGE
- -------- ------------------- ----------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
AVAILABLE FOR SALE:
1 year or less................ $ 0.3 $ 0.3 0.2%
More than 1 year through 3
years......................... 11.9 11.9 6.6
More than 3 years through 5
years......................... 12.2 12.7 7.0
More than 5 years through 10
years......................... 70.3 71.0 39.1
More than 10 years through 15
years......................... 40.1 40.4 22.3
More than 15 years through 20
years......................... 13.5 13.8 7.6
More than 20 years............ 20.1 21.6 11.9
Mortgage-backed securities.... 9.2 9.8 5.3
------ ------ -----
Total....................... $177.6 $181.5 100.0%
====== ====== =====
HELD TO MATURITY:
1 year or less................ $ 0.1 $ 0.1 0.8%
More than 1 year through 3
years......................... 1.1 1.1 8.9
More than 3 years through 5
years......................... 0.4 0.4 3.3
More than 5 years through 10
years......................... 5.1 5.1 41.5
More than 10 years through 15
years......................... 4.5 4.5 36.6
More than 15 years through 20
years......................... 1.0 1.1 8.9
More than 20 years............ 0.0 0.0 0.0
------ ------ -----
Total....................... $ 12.2 $ 12.3 100.0%
====== ====== =====
</TABLE>
- --------
(1) Fixed maturities in the Available for Sale Portfolio are carried at market
value in the consolidated financial statements of the Company. Mortgage
loans, cash and short-term investments and other invested assets are
carried at cost, which approximates market value. Fixed maturities in the
Held to Maturity Portfolio are carried at amortized cost.

(2) The Company obtains market value information primarily through the pricing
service offered by Interactive Data Corporation. Market values are also
obtained, to a lesser extent, from various brokers who provide price
quotes.

The average duration and average maturity of Farm Family's fixed maturity
investments as of March 31, 1996 were approximately 7 and 11 years,
respectively. As a result, the market value of the Company's investments may
fluctuate significantly in response to changes in interest rates. In addition,
the Company may also be likely to experience investment losses to the extent
its liquidity needs require the disposition of fixed maturity securities in
unfavorable interest rate environments.

For the year ended December 31, 1995, compared with the prior year, the
amortized cost of Farm Family's cash and invested assets increased 9.6% to
$196.4 million. As a result of the reduction in holdings of certain non-
investment grade securities, the Company anticipates that future investment
yields may be lower than they otherwise would be. Farm Family's net investment
income, average cash and invested assets and return on average cash and
invested assets for the three years ended December 31, 1993, 1994 and 1995 and
the three months ended March 31, 1995 and 1996 were as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net investment income............. $ 13.8 $ 13.2 $ 14.3 $ 3.5 $ 3.9
Average cash and invested assets.. 165.3 173.9 187.8 181.6 196.9
Return on average cash and
invested assets................... 8.4% 7.6% 7.6% 7.7% 7.8%
</TABLE>

51
<PAGE>

INFORMATION SERVICES

Farm Family's automated information processing capabilities are supported by
centralized computer systems and a network of personal computers linking the
agents, claims offices and service centers with the Company's home office data
center and information services division. This network enables field employees
and agents to work directly with clients in response to service questions and
policy transactions. A specialized client information system containing policy
and claim information for each customer's portfolio is utilized by Farm
Family's agents to monitor policy activity. Also, personalized summaries of
material events affecting each agent's policies are updated daily on the
network and forwarded to agents. Substantially all of Farm Family's
information services equipment, including the centralized computer systems and
computer network, is owned by the Life Company. Information systems expenses
are shared by Farm Family and the Life Company pursuant to an agreement. See
"Certain Relationships and Related Transactions--Life Company--Expense Sharing
Agreement."

A.M. BEST RATING

A.M. Best, which rates insurance companies based on factors of concern to
policyholders, currently assigns an "A-" (Excellent) rating (its fourth
highest rating category) to Farm Family Mutual. A.M. Best assigns "A" or "A-"
ratings to companies which, in its opinion, have demonstrated excellent
overall performance when compared to the standards established by A.M. Best.
Companies rated "A" and "A-" have a strong ability to meet their obligations
to policyholders over a long period of time. In evaluating a company's
financial and operating performance, A.M. Best reviews the company's
profitability, leverage and liquidity, as well as the company's book of
business, the adequacy and soundness of its reinsurance, the quality and
estimated market value of its assets, the adequacy of its loss reserves, the
adequacy of its surplus, its capital structure, the experience and competency
of its management and its market presence. No assurance can be given that A.M.
Best will not reduce Farm Family Mutual's current rating in the future. See
"Risk Factors--A.M. Best Rating" and "Business--Investments."

COMPETITION

The property and casualty insurance market is highly competitive. Farm
Family competes with stock insurance companies, mutual companies, local
cooperatives and other underwriting organizations. Certain of these
competitors have substantially greater financial, technical and operating
resources than Farm Family. The Company's ability to compete successfully in
its principal markets is dependent upon a number of factors, many of which
(including market and competitive conditions) are outside the Company's
control. Many of the lines of insurance written by Farm Family are subject to
significant price competition. Some companies may offer insurance at lower
premium rates through the use of salaried personnel or other methods, rather
than agents paid on a commission basis, as Farm Family does. In addition to
price, competition in the lines of business written by the Company is based on
quality of the products, quality and speed of service (including claims
service), financial strength, ratings, distribution systems and technical
expertise.

REGULATION

General

52
<PAGE>

Insurance companies are also affected by a variety of state and federal
legislative and regulatory measures and judicial decisions that define and
extend the risks and benefits for which insurance is sought and provided.
These include redefinitions of risk exposure in areas such as products
liability, environmental damage and workers' compensation. Certain state
insurance departments and legislatures may prevent premium rates for some
classes of insureds from reflecting the level of risk assumed by the insurer
for those classes. Several states place restrictions on the ability of
insurers to discontinue or withdraw from some lines of insurance. Such
developments may adversely affect the profitability of various lines of
insurance.

Assigned Risk Plans and Mandatory Pools

As a condition to writing automobile insurance in many states, insurers are
required to provide automobile insurance pursuant to assigned risk plans at
premium rates which are determined by the insurance departments of the various
states. Historically, such premium rates have been inadequate. In most states,
assigned risk business is shared among insurance companies under legislatively
mandated arrangements whereby residual market applicants are divided and
assigned to reinsurers in proportion to the amount of automobile insurance
business written by such insurers in the voluntary market. The Company's
direct written premiums from such assigned risk plans for the years ended
December 31, 1993, 1994 and 1995 were $4.4 million, $4.8 million and $6.6
million, respectively, and $1.2 million and $1.5 million for the three months
ended March 31, 1995 and 1996, respectively. The mandatory state residual
market automobile assigned risk plans in which the Company participates
resulted in the Company recognizing net losses of approximately $1.1 million,
$0.7 million and $2.5 million for the years ended December 31, 1993, 1994 and
1995, respectively, and $0.5 million and $0.6 million for the three months
ended March 31, 1995 and 1996, respectively. In addition, the Company
participates in various state-sponsored mandatory pools which are established
to provide automobile and worker's compensation insurance for consumers who
are unable to obtain insurance in the voluntary insurance market. The Company
shares in the results of these mandatory pools on a pro rata basis based on
its relative premiums for voluntary business written for these coverages
within such states. As a result of the Company's participation in such
mandatory pools, net income for the years ended December 31, 1993, 1994 and
1995 decreased by $0.4 million, increased by $0.3 million and decreased by
$0.8 million, respectively, and increased by approximately $9,000 and $0.3
million for the three months ended March 31, 1995 and 1996, respectively.

Assessments Related to Insolvency Funds and Associations

Most states require admitted property and casualty insurers to become
members of insolvency funds or associations which were established to protect
policyholders against the insolvency of such insurers. Members of the fund or
association must contribute to the payment of certain claims made against
insolvent insurers. Maximum contributions required by law in any one year vary
between 1% and 2% of annual premiums written by a member in that state. The
Company's assessments incurred from guaranty funds were approximately
$415,000, $788,000 and $480,000 for the years ended December 31, 1993, 1994
and 1995, respectively, and were approximately $100,000 and $55,000 for the
three months ended March 31, 1995 and 1996, respectively. Most of these
payments are recoverable through future policy surcharges and premium tax
reductions.

Risk-Based Capital

State insurance departments have adopted a new methodology developed by the
NAIC for assessing the adequacy of statutory surplus of property and casualty
insurers which includes a risk-based capital formula that attempts to measure
statutory capital and surplus needs based on the risks in a company's mix of
products and investment portfolio. The formula is designed to allow state
insurance regulators to identify potential inadequately capitalized companies.
Under the formula, a company determines its "risk-based capital" ("RBC") by
taking into account certain risks related to the insurer's assets (including
risks related to its investment portfolio and ceded reinsurance) and the
insurer's liabilities (including underwriting risks related to the nature and
experience of its insurance business). The risk-based capital rules provide
for different levels of regulatory attention depending on the ratio of a
company's total adjusted capital to its "authorized control level"

53
<PAGE>

of RBC. Based on calculations made by Farm Family, the risk-based capital
level for FFCIC exceeds a level that would trigger regulatory attention. At
December 31, 1995, FFCIC's RBC was $55.4 million, and the threshold requiring
the least regulatory attention was $22.5 million.

NAIC-IRIS Ratios

The NAIC's Insurance Regulatory Information System ("IRIS") was developed by
a committee of state insurance regulators and is primarily intended to assist
state insurance departments in executing their statutory mandates to oversee
the financial condition of insurance companies operating in their respective
states. IRIS identifies 12 ratios for the property and casualty insurance
industry and specifies a range of "usual values" for each ratio. Departure
from the "usual value" range on four or more ratios may lead to increased
regulatory oversight from individual state insurance commissioners. FFCIC did
not have any ratios which varied from the "usual value" range in 1995, 1994 or
1993.

Holding Company Act

In addition to the regulatory oversight of FFCIC, Farm Family is also
subject to regulation under Article 15 of the New York Insurance Law (the
"Holding Company Law"). The Holding Company Law contains certain reporting
requirements including those requiring the ultimate parent company of a New
York insurance company to file information relating to its capital structure,
ownership, and financial condition and the general business operations of its
insurance subsidiary. The Holding Company Law contains special reporting and
prior approval requirements with respect to transactions among affiliates.

Restrictions on Dividends

FFCIC is subject to various state statutory and regulatory restrictions,
generally applicable to each insurance company in New York, which limit the
amount of dividends or distributions by an insurance company to its
stockholders.

The New York Insurance Law regulates the distribution of dividends and other
payments to the Holding Company by FFCIC. Under the applicable New York
statute, a property and casualty stock insurance company may not declare or
distribute dividends except out of statutorily defined earned surplus and may
not declare or distribute a dividend, without prior regulatory approval, if
such dividend, together with all dividends declared or distributed by it
during the next preceding 12 months, exceeds the lesser of (i) 10% of its
surplus to policyholders as shown by its last statement on file with the
Superintendent, or (ii) 100% of its statutorily defined adjusted net
investment income during the same period. Additional dividends are payable
only upon receiving prior regulatory approval. Such restrictions or any
additional subsequently imposed restrictions may in the future affect the
Holding Company's ability to pay debt, expenses and cash dividends to its
stockholders. Future dividends from FFCIC may also be limited by business
considerations.

Insurance Regulation Concerning Change or Acquisition of Control

FFCIC is a domestic property and casualty insurance company organized under
the New York Insurance Law. The New York Insurance Law provides that the
acquisition or change of "control" of a domestic insurer or of any person that
controls a domestic insurer cannot be consummated without notice to and the
prior approval of the Superintendent. A person seeking to acquire control,
directly or indirectly, of a domestic insurance company or of any person
controlling a domestic insurance company must generally file with the
Superintendent an application for change of control containing certain
information required by statute and published regulations and provide a copy
of such application to the domestic insurer. In New York, control is generally
presumed to exist if any person, directly or indirectly, owns, controls, holds
with the power to vote or holds proxies representing 10% or more of the voting
securities of any other person. Such requirements may deter, delay or prevent
certain transactions that could be advantageous to the stockholders of Farm
Family.

54
<PAGE>

In addition, many state insurance regulatory laws contain provisions that
require pre-notification to state agencies of a change in control of a non-
domestic admitted insurance company in that state. While such pre-notification
statutes do not authorize the state agency to disapprove the change of
control, such statutes do authorize issuance of a cease and desist order with
respect to non-domestic admitted insurers doing business in that state if
certain conditions exist such as undue market concentration.

LEGAL PROCEEDINGS

Farm Family is subject to litigation in the normal course of business. Based
upon information presently available to it, the Company does not consider any
threatened or pending litigation to be material. However, given the
uncertainties attendant to litigation, there can be no assurance that the
Company's results of operations and financial condition will not be materially
adversely affected by any threatened or pending litigation.

PROPERTIES

Farm Family currently leases space for its home office in Glenmont, New York
from the Life Company. The lease provides for the Company to pay the Life
Company an annual rental of approximately $629,216. The lease expires on
December 31, 1998. See "Certain Relationships and Related Transactions--Life
Company--Lease Agreement."

EMPLOYEES

The Company shares most of its employees with the Life Company. As of March
31, 1996, the total number of full time employees of the Company and the Life
Company was 417 employees in aggregate, of which 311 employees were employed
in the home office. Based on annual time studies, 61% of total employee
expenses, including salary expense, is currently allocated to the Company and
39% is allocated to the Life Company and United. See "Certain Relationships
and Related Transactions--Life Company--Expense Sharing Agreement." None of
these employees are covered by a collective bargaining agreement, and the
Company believes that its employee relations are good.

55
<PAGE>

MANAGEMENT

Information regarding the directors and executive officers of the Company is
provided as follows. Substantially all directors are directors of both the
Holding Company and FFCIC. Except where indicated otherwise, all executive
officer positions are held at the Holding Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William M. Stamp, Jr.... 56 Chairman of the Board of Directors; President
of FFCIC and Director(/3/)
John W. Lincoln......... 57 Vice Chairman of the Board of Directors; First
Vice President of FFCIC and Director(/2/)(/3/)
Philip P. Weber......... 47 President and Chief Executive Officer; Executive
Vice President and Chief Executive Officer of FFCIC
James J. Bettini........ 41 Executive Vice President--Operations; Senior Vice
President--Operations of FFCIC
Charles E. Simon........ 51 Executive Vice President and Treasurer; Senior Vice
President and Chief Financial Officer of FFCIC
Victoria M. Stanton..... 36 Executive Vice President, General Counsel and Secretary;
Senior Vice President, General Counsel and Secretary of FFCIC
William T. Conine....... 47 Senior Vice President--Information Services of FFCIC
Stuart C. Henderson..... 40 Senior Vice President--Casualty Operations of FFCIC
David M. Neville........ 58 Senior Vice President--Human Resources of FFCIC
Raymond A. Osterhout.... 51 Senior Vice President--Investments of FFCIC
Timothy A. Walsh........ 34 Senior Vice President--Finance of FFCIC
Dale E. Wyman........... 53 Senior Vice President--Marketing of FFCIC
Robert L. Baker......... 46 Director(/1/)
Randolph C. Blackmer,
Jr...................... 55 Director(/1/)(/2/)
Fred G. Butler, Sr...... 67 Director(/3/)
Joseph E. Calhoun....... 61 Director(/3/)
James V. Crane.......... 34 Director
Stephen J. George....... 56 Director(/3/)
Gordon H. Gowen......... 69 Director(/3/)
Jon R. Greenwood........ 42 Director(/1/)
Clark W. Hinsdale III... 40 Director(/2/)(/3/)
Richard A. Jerome....... 47 Director
Arthur D. Keown, Jr..... 50 Director(/3/)
Daniel R. LaPointe...... 58 Director(/3/)
Wayne A. Mann........... 62 Director(/1/)
John P. Moskos.......... 45 Director(/2/)(/3/)
Norma R. O'Leary........ 62 Director(/3/)
John I. Rigolizzo, Jr... 43 Director
Harvey T. Smith......... 50 Director
Howard T. Sprow......... 76 Director(/1/)
Richard D. Tryon........ 72 Director
Charles A. Wilfong...... 38 Director(/1/)
Tyler P. Young.......... 36 Director
</TABLE>
- --------
(1) Serves on the Audit Committee of the Holding Company Board.

(2) Serves on the Compensation Committee of the Holding Company Board.

(3) Serves on the Executive Committee of the Holding Company Board.

56
<PAGE>

The directors and executive officers of the Holding Company are listed
above. Directors are elected by the stockholders to staggered three-year terms
subject to the provisions of the Bylaws. The Holding Company Board appoints
the Holding Company's officers, who serve until the meeting of the Holding
Company Board following the next annual meeting of stockholders or until their
successors are appointed and qualified.

The Holding Company Board has established an Audit Committee consisting of
six directors, none of whom is an officer or employee of the Holding Company.
The Audit Committee recommends to the Holding Company Board the selection of
independent certified public accountants to audit annually the books and
records of the Holding Company, reviews the activities and the reports of the
independent certified public accountants and reports the results of such
reviews to the Holding Company Board. The Audit Committee also considers the
adequacy of the Holding Company's internal controls and internal auditing
methods and procedures. The Holding Company Board has also established a
Compensation Committee consisting of four directors, none of whom is an
employee of the Holding Company, which, as authorized by the Holding Company
Board, makes recommendations to the Holding Company Board with respect to the
administration of the salaries, bonuses and other compensation to be paid to
the Holding Company's officers. The Holding Company Board has also established
an Executive Committee consisting of eleven directors, which, to the extent
authorized by the Holding Company Board, exercises all the powers and
authority of the Holding Company Board in the management of the business and
affairs of the Holding Company.

BIOGRAPHICAL INFORMATION FOR DIRECTORS AND EXECUTIVE OFFICERS

Traditionally, Farm Bureau officers have been nominated and elected to
directorships with FFCIC and the Life Company.

WILLIAM M. STAMP, JR. has been a Director and Chairman of the Holding
Company Board since February 1996. His term as a Director will expire in 1999.
Mr. Stamp has also served as President of FFCIC since 1987 and as a Director
of FFCIC since 1975. Upon the Effective Date, Mr. Stamp will become Chairman
of the FFCIC Board. Mr. Stamp is President and a Director of Rhode Island Farm
Bureau Federation, Inc. Mr. Stamp has been a farmer and President of Stamp
Farm Enterprises, Inc., a greenhouse and sweet corn farming operation, since
1956.

JOHN W. LINCOLN has been a Director and Vice Chairman of the Holding Company
Board since February 1996. His term as a Director will expire in 1997. Mr.
Lincoln has also served as First Vice President of FFCIC since 1996 and as a
Director of FFCIC since 1984. Upon the Effective Date, Mr. Lincoln will become
Vice Chairman of the FFCIC Board. Mr. Lincoln is President and a Director of
New York Farm Bureau, Inc. Mr. Lincoln has owned and operated a dairy farm
since 1961.

PHILIP P. WEBER has been President and Chief Executive Officer of the
Holding Company since February 1996. Mr. Weber has also served as Executive
Vice President and Chief Executive Officer of FFCIC since January 1991. Upon
the Effective Date, Mr. Weber will become President and Chief Executive
Officer of FFCIC. Mr. Weber has been employed by FFCIC in various capacities
since June 1987 and held various agent and agency manager positions with FFCIC
from 1980 to 1987.

JAMES J. BETTINI has been Executive Vice President--Operations of the
Holding Company since February 1996. Mr. Bettini has also served as Senior
Vice President--Operations of FFCIC since January 1991 and will become
Executive Vice President--Operations of FFCIC on the Effective Date. Mr.
Bettini has been employed by FFCIC in various capacities since July 1979.

CHARLES E. SIMON has been Executive Vice President and Treasurer of the
Holding Company since February 1996. Mr. Simon has also served as Senior Vice
President and Chief Financial Officer of FFCIC since July 1987 and will become
Executive Vice President--Strategic Development of FFCIC upon the Effective
Date. Mr. Simon has been employed by FFCIC in various capacities since October
1972.

57
<PAGE>

VICTORIA M. STANTON has been Executive Vice President, General Counsel and
Secretary of the Holding Company since February 1996. Ms. Stanton has also
served as Senior Vice President, General Counsel and Secretary of FFCIC since
March 1993 and will become Executive Vice President, General Counsel and
Secretary of FFCIC upon the Effective Date. Ms. Stanton was Senior Vice
President and General Counsel of FFCIC from July 1992 to March 1993 and
Corporate Counsel of FFCIC from April 1991 to July 1992. Ms. Stanton was
previously an attorney with McNamee, Lochner, Titus & Williams, P.C., Albany,
New York, from 1989 to 1991, and with Rogers & Wells, New York, New York, from
1987 to 1989.

WILLIAM T. CONINE has been Senior Vice President--Information Services of
FFCIC since December 1989. Mr. Conine has been employed by FFCIC in various
capacities since June 1975.

STUART C. HENDERSON has been Senior Vice President--Casualty Operations of
FFCIC since March 1996. Mr. Henderson was Senior Vice President--Claims of
FFCIC from March 1993 to March 1996 and Vice President--Claims Counsel of
FFCIC from April 1991 to March 1993 and has been employed by FFCIC in various
capacities since May 1986.

DAVID M. NEVILLE has been Senior Vice President--Human Resources of FFCIC
since January 1993. Mr. Neville was Vice President--Human Resources of FFCIC
from January 1990 to January 1993 and has been employed by FFCIC in various
capacities since February 1973. Mr. Neville was previously employed by FFCIC
from September 1964 to April 1968.

RAYMOND A. OSTERHOUT has been the Senior Vice President--Investments of
FFCIC since January 1991 and was Vice President--Investments of FFCIC from
October 1987 to January 1991.

TIMOTHY A. WALSH has been the Senior Vice President--Finance of FFCIC since
March 1996. Mr. Walsh was Director of Corporate Development for FFCIC from
August 1995 to March 1996. Mr. Walsh was previously Vice President, Finance &
Chief Financial Officer with MPW Industrial Services, Inc., Columbus, Ohio,
from April 1994 to August 1995, Corporate Controller of NSC Corporation,
Methuen, Massachusetts, from July 1992 to April 1994 and a Senior Manager at
KPMG Peat Marwick from July 1983 to July 1992.

DALE E. WYMAN has been Senior Vice President--Marketing of FFCIC since
January 1991. Mr. Wyman was Vice President--Marketing of FFCIC from September
1989 to January 1991 and held various agent and agency manager positions with
FFCIC from November 1975 to September 1989.

ROBERT L. BAKER has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1997. Mr. Baker has also served as
a Director of FFCIC since 1988. Mr. Baker is First Vice President and a
Director of Delaware Farm Bureau, Inc. Mr. Baker has been a farmer and
Treasurer of Baker Farms, Inc. since 1972.

RANDOLPH C. BLACKMER, JR. has been a Director of the Holding Company since
February 1996. His term as a Director will expire in 1999. Mr. Blackmer has
also served as a Director of FFCIC since 1984. Mr. Blackmer is First Vice
President and a Director of Connecticut Farm Bureau Association, Inc. Mr.
Blackmer has been a self-employed farmer since 1966 and has been President of
Ag Service, Inc and of Blackmer Farm since 1975.

FRED G. BUTLER, SR. has been a Director of the Holding Company since
February 1996. His term as a Director will expire in 1999. Mr. Butler has also
served as a Director of FFCIC since 1981. Mr. Butler is President and a
Director of West Virginia Farm Bureau, Inc. Mr. Butler has been a self-
employed dairy farmer since 1956 and has been owner and President of Wright
Motors, Inc., a used car dealership, since 1965.

JOSEPH E. CALHOUN has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1998. Mr. Calhoun has also served
as a Director of FFCIC since 1990. Mr. Calhoun is President and a Director of
Delaware Farm Bureau, Inc. Mr. Calhoun has owned and operated Joseph E.
Calhoun Farms since 1953.

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<PAGE>

JAMES V. CRANE has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1997. Mr. Crane has also served as
a Director of FFCIC since 1994. Mr. Crane is Vice President and a Director of
Maine Farm Bureau Association. Mr. Crane has been a farmer and manager of
Crane Bros., Inc. since 1983.

STEPHEN J. GEORGE has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1999. Mr. George has also served
as a Director of FFCIC since 1989. Mr. George has been a self-employed farmer
in the greenhouse and nursery business since 1965.

GORDON H. GOWEN has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1998. Mr. Gowen has also served as
a Director of FFCIC since 1991. Mr. Gowen previously served as a Director of
FFCIC from 1978 to 1980. Mr. Gowen is President and a Director of New
Hampshire Farm Bureau Federation. Mr. Gowen has been a self-employed farmer
since 1957.

JON R. GREENWOOD has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1998. Mr. Greenwood has also
served as a Director of FFCIC since 1995. Mr. Greenwood is Vice President and
a Director of New York Farm Bureau, Inc. Mr. Greenwood has been a self-
employed farmer since 1978.

CLARK W. HINSDALE III has been a Director of the Holding Company since
February 1996. His term as a Director will expire in 1997. Mr. Hinsdale has
also served as a Director of FFCIC since 1993. Mr. Hinsdale is President and a
Director of Vermont Farm Bureau, Inc. Mr. Hinsdale has been a self-employed
farmer, a self-employed land planner and real estate broker since 1983.

RICHARD A. JEROME has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1999. Mr. Jerome has also served
as a Director of FFCIC since 1995. Mr. Jerome is a Director of New York Farm
Bureau, Inc. Mr. Jerome has been a self-employed farmer since 1972.

ARTHUR D. KEOWN, JR. has been a Director of the Holding Company since
February 1996. His term as a Director will expire in 1999. Mr. Keown has also
served as a Director of FFCIC since 1993. Mr. Keown is President and a
Director of Massachusetts Farm Bureau Federation, Inc. Mr. Keown has been a
self-employed farmer since 1967.

DANIEL R. LAPOINTE has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1999. Mr. LaPointe has also served
as a Director of FFCIC since 1987. Mr. LaPointe is President and a Director of
Maine Farm Bureau Association. Mr. LaPointe has been a self-employed farmer
since 1960.

WAYNE A. MANN has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1997. Mr. Mann has also served as
a Director of FFCIC since 1994. Mr. Mann is First Vice President and a
Director of New Hampshire Farm Bureau Federation. Mr. Mann is a retired air
force officer and pilot and has been a self-employed farmer since 1980.

JOHN P. MOSKOS has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1998. Mr. Moskos has been Senior
Vice President, Corporate Banking of Fleet Bank since January 1996. Mr. Moskos
was previously employed by Chase Manhattan Bank N.A. in various capacities
from 1973 to 1995, including serving as a Regional President and Senior
Lending Officer and a Division Executive.

NORMA R. O'LEARY has been a Director of the Holding Company since February
1996. Her term as a Director will expire in 1998. Ms. O'Leary has also served
as a Director of FFCIC since 1983. Ms. O'Leary is President and a Director of
Connecticut Farm Bureau Association, Inc. Ms. O'Leary has been a self-employed
farmer since 1952.

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<PAGE>

JOHN I. RIGOLIZZO, JR. has been a Director of the Holding Company since
February 1996. His term as a Director will expire in 1998. Mr. Rigolizzo has
also served as a Director of FFCIC since 1995. Mr. Rigolizzo is President and
a Director of New Jersey Farm Bureau. Mr. Rigolizzo has been a farm employee
of Johnny Boy Farms, Inc. since 1975.

HARVEY T. SMITH has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1998. Mr. Smith has also served as
a Director of FFCIC since 1994. Mr. Smith is First Vice President and a
Director of Vermont Farm Bureau. Mr. Smith has been a self-employed farmer
since 1972.

HOWARD T. SPROW has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1997. Mr. Sprow is an attorney and
has been Senior Counsel to Whiteman Osterman & Hanna, Albany, New York since
November 1992 and was Professor of Law, Albany Law School of Union University
from July 1980 until 1990; he is at present Professor of Law Emeritus.
Previously, Mr. Sprow was Of Counsel to the law firm of Crane & MacKrell,
Albany, New York from August 1990 to November 1992, Partner at the law firm of
Rogers & Wells, New York, New York from January 1977 to June 1980 and General
Counsel, Vice President--Corporate and Public Affairs and Secretary of Merrill
Lynch, Pierce, Fenner & Smith, Incorporated and Merrill Lynch & Co., Inc., New
York from May 1970 to December 1976.

RICHARD D. TRYON has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1998. Mr. Tryon previously served
as a Director of FFCIC from 1988 to 1996. Mr. Tryon is a Director of
Massachusetts Farm Bureau Federation, Inc. Mr. Tryon has been a self-employed
farmer since 1946.

CHARLES A. WILFONG has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1997. Mr. Wilfong has also served
as a Director of FFCIC since 1991. Mr. Wilfong is Vice President and a
Director of West Virginia Farm Bureau, Inc. Mr. Wilfong has been a farmer and
Partner of Wilfong Farms since 1976.

TYLER P. YOUNG has been a Director of the Holding Company since February
1996. His term as a Director will expire in 1997. Mr. Young has also served as
a Director of FFCIC since 1995. Mr. Young is Vice President and a Director of
Rhode Island Farm Bureau Federation, Inc. Mr. Young has been a farmer and
Manager of Ferolbink Farms, Inc. since 1984.

DIRECTORS' COMPENSATION

All of the directors of the Holding Company, except John P. Moskos, Howard
T. Sprow and Richard D. Tryon, are also directors of FFCIC, the Life Company
and United. The Chairman of the Board (the same individual for each company)
and the Vice Chairman of the Board (also the same individual for each company)
receive an annual retainer of $10,000 and $4,500, respectively. All other
directors receive $3,000. Directors also receive a daily fee of $500 for
meetings of the boards of directors of the companies, $250 per meeting of a
board committee and $250 per day for attendance at other company functions.
Directors are reimbursed for reasonable travel and other expenses of attending
meetings of the boards of directors and board committees and other functions.
Fees and expenses paid to directors are allocated among the companies pursuant
to expense sharing arrangements. See "Certain Relationships and Related
Transactions--Life Company" and "--United."

EXECUTIVE COMPENSATION

The following table sets forth information regarding the compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for the fiscal year ended December 31, 1995. The
figures below represent the aggregate compensation paid to such executive
officers by the Company, the Life Company and United. Under expense sharing
arrangements among the Company, the Life Company and United, 46% of such
aggregate compensation expense in 1995 was charged to the Company, 46%

60
<PAGE>

was charged to the Life Company and 8% was charged to United. See "Certain
Relationships and Related Transactions--Life Company--Expense Sharing
Agreement."

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION
- ------------------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Philip P. Weber............... $240,000 $ 0 $ -- (/1/) $1,449(/2/)
President and Chief Executive
Officer
Charles E. Simon.............. 152,550 0 17,384(/3/) 4,599(/4/)
Executive Vice President and
Treasurer
Victoria M. Stanton........... 118,000 11,150 13,643(/5/) 4,377(/6/)
Executive Vice President,
General Counsel and Secretary
James J. Bettini.............. 114,500 10,000 14,898(/5/) 4,271(/7/)
Executive Vice President--
Operations
Dale E. Wyman................. 112,000 0 11,650(/5/) 1,309(/8/)
Senior Vice President--
Marketing of FFCIC
</TABLE>
- --------
(1) Does not include certain compensation in the form of perquisites and other
personal benefits provided to Mr. Weber for his services to the Company
during 1995, the aggregate value of which did not exceed 10% of total
annual salary and bonus.

(2) Represents a contribution by the Company to Mr. Weber's account of $240
under the Farm Family Employee "Savings Plus" Plan (the "Savings Plus
Plan"), and a group term life insurance premium of $1,209 paid by the
Company for the benefit of Mr. Weber, of which $696 was taxable income.

(3) Includes a car allowance of $8,640 and gasoline credit card payments of
$4,434 paid by the Company.

(4) Represents a contribution by the Company to Mr. Simon's account of $3,390
under the Savings Plus Plan, and a group term life insurance premium of
$1,209 paid by the Company for the benefit of Mr. Simon, of which $1,152
was taxable income.

(5) Includes a car allowance of $8,640 paid by the Company.

(6) Represents a contribution by the Company to Ms. Stanton's account of
$3,244 under the Savings Plus Plan, and a group term life insurance
premium of $1,133 paid by the Company for the benefit of Ms. Stanton, of
which $245 was taxable income.

(7) Represents a contribution by the Company to Mr. Bettini's account of
$3,175 under the Savings Plus Plan, and a group term life insurance
premium of $1,096 paid by the Company for the benefit of Mr. Bettini, of
which $365 was taxable income.

(8) Represents a contribution by the Company to Mr. Wyman's account of $240
under the Savings Plus Plan, and an insurance premium of $1,069 paid by
the Company for the benefit of Mr. Wyman, of which $1,002 was taxable
income.

SEVERANCE PLAN

Each of the officers of FFCIC and the Life Company is eligible for severance
benefits under the companies' joint Officer Severance Pay Plan (the "Severance
Plan") when such officer's employment is terminated under defined qualifying
conditions, which include, but are not limited to, certain sales of assets or
mergers or other corporate reorganizations involving the companies. Under the
Severance Plan, the companies will pay to a qualifying officer severance
benefits generally equal to the greater of (i) one week's salary for each year
of

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<PAGE>

service with the companies or (ii) 24 months salary in the case of the Chief
Executive Officer, 12 months salary in the case of a Senior Vice President and
6 months salary in the case of any other officer.

PENSION BENEFITS

Substantially all salaried employees of the Company, including executive
officers, are eligible to receive pension benefits under the Farm Family
Employee Retirement Plan (the "Retirement Plan"), which is a qualified defined
benefit retirement plan under the Employee Retirement Income Security Act of
1974, as amended. Federal legislation limits the amount of pension benefits
that can be paid and compensation that can be recognized under a tax-qualified
retirement plan. The Company has adopted a non-qualified unfunded retirement
plan, the Farm Family Supplemental Employee Retirement Plan (the "SERP"), for
the payment of those benefits at retirement that cannot be paid from the
Retirement Plan. The practical effect of the SERP is to provide for the
calculation of retirement benefits on a uniform basis for all employees.
Benefit payments under the Retirement Plan and the SERP are allocated between
the Company and the Life Company pursuant to an expense sharing agreement. See
"Certain Relationships and Related Transactions--Life Company--Expense Sharing
Agreement."

The table below illustrates the approximate annual retirement benefits which
would be payable at age 65 under the Retirement Plan and, if applicable, under
the SERP.

<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL --------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000......................... $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 60,000
150,000......................... 45,000 60,000 75,000 90,000 90,000
200,000......................... 60,000 80,000 100,000 120,000 120,000
250,000......................... 75,000 100,000 125,000 150,000 150,000
300,000......................... 90,000 120,000 150,000 180,000 180,000
350,000......................... 105,000 140,000 175,000 210,000 210,000
400,000......................... 120,000 160,000 200,000 240,000 240,000
</TABLE>

For the purpose of calculating retirement benefits, a participant's average
annual compensation ("Average Annual Compensation") shall be equal to a
participant's compensation during the five calendar years (out of the last ten
calendar years of employment) for which the participant's compensation was
highest, divided by five. Compensation, as used to calculate retirement
benefits, means the aggregate of the amounts listed in the Summary
Compensation Table under the captions "Salary," "Bonus" and "Other Annual
Compensation," and the portion of the amount listed under the caption "All
Other Compensation" which corresponds to the part of the group term life
insurance premium, if any, paid by the Company which is taxable as income to
the participant in the Retirement Plan. For the fiscal year ended December 31,
1995, the compensation covered by the Farm Family Employee Retirement Plan for
Mr. Weber, Ms. Stanton and Mr. Bettini was approximately $256,000, $143,000
and $140,000, respectively.

The credited years of service as of December 31, 1995 for Mr. Weber, Mr.
Simon, Ms. Stanton, Mr. Bettini and Mr. Wyman were 16.0, 23.4, 5.0, 17.0 and
12.9, respectively.

The annual pension benefit under the Farm Family Employee Retirement Pension
Plan and, when applicable, the SERP, equals 2.0% of Average Annual
Compensation, multiplied by years of service (not to exceed 30 years).
Benefits under the Retirement Plan and the SERP are not subject to Social
Security or other offset amounts.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

LIFE COMPANY

Option Purchase Agreement

Under the Option Purchase Agreement, the shareholders of the Life Company
have granted to the Holding Company the exclusive and irrevocable option to
purchase the Option Shares. Such option may be exercised at any time up to the
second anniversary of the Effective Date, unless extended to the third
anniversary of the Effective Date upon the agreement of the parties to the
Option Purchase Agreement. The exercise price for each Option Share will be
the fair market value thereof, as of the exercise date, determined in
accordance with specified valuation procedures and assumptions set forth in
the Option Purchase Agreement by an investment banking firm of national
standing selected by the Holding Company and reasonably acceptable to the
shareholders of the Life Company. The valuation procedures and assumptions set
forth in the Option Purchase Agreement provide that the fair market value per
Option Share will be based on the fully distributed, independent, public
market value of the common stock of the Life Company as of the exercise date
of the Option Purchase Agreement including any reallocation of participating
policyholder surplus, without giving effect to the percentage ownership
represented by the common stock being valued (individually or in the
aggregate), the aggregate amount of the valuation of the Life Company or the
relationship between the Life Company and FFCIC, including the Life Company's
lack of stand-alone management, infrastructure or distribution system. In
determining such value, the procedures also provide that consideration may be
given to the trading value of the publicly traded common stock of comparable
companies as well as any other valuation methods or criteria that are deemed
relevant.

Salomon Brothers Inc has been retained by the Company to provide investment
banking advice, including a valuation of the Life Company, in connection with
the Option Purchase Agreement. Salomon Brothers Inc will render to the Holding
Company, at its request, an opinion as to the fairness, from a financial point
of view, to the Holding Company of such exercise price for each Option Share.
In the event that the Life Company shareholders do not agree with such
determination, the Option Purchase Agreement provides for certain dispute
resolution procedures pursuant to which one or two additional investment
banking firms may be engaged to determine the fair market value of each Option
Share and the exercise price shall generally be the average or, in certain
cases, the median, of the fair market value determination provided by such
firm or firms and the determination provided by Salomon Brothers Inc. The
exercise price under the Option Purchase Agreement will be payable by the
Holding Company to the Life Company shareholders in shares of Common Stock
and, at the option of such shareholders, in up to $6 million stated value of
shares of Series A Preferred Stock. The Holding Company will reserve shares of
Common Stock under the Plan for issuance upon exercise of the option under the
Option Purchase Agreement. In addition, the Life Company requested that the
New York Insurance Department approve the reallocation of a portion of its
unassigned surplus to shareholders' surplus. The New York Insurance Department
has advised the Life Company that it will not object to the retroactive
reallocation of "a portion of policyholders' surplus to the shareholder
account," provided such reallocation is carried out within applicable
statutory limitations and that the amount reallocated can be demonstrated as
not having any undue negative effect on participating policyholders. As a
result, a portion of the Life Company's unassigned surplus may be reallocated
to shareholders' surplus. The Life Company's determination as to whether and
to what extent it will retroactively reallocate a portion of unassigned
surplus to shareholders' surplus will depend upon, among other factors,
actuarial determinations and considerations, the decision of the Board of
Directors of the Life Company to make such reallocation, the approval of the
Life Company's shareholders and the review of such reallocation by the New
York Insurance Department. Any reallocation of unassigned surplus to
shareholders' surplus will increase shareholders' equity under GAAP, which, in
turn, will increase the valuation of the Life Company. Accordingly, the fair
market value of the Life Company and the number of shares of Common Stock
issued in connection with the acquisition if the option is exercised may
increase significantly as a result of an increase in the Life Company's
shareholders' equity under GAAP. To the extent that the Company issues
additional shares of Common Stock as a result of such change in the valuation
of the Life Company, subscribers for Shares in the Subscription Offering will
experience additional dilution in their ownership interest

63
<PAGE>

and voting power in the Company. See "Risk Factors--Effect of Exercise of
Option to Acquire Life Company." See "Option to Acquire Life Company" for a
description of the terms of the Option Purchase Agreement.

If the Company does not exercise its option under the Option Purchase
Agreement to acquire the Life Company, conflicts of interest may exist as it
is anticipated that the Company and the Life Company will continue to have
separate ownership, while maintaining substantially identical management and
continuing to share the same agency force, most employees and office
facilities. The Holding Company has not made a final determination as to
whether it will exercise its option to acquire the Life Company under the
Option Purchase Agreement. The Holding Company's decision to exercise the
option will depend on, among other things, the exercise price for the Option
Shares, an evaluation of the financial statements prepared in accordance with
generally accepted accounting principles and prospects of the Life Company,
the outcome of a vote by the Holding Company's shareholders and the receipt of
applicable regulatory approvals. See "Risk Factors--Relationships with Farm
Bureaus and Life Company; Potential Conflicts of Interest," "--Effect of
Exercise of Option to Acquire Life Company," and "Business--Relationship with
Farm Bureaus."

Expense Sharing Agreement

The Company and the Life Company are parties to an expense sharing
agreement, effective as of January 1, 1996 (the "Expense Sharing Agreement"),
pursuant to which shared expenses for goods, services and facilities are
allocated between the Company and the Life Company. Under the Expense Sharing
Agreement, expenses are allocated in accordance with applicable provisions of
the New York Insurance Law and regulations promulgated thereunder. Direct
expenses are charged as incurred to the Company and the Life Company, as
applicable, at cost. Shared expenses relating to (i) salaries and expenses for
directors, officers and employees (including employee benefits and payroll
taxes), (ii) joint office space (excluding home office space rented by Farm
Family pursuant to the Lease Agreement (as defined herein), (iii) depreciation
and costs relating to fixed assets and (iv) general expenses are allocated
between the Company and the Life Company on a pro rata basis based upon
internally prepared ratios derived from weighted time studies periodically
conducted for the purpose of quantifying the efforts of directors, officers
and employees as applied to each of the Company and the Life Company. See "--
Lease Agreement" below for a description of the terms of the Lease Agreement.
Expenses relating to advertising, conferences and meetings are allocated
between the Company and the Life Company on a pro rata basis based upon the
ratio of direct written premiums of the Company and the Life Company to the
aggregate amount of such premiums as reported in the annual statements of each
company filed with the New York Insurance Department. Expenses relating to
electronic data processing services are allocated on a pro rata basis based
upon the estimated actual hours of use.

The Expense Sharing Agreement provides that it will remain in effect until
terminated by mutual consent of the parties or by either party upon at least
60 days prior written notice. The methods of expense allocation used in the
Expense Sharing Agreement may be modified and adjusted by mutual agreement of
the parties as necessary or appropriate to reflect fairly and equitably the
actual incidence of cost incurred by the Company and the Life Company. All
amounts due under the Expense Sharing Agreement are determined at the end of
each month on the basis of accounting principles and practices prescribed by
the New York Insurance Department.

For the years ended December 31, 1993, 1994 and 1995, 56%, 60% and 61%,
respectively, of aggregate operating expenses totalling $23.8 million, $23.8
million and $26.7 million, respectively, were allocated to Farm Family under a
similar expense sharing arrangement. For the three months ended March 31, 1995
and 1996, 61% and 66%, respectively, of aggregate operating expenses totalling
$6.7 million and $7.2 million, respectively, were allocated to Farm Family
under expense sharing arrangements.

Lease Agreement

Farm Family and the Life Company are parties to the Lease Agreement, dated
July 1, 1988, as amended by the Amendment to Lease Agreement, effective
January 1, 1994 (as so amended, the "Lease Agreement"), pursuant to which Farm
Family leases home office space in Glenmont, New York from the Life Company.

64
<PAGE>

Annual rent under the Lease Agreement was $491,000, $629,000 and $687,000 for
the years ended December 31, 1993, 1994 and 1995, respectively, and is subject
to adjustment annually based upon the adjustment in the Rental Equivalence
Measure of the United States Department of Labor Cost-of-Living Index. Under
the terms of the Lease Agreement, Farm Family also pays, as additional rent,
50.50% of any increase in taxes and expenses in excess of 10% above the base
year in the next lease year and in any single year thereafter. In the event
that the taxes or expenses in any subsequent lease year are less than the
taxes or expenses in the base year by 10% or more the Life Company will pay to
Farm Family 50.50% of such reduction in taxes or expenses as exceed 10% of the
base year, and in the case of taxes, 50.50% of any reduction in excess of 10%
in any single year thereafter, or in the case of expenses, 8.28% of any
reduction in excess of 10% in any single year thereafter. The Lease Agreement
terminates on December 31, 1998.

UNITED

Per Risk Reinsurance Agreement

Farm Family and United are parties to the Underlying Multi-Line Per Risk
Reinsurance Contract, effective January 1, 1995, as amended by Addendum No. 1,
effective January 1, 1996 (as so amended, the "Per Risk Reinsurance
Agreement"). Under the Per Risk Reinsurance Agreement, United reinsures the
excess liability which accrues to Farm Family under its policies in force at
the effective date or issued or renewed on or after such date, and classified
by Farm Family as: (i) property business: fire and allied lines, homeowners
(property perils only), mobile homeowners (property perils only), farmowners
(property perils only), commercial multiple peril (property perils only),
inland marine and earthquake; and (ii) casualty business: automobile liability
(including no-fault, uninsured and underinsured motorists and garage
liability), homeowners (liability perils only), mobile homeowners (liability
perils only), farmowners (liability perils only), commercial multiple peril
(liability perils only), general liability and workers' compensation
(including employers liability and occupational disease written in connection
therewith). The agreement specifically excludes reinsurance coverage for
certain risks, including, among others, nuclear risks and loss or damage
caused by or resulting from war.

Pursuant to the terms of the Per Risk Reinsurance Agreement, Farm Family
retains and is liable for the first $100,000 of ultimate net loss in respect
of any one risk, each loss, for any property business, and United is liable up
to $150,000 on any one risk, each loss, for the amount by which such ultimate
net loss exceeds $100,000. Farm Family retains and is liable for the first
$100,000 of ultimate net loss (whether involving any one or any combination of
the casualty business, covered under the agreement, regardless of the number
of policies under which such loss is payable or the number of different
interests insured) arising out of each occurrence in respect of the casualty
business, and United is liable, up to $200,000 per occurrence, for the amount
by which such ultimate net loss exceeds $100,000. "Ultimate net loss" is
generally defined in the Per Risk Reinsurance Agreement as the sum (including
loss in excess of Reinsured Policy limits, extra contractual obligations and
any LAE) paid or payable by Farm Family in settlement of claims and in
satisfaction of judgments rendered on account of such claims, after deduction
of all salvage, recoveries and claims on inuring insurance or reinsurance.

Under the Per Risk Reinsurance Agreement, as of January 1, 1996, Farm Family
pays to United 7.0% of its net earned premiums in respect of the reinsured
policies. Net earned premiums includes Farm Family's gross earned premiums,
less the earned portion of premiums, if any, ceded by Farm Family for
reinsurance which inures to the benefit of the agreement. The Per Risk
Reinsurance Agreement only applies to the portion of insurance or reinsurance
that Farm Family retains net for its own account (prior to deduction of any
underlying reinsurance specifically permitted under the agreement). The
agreement provides that Farm Family and United may exercise at any time and
from time to time, the right to offset any balances, on account of premiums or
on account of losses or otherwise, due from one party to the other under the
terms of the agreement. The Per Risk Reinsurance Agreement may be terminated
by United or Farm Family on any December 31, upon not less than 90 days prior
written notice.

For the year ended December 31, 1995, net earned premiums ceded by Farm
Family to United under the Per Risk Reinsurance Agreement were $8.0 million.
For the years ended December 31, 1993 and 1994, net

65
<PAGE>

earned premiums ceded by Farm Family to United under a reinsurance contract
containing substantially similar terms were $8.0 million and $8.6 million,
respectively, and for the three months ended March 31, 1995 and 1996 were $1.8
million and $1.9 million, respectively.

Umbrella Reinsurance Agreement

Under the Umbrella Quota Share Reinsurance Contract, effective January 1,
1995, as amended by Addendum No. 1, effective January 1, 1995 (as so amended,
the "Umbrella Reinsurance Agreement"), issued to Farm Family by the
Subscribing Reinsurer(s) Executing the Interests and Liabilities Agreement(s)
Attached thereto, Farm Family cedes to United 5% of its net liability retained
under its policies in force at the effective date or issued or renewed on or
after that date, and classified by Farm Family as umbrella liability
(including personal, commercial and/or farm umbrella) in respect of the first
$1 million of coverage issued. The agreement specifically excludes reinsurance
coverage for certain risks, including, among others, reinsurance assumed,
business derived from pools or associations, nuclear risks, certain
professional liability policies, most directors and officers liability, errors
and omissions, most liquor liability, seepage and/or pollution liability,
certain manufacturing, production and other risks for natural or artificial
fuel gas, butane, propane or petroleum gases or gasoline, asbestos removal,
manufacturing and asbestos related activities.

Under the Umbrella Reinsurance Agreement, Farm Family retains 10% of its net
liability, for the first $1 million of reinsurance coverage under the
agreement and cedes to the reinsurers 90% of its net liability, subject to a
maximum cession of 90% of $1 million for any one policy, any one coverage.
Farm Family pays to United 5% of its net written premiums for the first $1
million of coverage under policies subject to the agreement. Net written
premiums include Farm Family's gross written premiums, less cancellations and
return premiums, and less premiums, if any, ceded by Farm Family for
reinsurance which inures to the benefit of the agreement. The Umbrella
Reinsurance Agreement will continue in force until terminated by either party
on any December 31, upon not less than 90 days prior notice.

For the year ended December 31, 1995, net written premiums ceded by Farm
Family to United under the Umbrella Reinsurance Agreement were $0.2 million
and for the three months ended March 31, 1995 and 1996 were $0.04 million and
$0.04 million, respectively. For the years ended December 31, 1993 and 1994,
net written premiums ceded by Farm Family to United under a reinsurance
contract containing substantially similar terms were $0.1 million and $0.2
million, respectively.

Catastrophe Reinsurance Contract

Under the Excess of Catastrophe Reinsurance Contract, effective January 1,
1996 (the "Catastrophe Reinsurance Contract"), issued to Farm Family by the
Subscribing Reinsurer(s) Executing the Interests and Liabilities Agreement(s)
Attached thereto, United assumes 2% of losses per occurrence between $11
million and $51 million and approximately 16% of losses between $3 million and
$6 million. Under the Catastrophe Reinsurance Contract, the reinsurers
(including United) reinsure the excess liability which accrues to Farm Family
under its reinsured policies in force at the effective date or issued or
renewed on or after such date and classified by Farm Family as fire and allied
lines, homeowners (property perils only), mobile homeowners (property perils
only), farmowners (property perils only), commercial multiple peril (property
perils only), automobile physical damage (excluding collision), inland marine
and earthquake business. The agreement specifically excludes reinsurance
coverage for certain risks, including, among others, nuclear risks and losses,
business derived from certain pools, associations and syndicates, excess of
loss reinsurance assumed by Farm Family, most reinsurance assumed by Farm
Family under obligatory reinsurance agreements, insurance on growing or
standing crops (excluding produce, plants or flowers inside greenhouses), and
Difference in Conditions insurance (as defined therein) and similar kinds of
insurance which provides coverage for losses from, among others, flood,
surface water, waves and tidal water or waves (except when covering property
in transit or otherwise written as inland marine coverage, farm machinery
and/or livestock insured under farmowners policies), earthquake, landslide,
subsidence or other earth movement, or resulting from war.

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Farm Family retains and is liable for the first amount of "ultimate net
loss" (as defined in the Catastrophe Reinsurance Contract), shown as the
"Company's Retention" (being $3 million) as set forth in Schedule A to the
Agreement, arising out of each loss occurrence (as defined therein). The
reinsurers are then liable, as respects each excess layer, for 95% of the
ultimate net loss of either (i) the reinsurer's per occurrence limits which
are $3 million, $5 million, $10 million and $30 million for the first, second,
third and fourth layers, respectively, or (ii) the reinsurer's annual limits
which are $6 million, $10 million, $20 million and $60 million, for each such
layer, respectively. In addition to its initial retention for each loss
occurrence, Farm Family retains, net and unreinsured elsewhere, 5% of the
excess ultimate net loss for the first, second, third and fourth layers. Farm
Family pays to the reinsurers, including United, 1.11%, 1.07%, 1.43% and 2.47%
of its net earned premiums for the first, second, third and fourth layer of
excess reinsurance, respectively, subject to certain annual minimum premium
amounts. Net earned premiums are defined to include Farm Family's gross earned
premiums for the classes of business subject to the agreement, less only the
earned portion of premiums, if any, ceded by Farm Family for reinsurance which
inures to the benefit of the agreement. The Catastrophe Reinsurance Contract
only applies to the portion of insurance or reinsurance that Farm Family
retains net for its own account (prior to deduction of an underlying
reinsurance specifically permitted under the agreement). The agreement
terminates on December 31, 1996.

For the years ended December 31, 1993, 1994 and 1995, net earned premiums
ceded by Farm Family to United were $0.03 million, $0.03 million and $0.11
million, respectively, and for the three months ended March 31, 1995 and 1996
were $0.05 million and $0.03 million, respectively, under a reinsurance
contract containing substantially similar terms.

Assumption Agreement

Farm Family and United are parties to the Assumption Agreement, commencing
January 1, 1995 (the "Assumption Agreement"), pursuant to which Farm Family
retrocedes to United 50% of its assumed reinsurance obligations for each year
during the term of the agreement, other than its assumed reinsurance
obligations from the Mutual Atomic Energy Reinsurance Pool and from the
National Workers' Compensation Reinsurance Pool/Massachusetts Workers'
Compensation Reinsurance Pool, of which it retrocedes to United 33% and 12%,
respectively. The Assumption Agreement has a one-year term and automatically
renews for successive one-year terms unless terminated by either party upon
ten days prior written notice. For the year ended December 31, 1995, premiums
retroceded to United under the Assumption Agreement were $0.9 million and for
the three months ended March 31, 1995 and 1996 were $0.3 million and $0.3
million, respectively. For the years ended December 31, 1993 and 1994,
premiums of $0.8 million and $1.0 million, respectively, were retroceded to
United under a substantially identical unwritten reinsurance assumption
arrangement.

Service Agreement

Farm Family and United are parties to the Service Agreement, dated July 25,
1988 (the "Service Agreement"), pursuant to which Farm Family provides United
with certain administrative and special services necessary for its operations,
including, but not limited to, claims management, underwriting, accounting,
tax and auditing, investment management, and functional support services, such
as actuarial services, telecommunications services and electronic data
processing and legal services. Under the Service Agreement, Farm Family also
provides United with certain personnel, property, equipment and facilities for
its operations. The Service Agreement is subject to certain provisions of the
New York Insurance Law and regulations promulgated thereunder. Farm Family
receives a fee for its services and facilities provided to United under the
Service Agreement equal to all direct and allocable expenses, reasonably and
equitably determined to be attributable to United by Farm Family, plus a
reasonable charge for overhead, as agreed to from time to time by the parties.
The basis used by Farm Family for determining expenses allocable to United
under the Service Agreement may be modified and adjusted by mutual agreement
where necessary or appropriate to reflect fairly and equitably the actual
incidence of cost incurred by Farm Family on behalf of United.

The Service Agreement will remain in effect until terminated in whole or in
part by mutual agreement of the parties or by either party upon at least 30
days prior written notice. For the years ended December 31, 1993,

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1994 and 1995, United incurred approximately $0.5 million, $0.5 million and
$0.8 million, respectively, and for the three months ended March 31, 1995 and
1996 approximately $0.1 million and $0.2 million, respectively, in direct and
allocated expenses and overhead under the Service Agreement.

FARM BUREAUS

Membership List Purchase Agreement

Farm Family is a party to a separate Membership List Purchase Agreement,
commencing on January 1, 1996, with each of the Farm Bureaus. The Life Company
has also entered into a Membership List Purchase Agreement with each of the
Farm Bureaus, also commencing on January 1, 1996. Pursuant to each Membership
List Purchase Agreement, on or before January 1, 1996, and annually thereafter
for the term of each agreement, each Farm Bureau provides to Farm Family
mailing lists of all Farm Bureau members who are in good standing. Under the
terms of each agreement, Farm Family has agreed to pay, commencing on or about
March 1, 1996, a fee to each Farm Bureau during the term of each agreement,
including any renewals thereof, of $7.50 for each member of the Farm Bureau as
reported on the Annual Membership Census of the American Farm Bureau
Federation.

Under the terms of each Membership List Purchase Agreement, the membership
list, including all of the information included therein, at all times remains
the property of the Farm Bureau, and Farm Family has acquired no proprietary
interest in the mailing list. Farm Family and its agents are permitted to use
the Farm Bureau membership list for purposes of marketing Farm Family's
insurance products to the Farm Bureau members. In addition, under each
Membership List Purchase Agreement, each Farm Bureau is prohibited, without
Farm Family's prior written consent, from releasing its membership list to any
third party or from promoting or endorsing the sale of other insurers'
products, except, in each case, the Life Company.

Under each Membership List Purchase Agreement, each Farm Bureau sublicenses
to Farm Family the American Farm Bureau Federation's service marks for Farm
Bureau and FB. The rights granted to Farm Family under the sublicense from the
American Farm Bureau Federation permit Farm Family also to use the service
marks through Rural Agency, which is a party to each agreement for this
purpose. The sublicense is subject to certain terms and conditions regarding
the use and display of such marks, as well as approval and revocation by the
Board of Directors of the American Farm Bureau Federation. Farm Family is
permitted to use the service marks in connection with the promotion and sale
of its insurance products within each of the ten states in which it operates.
Each Membership List Purchase Agreement also provides that the nature and
quality of all insurance products offered or sold by Farm Family must meet or
exceed the standards required by applicable state laws and regulations and
must be appropriate for the needs of Farm Bureau members. Each Farm Bureau,
either acting alone or at the direction of the American Farm Bureau
Federation, has the right to revoke Farm Family's right to use the service
marks and each Farm Bureau's other names and logos in the event that, in the
judgment of such Farm Bureau and/or the American Farm Bureau Federation, the
level or the nature and quality of the insurance products offered and sold by
Farm Family is not appropriate for the needs of Farm Bureau members. Farm
Family's sublicense to use the service marks may not be assigned by Farm
Family without the prior written consent of the American Farm Bureau
Federation.

The term of each Membership List Purchase Agreement is for six years
commencing on January 1, 1996. Each agreement is automatically renewed for
successive one-year terms, unless either party provides at least 60 days prior
written notice of its intention not to renew the agreement. For the years
ended December 31, 1993, 1994 and 1995, Farm Family paid $101,933, $516,488
and $547,418, respectively, to the Farm Bureaus, in the aggregate, under
substantially similar Membership List Purchase Agreements in effect for such
periods.

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STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of the shares of Common Stock as of the Effective Date by (i) each
person who the Company believes will own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director or nominee for director
of the Holding Company, (iii) each executive officer named in the table
contained under the caption "Management--Executive Compensation" above and
(iv) all executive officers and directors of the Holding Company as a group.
The Company does not believe that any person will beneficially own more than
5%, nor that any executive officer, director, nominee for director or all
executive officers and directors as a group beneficially own more than 1%, of
the shares of Common Stock (not including any shares that may be purchased by
such persons in the Public Offering) as of the Effective Date. The number of
shares of Common Stock beneficially owned by each person listed below is based
upon the number of shares each such person is estimated to receive as an
Eligible Policyholder under the Plan, but does not include the shares that any
such person may elect to receive as a holder of a Surplus Note, or the Shares
which such person may be entitled to purchase pursuant to the Subscription
Offering. Except as noted below, each person listed in the table will have
sole investment and voting power with respect to the shares held by such
person.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
NAME BENEFICIALLY OWNED(/1/)
- ---- -----------------------
<S> <C>
William M. Stamp, Jr............................... 146(/2/)(/3/)
John W. Lincoln.................................... 97(/2/)(/4/)
Philip P. Weber.................................... 89(/5/)
James J. Bettini................................... 53(/6/)
Charles E. Simon................................... 86
Victoria M. Stanton................................ 32(/7/)
Dale E. Wyman...................................... 57(/8/)
Robert L. Baker.................................... 863(/2/)(/9/)
Randolph C. Blackmer, Jr........................... 301(/2/)(/1//0/)
Fred G. Butler, Sr................................. 87(/2/)(/1//1/)
Joseph E. Calhoun.................................. 73(/2/)(/1//2/)
James V. Crane..................................... 350(/2/)(/1//3/)
Stephen J. George.................................. 0(/2/)(/1//4/)
Gordon H. Gowen.................................... 105(/2/)(/1//5/)
Jon R. Greenwood................................... 180(/2/)(/1//6/)
Clark W. Hinsdale III.............................. 79(/2/)(/1//7/)
Richard A. Jerome.................................. 50(/2/)(/1//8/)
Arthur D. Keown, Jr................................ 174(/2/)(/1//9/)
Daniel R. LaPointe................................. 62(/2/)(/2//0/)
Wayne A. Mann...................................... 25(/2/)(/2//1/)
John P. Moskos..................................... 0
Norma R. O'Leary................................... 430(/2/)(/2//2/)
John I. Rigolizzo, Jr.............................. 27(/2/)(/2//3/)
Harvey T. Smith.................................... 216(/2/)(/2//4/)
Howard T. Sprow.................................... 0
Richard D. Tryon................................... 97(/2/)(/2//5/)
Charles A. Wilfong................................. 0(/2/)(/2//6/)
Tyler P. Young..................................... 27(/2/)(/2//7/)
All directors and executive officers as a group (27
Persons)........................................... 3,649(/2//8/)
</TABLE>
- --------
(1) Excludes shares which may be received as a holder of a Surplus Note or
purchased in the Subscription Offering.

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<PAGE>

(2) Excludes 2,215 shares estimated to be received by the Life Company and
102 shares estimated to be received by United as Eligible Policyholders.
Excludes shares which may be received by the Life Company in exchange for
$813,000 of Surplus Notes held by the Life Company.

(3) Includes 58 shares as to which voting and investment power will be shared
with Stamp Farm Enterprises, Inc. Excludes shares which Mr. Stamp may
elect to receive in exchange for his $1,000 of Surplus Notes.

(4) Includes 43 shares as to which voting and investment power will be shared
with S. Anne Lincoln. Excludes 722 shares estimated to be received by New
York Farm Bureau, Inc. as an Eligible Policyholder, and shares which New
York Farm Bureau, Inc. may elect to receive in exchange for its $20,000
of Surplus Notes.

(5) Represents shares as to which voting and investment power will be shared
with Brenda Lee Weber.

(6) Represents shares as to which voting and investment power will be shared
with Marie C. Bettini.

(7) Represents shares as to which voting and investment power will be shared
with Randy M. Sweeney.

(8) Represents shares as to which voting and investment power will be shared
with Barbara Wyman.

(9) Represents 33 shares as to which voting and investment power will be
shared with Pamela M. Baker, 86 shares as to which voting and investment
power will be shared with Delaware Produce Growers, Inc. and 744 shares
as to which voting and investment power will be shared with Baker Farms,
Inc. Excludes 60 shares estimated to be received by Delaware Farm Bureau,
Inc. as an Eligible Policyholder, and shares which Delaware Farm Bureau,
Inc. may elect to receive in exchange for its $41,000 of Surplus Notes.

(10) Represents shares as to which voting and investment power will be shared
with Myrtie I. Blackmer or Ag Services, Inc. Excludes 91 shares estimated
to be received by Connecticut Farm Bureau Association, Inc. as an
Eligible Policyholder.

(11) Represents shares as to which voting and investment power will be shared
with Norma Gene Butler. Excludes shares which Mr. Butler may elect to
receive in exchange for his $1,000 of Surplus Notes. Excludes 35 shares
estimated to be received by West Virginia Farm Bureau, Inc. as an
Eligible Policyholder, and shares which West Virginia Farm Bureau, Inc.
may elect to receive in exchange for its $29,500 of Surplus Notes.

(12) Represents shares as to which voting and investment power will be shared
with Bessie J. Calhoun. Excludes shares which Mr. Calhoun may elect to
receive in exchange for his $2,000 of Surplus Notes. Excludes 60 shares
estimated to be received by Delaware Farm Bureau, Inc. as an Eligible
Policyholder, and shares which Delaware Farm Bureau, Inc. may elect to
receive in exchange for its $41,000 of Surplus Notes.

(13) Represents shares as to which voting and investment power will be shared
with Crane Bros., Inc. Excludes 39 shares estimated to be received by
Maine Farm Bureau Association as an Eligible Policyholder, and shares
which Maine Farm Bureau Association and its subsidiaries may elect to
receive in exchange for their $3,500 of Surplus Notes.

(14) Excludes 374 shares estimated to be received by New Jersey Farm Bureau as
an Eligible Policyholder.

(15) Includes 72 shares as to which voting and investment power will be shared
with Elizabeth R. Gowen. Excludes shares which Mr. Gowen may elect to
receive in exchange for his $5,000 of Surplus Notes. Excludes 78 shares
estimated to be received by New Hampshire Farm Bureau Federation as an
Eligible Policyholder.

(16) Represents shares as to which voting and investment power will be shared
with Linda R. Greenwood. Excludes 722 shares estimated to be received by
New York Farm Bureau, Inc. as an Eligible Policyholder, and shares which
New York Farm Bureau, Inc. may elect to receive in exchange for its
$20,000 of Surplus Notes.

(17) Excludes 193 shares estimated to be received by Vermont Farm Bureau, Inc.
as an Eligible Policyholder, and shares which Vermont Farm Bureau, Inc.
may elect to receive in exchange for its $500 of Surplus Notes.

(18) Represents shares as to which voting and investment power will be shared
with Mary Margaret Jerome. Excludes 722 shares estimated to be received
by New York Farm Bureau, Inc. as an Eligible Policyholder,

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<PAGE>

and shares which New York Farm Bureau, Inc. may elect to receive in
exchange for its $20,000 of Surplus Notes.

(19) Excludes 137 shares estimated to be received by Massachusetts Farm Bureau
Federation as an Eligible Policyholder, and shares which Massachusetts
Farm Bureau Federation may elect to receive in exchange for its $3,750 of
Surplus Notes.

(20) Excludes shares which Mr. LaPointe may elect to receive in exchange for
his $1,000 of Surplus Notes. Excludes 39 shares estimated to be received
by Maine Farm Bureau Association as an Eligible Policyholder, and shares
which Maine Farm Bureau Association and its subsidiaries may elect to
receive in exchange for their $3,500 of Surplus Notes.

(21) Represents shares as to which voting and investment power will be shared
with Ruth F. Mann. Excludes 78 shares estimated to be received by New
Hampshire Farm Bureau Federation as an Eligible Policyholder.

(22) Excludes shares which Ms. O'Leary may elect to receive in exchange for
her $500 of Surplus Notes. Excludes 91 shares estimated to be received by
Connecticut Farm Bureau Association, Inc. as an Eligible Policyholder.

(23) Represents shares as to which voting and investment power will be shared
with Marita Rigolizzo. Excludes 374 shares estimated to be received by
New Jersey Farm Bureau as an Eligible Policyholder.

(24) Includes 137 shares as to which voting and investment power will be
shared with Donna G. Smith. Excludes 193 shares estimated to be received
by Vermont Farm Bureau, Inc. as an Eligible Policyholder, and shares
which Vermont Farm Bureau, Inc. may elect to receive in exchange for its
$500 of Surplus Notes.

(25) Includes 32 shares as to which voting and investment power will be shared
with Barbara Tryon. Excludes 137 shares estimated to be received by
Massachusetts Farm Bureau Federation as an Eligible Policyholder, and
shares which Massachusetts Farm Bureau Federation may elect to receive in
exchange for its $3,750 of Surplus Notes.

(26) Excludes 35 shares estimated to be received by West Virginia Farm Bureau,
Inc. as an Eligible Policyholder, and shares which West Virginia Farm
Bureau, Inc. may elect to receive in exchange for its $29,500 of Surplus
Notes.

(27) Represents shares as to which voting and investment power will be shared
with Karla K. Young.

(28) Excludes shares which the Farm Bureaus may elect to receive in exchange
for their $100,750 of Surplus Notes, shares which the directors may elect
to receive in exchange for their $10,500 of Surplus Notes and shares
which the Life Company may elect to receive in exchange for its $813,000
of Surplus Notes.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Holding Company consists of (i)
10,000,000 shares of Common Stock, $.01 par value per share; and (ii)
1,000,000 shares of preferred stock (the "Preferred Stock"), the par value
(not to be less than $.01 per share), rights, preferences and powers of which
may be designated by the Holding Company Board. At present, there are 1,000
shares of Common Stock outstanding (all of which are issued to FFCIC) and no
shares of Preferred Stock issued or outstanding.

The following description of the capital stock of the Holding Company does
not purport to be complete or to give full effect to Delaware statutory or
common law and is, in all respects, qualified by reference to the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and the
Holding Company's Certificate and Bylaws.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Holding Company Board out of
funds legally available therefor. Upon the liquidation, dissolution or winding
up of the Holding Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Holding Company available after the payment of
all debts and other liabilities. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights except, as provided in the Plan
and pursuant to Section 7307 of the New York Insurance Law, for the rights of
Subscription Policyholders and Participating Surplus Note Holders to
participate in new issuances of Common Stock for a period of three years from
the Effective Date. All the outstanding shares of Common Stock are, and the
shares of Common Stock to be sold by the Holding Company in the Offerings when
issued and paid for will be, fully paid and non-assessable. See "The
Reorganization--Subscription Offering and Public Offering."

PREFERRED STOCK

Shares of Preferred Stock of the Holding Company may be issued from time to
time in one or more classes or series, each of which class or series shall
have such distinctive designation or title as shall be fixed by the Holding
Company Board prior to the issuance of any shares thereof. Each such class or
series of Preferred Stock shall have such voting powers, full or limited, or
no voting powers, and such preferences and relative, participating, optional
or other special rights and such qualifications, limitations or restrictions
thereof, as shall be stated in such resolution or resolutions providing for
the issue of such class or series of Preferred Stock as may be adopted from
time to time by the Holding Company Board prior to the issuance of any shares
thereof pursuant to the authority expressly vested in it, all in accordance
with the laws of the State of Delaware. If the shareholders of the Life
Company elect under the Option Purchase Agreement to receive shares of
Preferred Stock, the Holding Company Board will designate a certain number of
shares of Preferred Stock as Series A Preferred Stock for issuance to such
shareholders. See "Option to Acquire Life Company."

The effects of the issuance of Preferred Stock upon the rights of holders of
Common Stock might include restrictions on the rights of holders of Common
Stock to receive dividends and payments upon liquidation, dilution of the
voting power of the Common Stock to the extent that the Preferred Stock has
voting rights and dilution of the equity interest of the Common Stock to the
extent that the Preferred Stock is convertible into Common Stock. Issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could make it more
difficult for a third party to acquire a majority of the outstanding shares of
voting stock. Accordingly, the issuance of Preferred Stock may be used as an
"anti-takeover" device without further action on the part of the stockholders
of the Holding Company.

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DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

The following is a description of certain provisions of Delaware law and the
Holding Company's Certificate and Bylaws. This summary does not purport to be
complete and is qualified in its entirety by reference to the laws of
Delaware, the Certificate and the Bylaws.

The Holding Company is subject to the provisions of Section 203 of the DGCL.
Section 203 prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years did own, 15% of the corporation's voting stock.

Certain provisions of the Certificate and the Bylaws could have an anti-
takeover effect. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Holding Company Board and
in the policies formulated by the Holding Company Board and to discourage
certain types of transactions described below, which may involve an actual or
threatened change of control of the Holding Company. The provisions are
designed, for example, to reduce the vulnerability of the Holding Company to
an unsolicited proposal for a takeover of the Holding Company that does not
contemplate the acquisition of all of its outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of the Holding Company.
The provisions are also intended to discourage certain tactics that may be
used in proxy fights.

Classified Board of Directors

The Certificate provides for the Holding Company Board to be divided into
three classes of directors, with each class as nearly equal in number as
possible, serving staggered three-year terms. As a result, approximately one-
third of the Holding Company Board will be elected each year. The Holding
Company Board believes that a classified board of directors will help to
assure the continuity and stability of the Holding Company Board and the
business strategies and policies of the Holding Company as determined by the
Holding Company Board, because continuity and stability in the composition of
the Holding Company Board and in the policies formulated by it will be
enhanced by the staggered three-year terms.

The classified board provisions could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain
control of the Holding Company, even though such an attempt might be
beneficial to the Holding Company and its stockholders. In addition, the
classified board provisions could delay stockholders who do not like the
policies of the Holding Company Board from removing a majority of the Holding
Company Board for two years.

No Stockholder Action by Written Consent; Special Meetings

The Certificate provides that stockholder action can only be taken at an
annual or special meeting of stockholders and prohibits stockholder action by
written consent in lieu of a meeting. The Bylaws provide that special meetings
of stockholders may be called only by the Holding Company Board, its Chairman
or the President of the Holding Company. Stockholders are not permitted to
call a special meeting of stockholders or to require that the Holding Company
Board call a special meeting.

Advance Notice Procedures

The Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of the Holding Company (the
"Stockholder Notice Procedure"). The Stockholder Notice Procedure provides
that only persons who are nominated by, or at the direction of, the Holding
Company Board or by a stockholder who has given timely

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written notice to the Secretary of the Holding Company prior to the meeting at
which directors are to be elected, will be eligible for election as directors
of the Holding Company. The Stockholder Notice Procedure also provides that at
an annual meeting only such business may be conducted as has been brought
before the meeting by, or at the direction of, the Holding Company Board or by
a stockholder who has given timely written notice to the Secretary of the
Holding Company of such stockholder's intention to bring such business before
such meeting. Under the Stockholder Notice Procedure, for notice of
stockholder nomination to be made at an annual meeting to be timely, such
notice must be received at the principal executive offices of the Holding
Company not less than 60 days nor more than 90 days prior to the first
anniversary of the previous year's annual meeting (or if the date of the
annual meeting is not within 30 days before or after such anniversary date,
then, to be timely, notice must be received no later than the tenth day after
notice of the meeting was mailed or after public announcement of the date of
such meeting is first made). In addition, under the Stockholder Notice
Procedure, a stockholder's notice to the Holding Company proposing to nominate
a person for election as a director or relating to the conduct of business
other than the nomination of directors must contain certain specified
information. If the chairman of a meeting determines that business was not
properly brought before the meeting, in accordance with the Stockholder Notice
Procedure, such business shall not be discussed or transacted.

Number of Directors; Removal; Filling Vacancies

The Certificate provides that the Holding Company Board will consist of
between thirteen and twenty-five members, the exact number to be fixed from
time to time by resolution adopted by the directors of the Holding Company.
The Holding Company Board currently consists of twenty-three directors.
Further, subject to the rights of the holders of any series of Preferred Stock
then outstanding, the Certificate authorizes the Holding Company Board to fill
newly created directorships. Accordingly, this provision could prevent a
stockholder from obtaining majority representation on the Holding Company
Board by permitting the Holding Company Board to enlarge the Holding Company
Board and fill the new directorships with its own nominees. A director so
elected by the Holding Company Board holds office until the next election of
the class for which such director has been chosen and until his successor is
elected and qualified. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, the Certificate also provides that directors
may be removed only for cause and only by the affirmative vote of holders of a
majority of the outstanding shares of voting securities. The effect of these
provisions is to preclude a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the Holding Company Board
by filling the vacancies created by such removal with its own nominees.

Indemnification

The Certificate contains certain provisions permitted under the DGCL
relating to the liability of directors. The provisions eliminate a director's
liability for monetary damages for a breach of fiduciary duty, except in
certain circumstances involving wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. Further, the Certificate contains
provisions providing indemnification to directors and officers to the fullest
extent permitted by the DGCL. The Company believes that these provisions will
assist the Company in attracting and retaining qualified individuals to serve
as Directors.

Bylaws

The Certificate provides that the Bylaws are subject to adoption, amendment,
alteration, repeal or rescission either by (a) a majority of the authorized
number of directors or (b) the affirmative vote of the holders of not less
than two-thirds of the outstanding shares of voting securities. This provision
will make it more difficult for stockholders to make changes in the Bylaws by
allowing the holders of a minority of the voting securities to prevent the
holders of a majority of voting securities from amending the Bylaws.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is The Bank of New
York.

74
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

All shares of Common Stock distributed in the Reorganization, the
Subscription Offering or the Public Offering will be immediately and freely
tradeable by persons other than "affiliates" (as defined in rules promulgated
under the Securities Act) of the Company without further registration or
compliance with the time, volume, manner of sale and other limitations set
forth in Rule 144 under the Securities Act. The Company estimates that less
than 5% of its Common Stock will be held by affiliates of the Company on the
Effective Date (without taking into account any possible purchases of Shares
by affiliates in the Public Offering).

Prior to the earlier of (i) the Public Offering or (ii) the Effective Date,
there will be no public market for the Common Stock. As part of the
Reorganization, over Farm Family Mutual policyholders will receive a
total of shares of Common Stock in exchange for certain policyholder
membership interests. There can be no assurance that these policyholders, or
any other holders of Common Stock, will not seek to sell their shares of
Common Stock following the Effective Date. No prediction can be made as to the
effect, if any, such future sales of shares, or the availability of shares for
such future sales, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, FFCIC and the several
Underwriters named below (the "Underwriters"), the Company has agreed to sell
to each of the Underwriters named below, and each of the Underwriters, for
whom Salomon Brothers Inc is acting as representative (the "Representative"),
has severally agreed to purchase from the Company, the respective number of
Shares set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Salomon Brothers Inc............................................
---
Total.......................................................
===
</TABLE>

In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Shares offered pursuant
to this Prospectus (other than the shares of Common Stock covered by the
Underwriters' over-allotment option described below) if any of the Shares are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitments of
the non-defaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.

The Company has been advised by the Representative that the Underwriters
propose initially to offer the Shares directly to the public at the Public
Offering Price set forth on the cover of this Prospectus, and to certain
dealers at such price, less a concession not in excess of $ per Share. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per Share to other dealers. After the Public Offering, such
Public Offering Price and such concessions may be changed from time to time.
The Underwriters have informed the Company that the Underwriters do not intend
to confirm sales to any account over which they exercise discretionary
authority.

75
<PAGE>

The Company has agreed, for a period of 180 days following the execution of
the Underwriting Agreement, without the prior written consent of the
Representative, not to offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any other shares of
Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock other than: (i) the shares of Common
Stock to be issued pursuant to the Plan; (ii) the shares of Common Stock to be
issued in the Subscription Offering; and (iii) the shares of Common Stock to
be issued pursuant to the Option Purchase Agreement if the option thereunder
is exercised.

The Company has granted to the several Underwriters an option, exercisable
for the 30-day period after the date of this Prospectus, to purchase,
severally and not jointly, up to an additional shares of Common Stock at
the same purchase price per share as the Underwriters shall pay for the Shares
offered hereby. The Underwriters may exercise such option only for the purpose
of covering over-allotments, if any, in the sale of the Shares. To the extent
that the Underwriters exercise such option, each Underwriter will be
committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment.

The Underwriting Agreement provides that the Company and, subject to certain
limitations, FFCIC will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.

The Shares have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.

Prior to the earlier of (i) the Effective Date or (ii) the Public Offering,
there will be no public market for the Common Stock. The Public Offering Price
will be determined by negotiation between the Representative and the Company.
Among the factors to be considered in determining the Public Offering Price
are the sales, cash flow, earnings and certain other financial and operating
information of the Company in recent periods, the future prospects of the
Company and its industry in general, certain ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of the Company, and the general
condition of the securities market at the time of the Public Offering. There
can be no assurance, however, that the price at which the Shares will sell in
the public market after the Public Offering will not be lower than the price
at which they were sold by the Underwriters.

The Underwriters have from time to time performed various investment banking
and financial advisory services for the Company and its affiliates, for which
customary compensation has been received.

LEGAL MATTERS

The legality of the Shares offered hereby is being passed upon for Farm
Family by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York. Certain
legal matters in connection with the Public Offering will be passed on for the
Underwriters by Simpson Thacher & Bartlett, a partnership which includes
professional corporations, New York, New York.

EXPERTS

The Company's consolidated financial statements and financial statement
schedules as of December 31, 1995 and 1994, and for the years ended December
31, 1993, 1994 and 1995, and the Holding Company's balance sheet as of
February 29, 1996, included in this Prospectus and the Registration Statement
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent public accountants, given on the authority of that firm as
experts in accounting and auditing.

76
<PAGE>

GLOSSARY OF SELECTED INSURANCE TERMS

Acquisition costs............ Agents' or brokers' commissions, premium taxes,
marketing, and certain underwriting expenses
associated with the production of business.

Annuities.................... Contracts that provide for the payment of
periodic benefits at regular intervals
beginning at a specified date and continuing
for a specified period of time or for life.
Annuities may be immediate, in which event
periodic payments generally commence in the
month following the issuance of the contract,
or deferred, in which event periodic payments
generally commence at a future date. Immediate
annuities are single premium products backed by
the general account of the issuing company.
Deferred annuities can either accept a single
premium or flexible, periodic premiums.
Depending upon the specific product, the
premiums can be deposited in a fixed account
backed by the general account and be credited
with interest at a rate which is generally
reset annually; or under variable annuities all
or a portion of the premiums can be allocated
among one or more investment divisions of a
separate account under which the investment
risk is borne by the contractholder.

Assumed reinsurance.......... Insurance or reinsurance transferred from
another insurance or reinsurance entity.

Cede......................... To transfer to an insurer or a reinsurer all or
a part of the insurance or reinsurance written
by an insurance or reinsurance entity.

Claims-made coverage......... A policy that provides insurance with respect
to claims reported during the policy period or
any applicable extended reporting period.

Clash coverage............... A form of excess of loss casualty reinsurance
policy covering losses arising from a single
set of circumstances covered by more than one
primary policy. For example, if an insurer
covers both motorists involved in an accident,
clash cover would protect the insurer from
suffering a loss in the full amount of both
policies. Clash coverage would pay to the
insurer a portion of the loss in excess of the
coverage of one of the two policies.

Combined ratio............... The sum of the expense ratio and the loss
ratio, determined either in accordance with
statutory accounting practices or GAAP. A
combined ratio under 100% generally indicates
an underwriting profit and a combined ratio
over 100% generally indicates an underwriting
loss. The extent by which the combined ratio
deviates from 100% indicates relative
underwriting profit or loss.

Commercial multi-peril Insurance policies that provide comprehensive
insurance.................... protection to businesses, including coverage
for property damage from fire, lightning,
windstorm and certain other perils, for losses
from crime, and for liability for personal
injury to others.

Direct written premiums......
Total premiums written by an insurer other than
premiums for reinsurance assumed by an insurer.

77
<PAGE>

Earned premiums.............. The portion of net written premiums applicable
to the expired period of policies.

Expense ratio................ Under statutory accounting practices, the ratio
of underwriting expenses to net written
premiums.

Fixed annuity................ Contract that provides for annuity premiums to
be deposited in a fixed account backed by a
general account and credited with interest at a
rate which is generally reset annually.

Fire insurance............... Insurance policies that provide coverage for
damage to buildings and property resulting from
fire, lightning, windstorm, hail and certain
other perils.

Gross premiums............... Net premiums plus operating expenses,
commissions and other expenses.

Homeowners insurance......... Insurance policies that provide coverage for
damage to residences and their contents from a
broad range of perils, including fire,
lightning, windstorm and theft. These policies
also cover liability of the insured arising
from injury to other persons or their property
while on the insured's property and under the
specified conditions.

Incurred losses.............. The sum of losses paid plus the change in the
estimated liability for claims which have been
reported but which have not been settled and
claims which have occurred but have not yet
been reported to the insurer.

Insurance risks: preferred,
standard, non-standard.......
Categories of underwriting classifications for
risk selection and pricing. The classifications
consider the loss experience, the degree of
hazard and loss frequency potential. Preferred
risks have an absence of prior losses, low
degrees of hazard, and/or low loss frequency
potential. Standard risks have average loss
experience, moderate degree of hazard and/or
moderate loss frequency potential. Non-standard
risks have above average loss experience, a
higher degree of hazard and/or higher loss
frequency potential.

Loss adjustment expenses..... The expenses of settling claims, including
legal and other fees and the general expenses
of administering the claims adjustment process.

Loss and LAE ratio........... Under statutory accounting practices, the ratio
of incurred losses and loss adjustment expenses
to earned premiums.

Net earned premiums.......... The portion of written premiums that is
recognized for accounting purposes as revenue
during a period.

Net premiums................. Gross premiums less return premiums and
dividends paid.

Net written premiums......... Gross premiums written and insured by an
insurer less premiums ceded to reinsurers.

Occurrence basis.............
Policy coverage providing insurance for events
occurring during the policy period but without
regard for when the claim is reported.

78
<PAGE>

Participating policy......... A policy which entitles the policyholder to
participate in the divisible surplus of an
insurance company to the extent dividends are
apportioned thereon.

Personal and commercial
automobile insurance.........
Insurance policies that provide protection
against liability for bodily injury and
property damage arising from automobile
accidents, and provide protection against loss
from damage to automobiles owned by the
insured.

Reinsurance.................. A procedure whereby an insurer remits or cedes
a portion of the premiums to another insurer or
reinsurer as payment to that insurer or
reinsurer for assuming a portion of the related
risk.

Residual market.............. The market consisting of those persons (most
frequently drivers seeking automobile
insurance) who are unable to obtain insurance
coverage in the voluntary market.

Statutory accounting Recording transactions and preparing financial
practices.................... statements in accordance with the rules and
procedures prescribed or permitted by statute
or regulatory authorities, generally reflecting
a liquidating, rather than a going concern,
concept of accounting. The principal
differences between statutory accounting
practices ("SAP") and GAAP for property and
casualty insurance companies, the method by
which the Company generally reports its
financial results, are: (a) under SAP, certain
assets that are not admitted assets are
eliminated from the balance sheet; (b) under
SAP, policy acquisition costs are expenses as
incurred, while under GAAP, they are deferred
and amortized over the term of the policies;
(c) under SAP, no provision is made for
deferred income taxes; and (d) under SAP,
certain reserves are recognized which are not
recognized under GAAP.

Statutory capital and The sum remaining after all liabilities are
surplus...................... subtracted from all assets, applying statutory
accounting practices. This sum is regarded as
financial protection to policyholders in the
event an insurance company suffers unexpected
or catastrophic losses.

Term life insurance.......... Life insurance offering protection during a
certain number of years, but expiring without
policy cash value if the insured survives the
stated period.

Underwriting................. The process whereby an insurer reviews
applications submitted for insurance coverage
and determines whether it will accept all or
part of the coverage being requested and what
the applicable premiums should be. Underwriting
also includes an ongoing review of existing
policies and their pricing.

Underwriting expenses........ The aggregate of policy acquisition costs and
the portion of administrative, general and
other expenses attributable to underwriting
operations.

Underwriting profit (loss)...
The excess (deficiency), determined under
statutory accounting practices, resulting from
the difference between earned premiums

79
<PAGE>

and the sum of incurred losses, loss adjustment
expenses and underwriting expenses.

Universal life insurance..... Life insurance which provides the policyholder,
within certain limits established by the terms
of the policy, with the ability to select
premium levels and death benefits. Premiums in
excess of specified charges are credited to the
account value of the policy, which is credited
with interest at a rate determined by the
insurer subject to the minimum guaranteed
crediting rate specified in the policy. The
cost of insurance and administrative charges
are deducted from the account value of the
policy.

Variable annuity............. Annuity in which premium payments are used to
purchase accumulation units. The value of a
unit fluctuates in accordance with the
investment experience of a separate account;
variable annuity contracts typically include a
general account guaranteed interest investment
option. At the time of the payment of benefits
to the annuitant, the annuitant can generally
elect from a number of payment options which
provide either fixed or variable benefit
payments.

Voluntary market............. The market consisting of those persons whom
insurance companies voluntarily choose to
insure because such companies believe that they
can do so profitably at competitive rates.

Whole life insurance......... Life insurance that may be kept in force for a
person's entire life by paying one or more
premiums. The policy is paid for in one of
three different ways: (i) ordinary life
insurance (premiums are payable as long as the
insured lives), (ii) limited payment life
insurance (premiums are payable over a
specified number of years) and (iii) single
premium life insurance (a one time payment
amount paid at the inception of the policy).
Whole life insurance contracts also build up a
policy cash value.

Workers' compensation Insurance policies purchased by employers to
insurance.................... provide benefits to employees for injuries
sustained during employment and to protect
employees from certain third party liability
claims. The extent of coverage is established
by the workers' compensation laws of each
state.

80
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FARM FAMILY MUTUAL INSURANCE COMPANY AND SUBSIDIARY
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 (audited) and
at March 31, 1996 (unaudited)........................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1993,
1994 and 1995 (audited) and for the Three Months Ended March 31, 1995
and 1996 (unaudited).................................................... F-4
Consolidated Statements of Policyholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 (audited) and for the Three Months
Ended March 31, 1995 and 1996 (unaudited)............................... F-5
Statements of Consolidated Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 (audited) and for the Three Months Ended March 31,
1995 and 1996 (unaudited)............................................... F-6
Notes to Consolidated Financial Statements............................... F-7
FARM FAMILY HOLDINGS, INC.
Report of Independent Accountants........................................ F-22
Balance Sheet at February 29, 1996....................................... F-23
Notes to Balance Sheet................................................... F-24
</TABLE>

F-1
<PAGE>

[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Farm Family Mutual Insurance Company

We have audited the accompanying consolidated balance sheets of Farm Family
Mutual Insurance Company and Subsidiary as of December 31, 1995 and 1994, and
the related consolidated statements of income, policyholders' equity and cash
flows for the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Farm
Family Mutual Insurance Company and Subsidiary as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.

As discussed in the accompanying notes to the consolidated financial
statements, the Company changed its method of accounting for investments
(Note 1) at December 31, 1993 and for postretirement benefits (Note 8) at
January 1, 1995.

As described in Note 2, the Company has adopted a plan of demutualization.
Subject to certain approvals under the plan, the Company will convert to a
stock property and casualty insurance company on the effective date of the plan.

COOPERS & LYBRAND L.L.P.

Albany, New York
February 13, 1996

F-2

<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ -----------
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments
Fixed Maturities
Available for sale, at fair value (Amortized
cost: $156,591 in 1994, $171,694 in 1995
and $177,632 at March 31, 1996)........... $148,889 $181,189 $181,476
Held to maturity, at amortized cost
(Fair value: $10,948 in 1994, $13,100 in
1995 and $12,349 at March 31, 1996)....... 11,329 12,386 12,204
Equity securities
Available for sale, at fair value (Cost: $334
in 1994, 1995 and at March 31, 1996)...... 3,944 4,746 5,147
Mortgage loans................................ 1,890 1,822 1,803
Other invested assets......................... 1,572 1,246 1,027
Short-term investments........................ 3,013 6,532 638
-------- -------- --------
Total investments........................... 170,637 207,921 202,295
-------- -------- --------
Cash........................................... 4,507 2,410 3,794
Insurance receivables:
Reinsurance receivables....................... 15,027 13,773 12,708
Premiums receivable........................... 18,749 21,791 22,948
Deferred acquisition costs..................... 8,671 10,527 10,551
Accrued investment income...................... 4,047 4,260 4,017
Federal income taxes recoverable............... 899 448 220
Deferred income tax asset, net................. 6,601 -- 1,430
Prepaid reinsurance premiums................... 1,806 1,864 1,993
Receivable from affiliates, net................ 10,567 13,860 14,940
Other assets................................... 1,596 1,434 1,823
-------- -------- --------
Total assets................................ $243,107 $278,288 $276,719
======== ======== ========
LIABILITIES AND POLICYHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment
expenses....................................... 127,954 137,978 140,319
Unearned premium reserve...................... 48,843 52,799 53,999
Reinsurance premiums payable.................. 4,029 2,635 1,076
Accrued expenses and other liabilities........ 6,555 7,788 7,532
Debt.......................................... 2,749 2,707 2,698
Deferred income tax liability, net............ -- 217 --
-------- -------- --------
Total liabilities........................... 190,130 204,124 205,624
-------- -------- --------
Commitments and contingencies
Policyholders' equity:
Retained earnings............................. 55,678 65,284 65,586
Net unrealized investment gains (losses)...... (2,701) 8,998 5,627
Minimum pension liability adjustment.......... -- (118) (118)
-------- -------- --------
Total policyholders' equity................. 52,977 74,164 71,095
-------- -------- --------
Total liabilities and policyholders' equity. $243,107 $278,288 $276,719
======== ======== ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-3
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY CONSOLIDATED STATEMENTS OF INCOME
($ IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- -------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums.................... $ 96,672 $101,466 $116,936 $ 27,852 $ 31,676
Net investment income....... 13,861 13,190 14,326 3,504 3,858
Realized investment gains
(losses), net................ (174) 1,340 912 61 63
Other income................ 676 696 840 168 213
-------- -------- -------- ---------- ----------
Total revenues............ 111,035 116,692 133,014 31,585 35,810
-------- -------- -------- ---------- ----------
Losses and expenses:
Losses and loss adjustment
expenses..................... 73,213 82,680 83,184 19,157 25,722
Underwriting expenses....... 26,811 28,768 34,902 8,212 8,787
Interest expense............ 223 220 216 54 54
Dividends to policyholders.. 122 51 122 47 27
-------- -------- -------- ---------- ----------
Total losses and expenses. 100,369 111,719 118,424 27,470 34,590
-------- -------- -------- ---------- ----------
Income before federal income
tax expense and
extraordinary item.......... 10,666 4,973 14,590 4,115 1,220
Federal income tax expense... 3,082 1,447 4,984 1,193 397
-------- -------- -------- ---------- ----------
Income before extraordinary
item......................... 7,584 3,526 9,606 2,922 823
Extraordinary item--
demutualization expenses..... -- -- -- -- 521
-------- -------- -------- ---------- ----------
Net income................ $ 7,584 $ 3,526 $ 9,606 $ 2,922 $ 302
======== ======== ======== ========== ==========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-4
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY CONSOLIDATED STATEMENTS OF POLICYHOLDERS'
EQUITY
($ IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- -----------
1993 1994 1995 1996
------- -------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
RETAINED EARNINGS
Balance, beginning of period......... $44,568 $ 52,152 $55,678 $65,284
Net income........................... 7,584 3,526 9,606 302
------- -------- ------- -------
Balance, end of period............... 52,152 55,678 65,284 65,586
------- -------- ------- -------
NET UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENTS
Balance, beginning of period......... 1,883 8,360 (2,701) 8,998
Change in unrealized appreciation
(depreciation), net................... (293) (11,061) 11,699 (3,371)
Cumulative effect of accounting
change for investments................ 6,770 -- -- --
------- -------- ------- -------
Balance, end of period............... 8,360 (2,701) 8,998 5,627
------- -------- ------- -------
MINIMUM PENSION LIABILITY ADJUSTMENT
Balance, beginning of period......... -- -- -- (118)
Minimum pension liability adjustment. -- -- (118) --
------- -------- ------- -------
Balance, end of period............... -- -- (118) (118)
------- -------- ------- -------
TOTAL POLICYHOLDERS' EQUITY......... $60,512 $ 52,977 $74,164 $71,095
======= ======== ======= =======
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-5
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY STATEMENTS OF CONSOLIDATED CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
---------------------------- ----------------------
1993 1994 1995 1995 1996
-------- -------- -------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income............... $ 7,584 $ 3,526 $ 9,606 $ 2,922 $ 302
-------- -------- -------- ---------- ----------
Adjustments to reconcile
net income
to net cash provided by
operating activities:
Realized investment
(gains) losses........... 174 (1,340) (912) (61) (63)
Amortization of bond
discount................. 4 77 62 17 32
Depreciation............ 322 -- -- -- --
Deferred income taxes... (1,048) 596 581 (11) 169
Changes in:
Reinsurance
receivables.............. (3,968) 1,910 1,254 (193) 1,065
Premiums receivable.... (2,936) (2,732) (3,042) (2,404) (1,157)
Deferred acquisition
costs.................... (1,684) (39) (1,856) (883) (24)
Accrued investment
income................... (692) (426) (213) 504 243
Federal income taxes
recoverable.............. -- (899) 451 899 228
Prepaid reinsurance
premiums................. 211 (367) (58) (229) (129)
Receivable from
affiliates............... (1,344) 1,699 (3,293) (1,142) (1,080)
Other assets........... 397 96 271 818 (389)
Reserves for losses and
loss adjustment expenses. 5,980 4,477 10,024 1,555 2,341
Unearned premium
reserve.................. 1,595 4,541 3,956 2,098 1,200
Reinsurance premiums
payable.................. (1,418) 4 (1,394) (968) (1,559)
Accrued expenses and
other liabilities........ 3,269 (2,028) 1,001 1,543 (256)
Income taxes payable... (813) (459) -- 307 --
-------- -------- -------- ---------- ----------
Total adjustments.... (1,951) 5,110 6,832 1,850 621
-------- -------- -------- ---------- ----------
Net cash provided by
operating activities..... 5,633 8,636 16,438 4,772 923
-------- -------- -------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sales:
Fixed maturities
available for sale....... 21,921 26,100 28,466 3,167 3,918
Equity securities....... -- 732 -- -- 151
Investment collections:
Fixed maturities
available for sale....... 26,628 16,025 15,435 2,297 4,274
Fixed maturities held to
maturity................. 305 418 514 214 172
Mortgage loans.......... 185 58 68 16 19
Investment purchases:
Fixed maturities
available for sale....... (52,798) (54,010) (58,339) (11,109) (14,023)
Fixed maturities held to
maturity................. (7,240) (1,040) (1,598)
Change in short-term
investments, net......... 3,457 90 (3,519) (10) 5,894
Change in other invested
assets................... 328 3,186 480 157 65
Proceeds from sale of
property and equipment... -- 711 -- -- --
-------- -------- -------- ---------- ----------
Net cash provided by
(used in) investing
activities............... (7,214) (7,730) (18,493) (5,268) 470
-------- -------- -------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Principal payments on
debt..................... (36) (34) (42) (15) (9)
-------- -------- -------- ---------- ----------
Net cash used in
financing activities..... (36) (34) (42) (15) (9)
-------- -------- -------- ---------- ----------
Net increase
(decrease) in cash....... (1,617) 872 (2,097) (511) 1,384
Cash, beginning of
period................... 5,252 3,635 4,507 4,507 2,410
-------- -------- -------- ---------- ----------
Cash, end of period...... $ 3,635 $ 4,507 $ 2,410 $ 3,996 $ 3,794
======== ======== ======== ========== ==========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-6
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include the
accounts of Farm Family Mutual Insurance Company ("Farm Family Mutual") and
its wholly owned subsidiary, Rural Agency and Brokerage, Inc. ("Rural
Agency"), (collectively referred to as the "Mutual Company"). All significant
intercompany balances and transactions have been eliminated. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

The Mutual Company provides property and casualty insurance coverages to
members of the state Farm Bureau organizations in New York, New Jersey,
Delaware, West Virginia and all of the New England states. Membership in the
state Farm Bureau organizations is a prerequisite for voluntary insurance
coverage, except for employees of the Mutual Company and its affiliates.

The operations of the Mutual Company are closely related with those of its
affiliates, Farm Family Life Insurance Company (the "Life Company") and the
Life Company's wholly owned subsidiary, United Farm Family Insurance Company
("United"). (See Note 10.)

The accompanying unaudited consolidated financial statements, reflect, in
the opinion of management, all adjustments, consisting of only normal and
recurring adjustments, necessary for a fair presentation of the consolidated
financial position at March 31, 1996, and the consolidated results of
operations for the three month periods ended March 31, 1995 and 1996. The
results of operations for the three month period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.

The unaudited consolidated financial statements as of and for the three
month period ended March 31, 1996 include the accounts of Farm Family
Holdings, Inc. (the "Holding Company") since its incorporation on February 12,
1996. The Holding Company was incorporated under Delaware Law for the purpose
of becoming the parent holding company of the Mutual Company under a plan of
reorganization and conversion, as amended (the "Plan"), whereby the Mutual
Company will convert from a New York mutual property and casualty insurance
company to a New York stock property and casualty insurance company. (See Note
2.)

Investments:

Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires that investments classified
as available for sale be carried at fair value. Previously, fixed income
securities classified as available for sale were carried at the lower of
amortized cost or fair value, determined in the aggregate. Unrealized holding
gains and losses are reflected as a separate component of policyholders'
equity, net of deferred income taxes. The cumulative effect of adoption of
this statement increased policyholders' equity at December 31, 1993 by
$6,770,000.

Fixed maturities include bonds, redeemable preferred stocks and mortgage-
backed securities. Investments in fixed maturities which the Mutual Company
has both the ability and positive intent to hold to maturity are classified as
held to maturity and carried at amortized cost. Fixed maturities which may be
sold prior to their

F-7
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
contractual maturity are classified as available for sale and are carried at
fair value. The difference between amortized cost and fair value of fixed
maturities classified as available for sale, net of deferred income taxes, is
reflected as a component of policyholders' equity. The carrying values of all
investments in fixed maturities are reviewed on an ongoing basis. If this
review indicates a decline in fair value below cost is other than temporary,
the Mutual Company's carrying value in the investment is reduced to its
estimated realizable value and a specific writedown is taken. Such writedowns
are included in realized investment gains and losses.

Equity securities include common and non-redeemable preferred stocks which
are carried at fair value. The difference between cost and fair value of
equity securities, less deferred income taxes, is reflected as a component of
policyholders' equity.

Mortgage loans are carried at outstanding principal balance. Other invested
assets, which consist primarily of investments in limited partnerships, are
carried at cost.

Cash and short-term investments consist of demand deposits, repurchase
agreements and money market investments whose maturities are three months or
less from the date of purchase. Short-term investments are carried at cost
which approximates fair value.

Investment income consists primarily of interest and dividends. Interest is
recognized on an accrual basis and dividends are recorded on the date of
declaration. Interest income on mortgage-backed securities is determined on
the effective yield method based on estimated principal repayments. Realized
investment gains and losses are determined on a specific identification basis.

Income Taxes:

The income tax provision is calculated under the liability method. Deferred
income tax assets and liabilities are recorded based on the difference between
the financial statement and tax bases of assets and liabilities and the
enacted tax rates. The principal assets and liabilities giving rise to such
differences are reserves for losses and loss adjustment expenses, unearned
premiums, and deferred policy acquisition costs. Deferred income taxes also
arise from unrealized investment gains or losses on equity securities and
fixed maturities classified as available for sale.

Property-Liability Insurance Accounting:

Premiums are deferred and earned on a pro rata basis over the terms of the
respective policies. Amounts paid for ceded reinsurance premiums are reported
as prepaid reinsurance premiums and amortized over the remaining contract
period in proportion to premium. Premiums receivable are recorded at cost less
an allowance for doubtful accounts.

Policy acquisition costs such as agents' compensation, premium taxes, and
certain other underwriting expenses that vary with and are primarily related
to the production of business have been deferred. Such deferred policy
acquisition costs are amortized as premium revenue is recognized. Deferred
policy acquisition costs are limited to their estimated realizable value,
which gives effect to the premium to be earned, related investment income, and
losses and loss adjustment expenses expected to be incurred as the premium is
earned.

Reserves for losses and loss adjustment expenses represent estimates of the
ultimate amounts necessary to settle reported losses and a provision for
incurred but not reported claims of insured losses. The reserve estimates are
based on known facts and circumstances, including the Mutual Company's
experience with similar cases and historical trends involving reserving
patterns, loss payments, pending levels of unpaid claims and product mix, as
well as other factors including court decisions, economic conditions and
public attitudes. The reserves for

F-8
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
losses and loss adjustment expenses include case basis estimates of reported
losses, estimates of incurred but not reported losses based upon prior
experience adjusted for current trends, and estimates of losses to be paid
under assumed reinsurance contracts. Estimated amounts of recoverable salvage
and subrogation are deducted from the reserves for losses and loss adjustment
expenses. The establishment of appropriate reserves, as well as related
amounts recoverable under reinsurance contracts is an inherently uncertain
process. Reserve estimates are regularly reviewed and updated, using the most
current information available. Any resulting adjustments, which may be
material, are reflected in current operations. (See Note 7.)

Participating Policyholders:

All of the Mutual Company's insurance policies are written on a
participating basis. Dividends to policyholders are approved by the Board of
Directors based on overall underwriting experience by state for eligible
policies.

2. PLAN OF DEMUTUALIZATION AND OPTION TO ACQUIRE LIFE COMPANY

On November 1, 1995, the Mutual Company submitted an application to the New
York Superintendent of Insurance (the "Superintendent") for permission to
convert from a mutual property/casualty insurance company to a stockholder
owned company. As part of the demutualization, the Holding Company was formed
and the Mutual Company's policyholders will receive common stock in the
Holding Company and/or cash in exchange for their membership interest in the
Mutual Company. The submission of the application to the Superintendent
represents the first step in the demutualization process which will require
the approval of the Superintendent as well as the Mutual Company's
policyholders prior to demutualization.

The Holding Company has entered into the Option Purchase Agreement, dated
February 14, 1996 (the "Option Purchase Agreement"), with the shareholders of
the Life Company pursuant to which the Holding Company has, for a two-year
period commencing on the effective date of the Plan, the option to acquire the
Life Company subject to certain conditions, which include the approval of the
Holding Company's shareholders and applicable regulatory authorities.
Financial statements for the Life Company are not being furnished because the
Holding Company has determined that the acquisition of the Life Company is not
"probable" within the meaning of Rule 3.05 of Regulation S-X at this time.
Although the Holding Company believes that the acquisition of the Life Company
would be desirable under appropriate circumstances, the Holding Company is not
in a position at this time to predict with any certainty whether the option to
acquire the Life Company will in fact be exercised. The Holding Company's
decision to exercise the option will depend, among other things, on the
exercise price for the shares of the Life Company, an evaluation of the
financial statements prepared in accordance with generally accepted accounting
principles and prospects of the Life Company, the outcome of a vote by the
Holding Company's shareholders and the receipt of applicable regulatory
approvals. The Life Company's financial statements are prepared on the basis
of statutory accounting practices prescribed or permitted by insurance
regulatory authorities. Financial statements for the Life Company prepared in
accordance with generally accepted accounting principles do not currently
exist.

3. INVESTMENTS

The following is a schedule of the amortized cost, fair value and gross
unrealized gains and losses of investments in fixed maturities at December 31,
1994 and 1995.

F-9
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED GROSS UNREALIZED FAIR
1994 COST GAINS (LOSSES) VALUE
- ---- --------- ------- --------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government & Agencies................ $ 20,184 $ 606 $ (608) $ 20,182
States, Municipalities & Political
Subdivisions.............................. 19,630 304 (1,029) 18,905
Corporate................................. 108,410 1,077 (7,756) 101,731
Mortgage-backed Securities................ 1,923 44 -- 1,967
Redeemable Preferred Stock................ 6,444 105 (445) 6,104
-------- ------- -------- --------
Total................................... $156,591 $ 2,136 $ (9,838) $148,889
======== ======= ======== ========
HELD TO MATURITY
States, Municipalities & Political
Subdivisions.............................. $ 4,722 $ 21 $ (16) $ 4,727
Corporate................................. 6,607 -- (386) 6,221
-------- ------- -------- --------
Total................................... $ 11,329 $ 21 $ (402) $ 10,948
======== ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
AMORTIZED GROSS UNREALIZED FAIR
1995 COST GAINS (LOSSES) VALUE
- ---- --------- ------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government & Agencies................. $ 22,700 $ 1,543 $ -- $ 24,243
States, Municipalities & Political
Subdivisions............................... 21,871 1,675 (66) 23,480
Corporate.................................. 119,319 7,040 (987) 125,372
Mortgage-backed Securities................. 1,082 48 -- 1,130
Redeemable Preferred Stock................. 6,722 322 (80) 6,964
-------- ------- ------- --------
Total.................................... $171,694 $10,628 $(1,133) $181,189
======== ======= ======= ========
HELD TO MATURITY
States, Municipalities & Political
Subdivisions............................... $ 5,925 $ 373 $ -- $ 6,298
Corporate.................................. 6,461 354 (13) 6,802
-------- ------- ------- --------
Total.................................... $ 12,386 $ 727 $ (13) $ 13,100
======== ======= ======= ========
</TABLE>

The table below presents the amortized cost and fair value of fixed
maturities at December 31, 1995, by contractual maturity. Actual maturities
may differ from contractual maturities as a result of prepayments.

<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
------------------ -----------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- -------- --------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less.................... $ 349 $ 303 $ 79 $ 79
Due after one year through five years...... 25,420 25,839 1,477 1,539
Due after five years through ten years..... 69,862 72,994 5,057 5,161
Due after ten years........................ 66,528 71,769 5,773 6,321
-------- -------- ------- -------
162,159 170,905 12,386 13,100
Mortgage-backed securities................. 9,535 10,284 -- --
-------- -------- ------- -------
$171,694 $181,189 $12,386 $13,100
======== ======== ======= =======
</TABLE>

F-10
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unrealized investment gains and losses on fixed maturities classified as
available for sale and equity securities included in policyholders' equity at
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
COST/ NET
AMORTIZED FAIR GROSS UNREALIZED UNREALIZED
COST VALUE GAINS (LOSSES) GAINS
--------- -------- ------- -------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Fixed maturities available for
sale............................ $171,694 $181,189 $10,628 $(1,133) $9,495
Equity securities............... 334 4,746 4,440 (28) 4,412
-------- -------- ------- ------- ------
Total......................... $172,028 $185,935 $15,068 $(1,161) 13,907
======== ======== ======= =======
Deferred income taxes........... 4,909
------
Total......................... $8,998
======
</TABLE>

The change in unrealized appreciation (depreciation) of investments included
in policyholders' equity for the years ended December 31, 1993, 1994 and 1995
was as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------ -------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities available for sale.................. $9,532 $(17,236) $17,197
Equity securities.................................... 282 477 802
Other invested assets................................ -- -- (63)
------ -------- -------
$9,814 $(16,759) $17,936
Deferred income taxes................................ (3,337) 5,698 (6,237)
------ -------- -------
$6,477 $(11,061) $11,699
====== ======== =======
</TABLE>

The components of net investment income are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Interest on fixed maturities......................... $13,719 $13,546 $14,561
Dividends from equity securities..................... 102 23 19
Interest on mortgage loans........................... 211 182 180
Interest on short-term investments................... 81 145 315
Other, net........................................... 31 (381) (406)
------- ------- -------
Total investment income............................ 14,144 13,515 14,669
Investment expense................................... (283) (325) (343)
------- ------- -------
Net investment income.............................. $13,861 $13,190 $14,326
======= ======= =======

</TABLE>

A summary of realized investment gains (losses), net as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities..................................... $ (174) $ 1,241 $ 912
Equity securities.................................... -- 99 --
------- ------- -------
$ (174) $ 1,340 $ 912
======= ======= =======
</TABLE>

F-11
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined using
available market information and appropriate value methodologies. The
estimated fair value of financial instruments are not necessarily indicative
of the amounts the Mutual Company might pay or receive in actual market
transactions. Potential taxes and other transaction costs have not been
considered in estimating fair value. As a number of the Mutual Company's
significant assets (including deferred policy acquisition costs, and deferred
income taxes) and liabilities (including reserves for losses and loss
adjustment expenses) are not considered financial instruments, the disclosures
that follow do not reflect the fair value of the Mutual Company as a whole.

The following table presents the carrying value and fair value of the Mutual
Company's financial instruments at December 31, 1994 and 1995.

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Available for sale........................ $148,889 $148,889 $181,189 $181,189
Held to maturity.......................... 11,329 10,948 12,386 13,100
Equity securities........................... 3,944 3,944 4,746 4,746
Mortgage loans.............................. 1,890 1,890 1,822 1,822
Other invested assets....................... 1,572 1,572 1,246 1,246
Short-term investments...................... 3,013 3,013 6,532 6,532
Cash........................................ 4,507 4,507 2,410 2,410
Premiums receivable, net.................... 18,749 18,749 21,791 21,791
Accrued investment income................... 4,047 4,047 4,260 4,260
Receivable from affiliates.................. 10,567 10,567 13,860 13,860
Other assets................................ 1,596 1,596 1,434 1,434
LIABILITIES
Accrued expenses and other liabilities...... 6,555 6,555 7,788 7,788
Debt........................................ 2,749 2,749 2,707 2,707
</TABLE>

The following methods and assumptions were used in estimating the fair value
disclosures for the financial instruments:

. Fixed Maturities (available for sale and held to maturity), Equity
Securities and Other Invested Assets--The fair value is based upon quoted
market prices where available or from independent pricing services.

. Mortgage Loans--The fair value is based on discounted cash flows using
discount rates at which similar loans would be made to borrowers with
similar characteristics.

. Short-term Investments--Due to their short-term, highly liquid nature,
their carrying value approximates fair value.

. Premiums Receivable, Accrued Investment Income, Receivable from Affiliates,
Other Assets and Accrued Expenses and Other Liabilities--Due to their
short-term nature, their carrying value approximates fair value.

. Debt--The fair value is based on discounted cash flows using current
borrowing rates for similar debt arrangements.

F-12
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. REINSURANCE

The Mutual Company assumes and cedes insurance to participate in the
reinsurance market, limit maximum losses and minimize exposure on large risks.
Reinsurance contracts do not relieve the Mutual Company from its obligations
to policyholders as the primary insurer. The Mutual Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit
risk arising from similar geographic regions, activities and economic
characteristics of the reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies. Amounts recoverable are regularly
evaluated by the Mutual Company and an allowance for uncollectible reinsurance
is provided when collection is in doubt. At December 31, 1994 and 1995, the
Mutual Company determined it was not necessary to provide an allowance for
uncollectible reinsurance.

The Mutual Company's reinsurance program also includes reinsurance
agreements with United. (See Note 10.)

The effects of reinsurance on premiums written and earned, and losses and
loss adjustment expenses, for the years indicated was as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
PREMIUMS WRITTEN
Direct.......................................... $111,158 $122,039 $135,963
Assumed......................................... 9,045 7,577 6,261
Ceded to United................................. (9,010) (9,776) (9,237)
Ceded to non-affiliates......................... (12,715) (14,226) (12,153)
-------- -------- --------
Premiums written, net of reinsurance............ $ 98,478 $105,614 $120,834
======== ======== ========
PREMIUMS EARNED
Direct.......................................... $108,892 $117,384 $131,717
Assumed......................................... 9,716 7,690 6,552
Ceded to United................................. (9,009) (9,750) (9,238)
Ceded to non-affiliates......................... (12,927) (13,858) (12,095)
-------- -------- --------
Premiums earned, net of reinsurance............. $ 96,672 $101,466 $116,936
======== ======== ========
LOSSES AND LOSS ADJUSTMENT EXPENSES
Direct.......................................... $ 80,859 $ 91,467 $ 91,176
Assumed......................................... 7,165 4,513 4,658
Ceded to United................................. (6,613) (7,378) (6,604)
Ceded to non-affiliates......................... (8,198) (5,922) (6,046)
-------- -------- --------
Losses and loss adjustment expenses, net of
reinsurance...................................... $ 73,213 $ 82,680 $ 83,184
======== ======== ========
</TABLE>

F-13
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6.INCOME TAXES

The components of the deferred income tax assets and liabilities at December
31, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
DEFERRED INCOME TAX ASSETS
Reserves for losses and loss adjustment expenses..... $ 4,287 $ 4,444
Unearned premium reserve............................. 3,192 3,559
Unrealized investment losses, net.................... 1,391 --
Accrued expenses and other liabilities............... 324 474
Investments.......................................... 575 68
-------- --------
Total deferred income tax assets..................... 9,769 8,545
-------- --------
DEFERRED INCOME TAX LIABILITIES
Deferred acquisition costs........................... $ 2,948 $ 3,685
Unrealized investment gains, net..................... -- 4,846
Other assets......................................... 220 231
-------- --------
Total deferred income tax liabilities................ 3,168 8,762
-------- --------
Net deferred income tax asset (liability)............ $ 6,601 $ (217)
======== ========
</TABLE>

There was no valuation allowance for deferred income tax assets as of
December 31, 1994 or 1995. In assessing the realization of deferred tax
assets, management considers whether it is more likely than not that the
deferred tax assets will be realized. Management primarily considered the
existence of taxable income in the carryback period in making this assessment
and believes the benefits of the deductible differences recognized as of
December 31, 1994 and 1995 will ultimately be realized.

The components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
-------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Current.............................................. $ 4,130 $ 851 $ 4,403
Deferred............................................. (1,048) 596 581
-------- ------- -------
Total income tax expense............................. $ 3,082 $ 1,447 $ 4,984
======== ======= =======
</TABLE>

The Mutual Company paid income taxes of $4,943,000, $2,209,000 and
$3,952,000 in 1993, 1994 and 1995, respectively.

F-14
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the differences between the Mutual Company's effective
rates of tax and the United States federal income tax rates follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
1993 INCOME 1994 INCOME 1995 INCOME
------ ------ ------ ------ ------ ------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income tax provision at prevailing
rates............................. $3,633 34.06% $1,691 34.00% $5,006 34.31%
Tax effect of:
Tax exempt interest income....... (104) (.98) (67) (1.35) (11) (.08)
Dividends received deduction..... (200) (1.87) (140) (2.81) (148) (1.01)
Other, net....................... (247) (2.31) (37) (.74) 137 (.94)
------ ----- ------ ----- ------ -----
Federal income tax expense....... $3,082 28.90% $1,447 29.10% $4,984 34.16%
====== ===== ====== ===== ====== =====
</TABLE>

7.RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

As described in Note 1, the Mutual Company establishes reserves for losses
and loss adjustment expenses on reported and incurred but not reported claims
of insured losses. The establishment of appropriate reserves for losses and
loss adjustment expenses is an inherently uncertain process and the ultimate
cost may vary materially from the recorded amounts. Reserve estimates are
regularly reviewed and updated, using the most current information. Any
resulting adjustments, which may be material, are reflected in current
operations.

The following table provides a reconciliation of beginning and ending
liability balances for reserves for losses and loss adjustment expenses, net
of reinsurance for the years ended December 31, 1993, 1994 and 1995.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Reserves for losses and loss adjustment expenses
at beginning of year.............................. $117,497 $123,477 $127,954
Less reinsurance recoverables and receivables..... 24,463 28,761 28,230
-------- -------- --------
Net reserves for losses and loss adjustment
expenses at beginning of year..................... 93,034 94,716 99,724
-------- -------- --------
Incurred losses and loss adjustment expenses:
Provision for insured events of current year..... 73,114 86,370 88,366
Increase (decrease) in provisions for insured
events of prior years............................. 99 (3,690) (5,182)
-------- -------- --------
Total incurred losses and loss adjustment
expenses.......................................... 73,213 82,680 83,184
-------- -------- --------
Payments:
Losses and loss adjustment expenses attributable
to insured events of current year.............. 34,839 43,232 40,519
Losses and loss adjustment expenses attributable
to insured events of prior years............... 36,692 34,440 33,066
-------- -------- --------
Total Payments:............................... 71,531 77,672 73,585
-------- -------- --------
Net reserves for losses and loss adjustment
expenses at end of year........................... 94,716 99,724 109,323
Plus reinsurance recoverables and receivables..... 28,761 28,230 28,655
-------- -------- --------
Reserves for losses and loss adjustment expenses
at end of year.................................... $123,477 $127,954 $137,978
======== ======== ========
</TABLE>

F-15
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Mutual Company does not discount reserves for losses and loss adjustment
expenses except for certain lifetime workers' compensation indemnity reserves
it assumes from mandatory pools. The amount of such discounted reserves was
$4,876,000 (net of a discount of $1,217,000) and $4,754,000 (net of a discount
of $1,192,000) at December 31, 1994 and 1995, respectively.

8.DEBT

At December 31, 1995, debt consists of $1,249,500 of debentures and
$1,457,000 of subordinated surplus certificates. The debentures and
subordinated surplus certificates bear interest at the rate of eight percent
per annum, have no maturity date, and principal and interest are repayable
only with the approval of the Superintendent. No single holder, other than the
Life Company (see Note 10) holds more than 5% of the outstanding debentures or
subordinated surplus certificates. The Mutual Company paid interest of
$223,000, $220,000 and $217,000 for the years ended December 31, 1993, 1994
and 1995, respectively.

At December 31, 1995, the Mutual Company had an available line of credit
with a bank for $2,000,000.

9.BENEFITS PLANS

Pension Plans:

The Mutual Company and the Life Company sponsor a qualified multi-employer
noncontributory defined benefit pension plan covering substantially all of the
Mutual Company's and the Life Company's full-time employees who meet the
eligibility requirements. Benefits under the defined benefit pension plan are
primarily based upon the employee's length of service and the employee's
average compensation for certain periods during the last years of employment.
The Mutual Company's funding policy for its defined benefit pension plan is to
make annual contributions in accordance with accepted actuarial cost methods
subject to regulatory funding limitations. Plan assets at December 31, 1995
consisted primarily of long-term corporate, United States, and municipal
obligations and a group deposit annuity contract with the Life Company.

A summary of the components of net periodic pension expense for the plan
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
-------- ------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Service cost....................................... $ 694 $ 777 $ 708
Interest cost on projected benefit obligation...... 1,173 1,225 1,384
Actual return on plan assets....................... (1,212) (401) (1,844)
Net amortization (deferral)........................ 86 (756) 632
-------- ------- --------
Total pension expense.............................. $ 741 $ 845 $ 880
======== ======= ========
</TABLE>

The Mutual Company's portion of net periodic pension expense for the years
ended December 31, 1993, 1994 and 1995 was $415,000, $516,000 and $537,000,
respectively.

In accordance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions", the Mutual Company recorded a minimum
pension liability of $232,000 in 1995. The transaction, which had no effect on
net income, was offset by recording an asset of $114,000 and reducing
policyholders' equity by $118,000.

F-16
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Assumptions used in the determination of pension obligations and assets
were:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Weighted-average discount rate....................... 7.00% 7.90% 6.40%
Rate of increase in compensation levels.............. 4.00% 4.90% 3.40%
Expected long-term rate of return on plan assets..... 8.00% 8.00% 8.00%
</TABLE>

The following table summarizes the funded status of the defined benefit
pension plan:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995
----------- -----------
($ IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.............................................. $ 13,919 $ 17,901
Nonvested........................................... 354 338
----------- -----------
Accumulated benefit obligation....................... 14,273 18,239
Effect of projected future salary increases on past
service.............................................. 3,129 3,204
----------- -----------
Projected benefit obligation......................... 17,402 21,443
Plan assets at fair value............................ 15,477 17,112
----------- -----------
Projected benefit obligation in excess of plan
assets............................................... $ (1,925) $ (4,331)
=========== ===========
</TABLE>

The accrued pension liability of the defined benefit plan was as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995
----------- -----------
($ IN THOUSANDS)
<S> <C> <C>
Projected benefit obligation in excess of plan
assets............................................... $ (1,925) $ (4,331)
Unrecognized prior service asset..................... 142 114
Unrecognized net gain from past experience different
from that assumed.................................... 1,824 3,880
Unrecognized net asset at transition................. (613) (558)
Minimum liability adjustment......................... -- (232)
----------- -----------
Accrued pension liability............................ $ (572) $ (1,127)
=========== ===========
</TABLE>

Incentive Savings Plan:

The Mutual Company and the Life Company sponsor an employee incentive
savings plan which is qualified under Section 401(k) of the Internal Revenue
Code. Under the provisions of this plan, employees may contribute 1% to 16% of
their eligible compensation, with up to 6% being eligible for matching
contributions from the Mutual Company. In addition, the Mutual Company
contributes 1% of eligible compensation up to $240 of the plan for all
eligible employees. The Mutual Company's expense associated with the plan was
$119,000, $155,000 and $138,000 in 1993, 1994 and 1995, respectively.

Postretirement Benefits Other Than Pensions:

The Mutual Company and the Life Company provide life insurance benefits for
retired employees meeting certain age and length of service requirements. The
postretirement benefit plan is currently unfunded and noncontributory.
Benefits under the postretirement benefit plan are provided by a group term
life insurance policy.

F-17
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Effective January 1, 1995, the Mutual Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions", which
changed the accounting for the Mutual Company's postretirement benefit plan
from a cash basis by requiring accrual of the expected cost of providing
benefits under the plan during the years that the employee renders the
necessary service to the Mutual Company.

Net periodic postretirement benefit expense for the year ended December 31,
1995 included the following:

<TABLE>
<CAPTION>
1995
----------------
($ IN THOUSANDS)
<S> <C>
Service cost................................................... $ 37
Interest cost.................................................. 73
Return on assets............................................... --
Amortization of transition obligation.......................... 47
----
Total:....................................................... $157
====
</TABLE>

The Mutual Company incurred postretirement benefit expenses on a cash basis
of $5,000 and $6,000 during the years ended December 31, 1993 and 1994,
respectively. The Mutual Company's portion of net periodic postretirement
benefit expense for the year ended December 31, 1995, was $66,000.

The following table presents the plan's postretirement benefit obligations
as of December 31, 1995 reconciled with the plan's funded status and the
amount recognized in the Mutual Company's consolidated balance sheets:

<TABLE>
<CAPTION>
1995
----------------
($ IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit obligation
Retirees..................................................... $ (534)
Other fully eligible plan participants....................... (260)
Other active plan participants............................... (452)
------
Obligation at year-end..................................... (1,246)
Plan assets.................................................... --
------
Funded status.................................................. (1,246)
Unrecognized transition obligation............................. 893
Unrecognized net loss.......................................... 238
------
Accrued postretirement benefit liability at year-end......... $ (115)
======
</TABLE>

A 6.4% discount rate was used to determine the accumulated postretirement
benefit obligation at December 31, 1995.

F-18
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. RELATED PARTY TRANSACTIONS

The operations of the Mutual Company are closely related with those of the
Life Company and the Life Company's wholly owned subsidiary, United. These
three companies operate under an identical Board of Directors and have similar
senior management. These companies share home office premises, branch office
facilities, data processing equipment, certain personnel and other operational
expenses. Expenses are shared based on each company's estimated level of
usage. The gross shared expenses and each company's share of such expenses is
summarized below:

<TABLE>
<CAPTION>
COMPANY'S SHARE
------------------
GROSS SHARED
YEAR ENDED DECEMBER 31, EXPENSES AMOUNT PERCENTAGE
- ----------------------- ------------ ------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
1993......................................... $23,829 $13,431 56%
1994......................................... $23,833 $14,402 60%
1995......................................... $26,650 $16,182 61%
</TABLE>

The Life Company holds $813,000 of debentures issued by the Mutual Company.
The Mutual Company recognized interest expense of $65,000 in 1993, 1994 and
1995 on the debentures held by the Life Company. During 1994, the Mutual
Company sold its data processing equipment to the Life Company at net book
value.

The Mutual Company's reinsurance program includes reinsurance agreements
with United. In accordance with the provisions of these reinsurance
agreements, the Mutual Company recognized commission income (expenses) of
approximately $1,713,000, ($39,000), and $2,000 during the years ended
December 31, 1993, 1994 and 1995, respectively. A summary of the effect of the
reinsurance agreements with United on premiums written and earned is described
in Note 4.

Receivable from affiliates represents amounts due from United pursuant to a
reinsurance agreement and amounts due from the Life Company and United for
shared expenses.

Currently, the Life Company and its wholly owned subsidiary, United, prepare
their financial statements in accordance with statutory accounting practices.
Such practices vary significantly from generally accepted accounting
practices. The following financial information was derived from the statutory
basis financial statements for the Life Company and United as of and for the
year ended December 31, 1995:

<TABLE>
<CAPTION>
TOTAL STATUTORY NET
ASSETS SURPLUS INCOME
-------- --------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Life Company......................................... $687,721 $61,801 $12,029
United............................................... $ 32,069 $15,827 $ 2,244
</TABLE>

11. STATUTORY ACCOUNTING PRACTICES

The following table reconciles consolidated net income and policyholders'
equity as reported herein in conformity with generally accepted accounting
principles ("GAAP") with consolidated statutory net income and statutory
capital and surplus, determined in accordance with statutory accounting
practices ("SAP") prescribed or permitted by the New York Insurance
Department. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners (the
"NAIC"), as well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices
not so prescribed.

SAP differs from GAAP primarily due to the following: (a) the costs
associated with acquiring new business are expensed as incurred for SAP,
whereas for GAAP, such acquisition costs are deferred and amortized over the
term of the underlying policies, (b) timing differences between financial
statement earnings and earnings

F-19
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
reported for tax purposes are recognized as deferred income taxes for GAAP and
are not recognized for SAP, (c) debentures and subordinated surplus
certificates are recognized as surplus under SAP and recorded as a liability
(debt) under GAAP, (d) SAP prohibits recognition of certain assets that cannot
be readily converted to cash through a charge to surplus, whereas for GAAP,
such "nonadmitted assets" are recognized at their estimated net realizable
value, (e) SAP does not provide for the effect of SFAS No. 115, whereby in
accordance with GAAP, fixed income securities classified as available for sale
are carried at fair value and the related unrealized holding gains and losses
are reflected as a separate component of policyholders' equity, net of
deferred income taxes, and (f) SAP requires certain income and expense items
to be charged directly to surplus, whereas for GAAP, such items are recorded
in the statement of income.

<TABLE>
<CAPTION>
NET INCOME
--------------------------------------
FOR THE
THREE MONTHS
FOR THE YEAR ENDED ENDED POLICYHOLDERS' EQUITY
------------------------ ------------ -------------------------------
DECEMBER 31, MARCH 31, AT DECEMBER 31, AT MARCH 31,
------------------------ ------------ ----------------- ------------
1993 1994 1995 1996 1994 1995 1996
($ IN THOUSANDS) ------- ------ ------- ------------ ------- -------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance per generally
accepted accounting
principles............. $ 7,584 $3,526 $ 9,606 $ 302 $52,977 $ 74,164 $ 71,095
Investments............. 1,908 -- (1,908) -- 6,469 (9,459) (3,888)
Debt.................... -- -- -- -- 2,749 2,707 2,698
Deferred acquisition
costs................... (1,684) (39) (1,856) (24) (8,672) (10,527) (10,551)
Income taxes............ (1,048) (34) 582 168 (6,601) -- (1,430)
Salvage and subrogation. 211 (449) -- -- (3,936) -- --
Non-admitted assets..... -- -- -- -- (571) (886) (782)
Other, net.............. 162 (25) 91 696 455 (83) 537
------- ------ ------- ------ ------- -------- --------
Balance per statutory
accounting practices... $ 7,133 $2,979 $ 6,515 $1,142 $42,870 $ 55,916 $ 57,679
======= ====== ======= ====== ======= ======== ========
</TABLE>

12. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES

The Mutual Company is party to various legal actions. Although the outcome
cannot be determined, management and the Mutual Company's legal counsel are of
the opinion that such actions, either singly or in the aggregate, will not
have a material adverse effect on the Mutual Company's consolidated financial
position or results of operations.

The Mutual Company is obligated under certain non-cancelable leases for
branch office facilities. Rental expense under all operating leases totaled
$77,000 in 1993 and $76,000 in 1994 and 1995. The minimum future rental
payments under non-cancelable leases at December 31, 1995, were as follows:
1996--$76,000; 1997--$58,000; and 1998--$37,000.

Catastrophes are an inherent risk of the property/casualty insurance
industry and could produce significant adverse fluctuations in the Mutual
Company's results of operations and financial condition. Since the Mutual
Company operates primarily within the northeastern U.S., it is subject to a
concentration of risk within this geographic region. For the years ended
December 31, 1993, 1994 and 1995, approximately 58%, 58% and 60%,
respectively, of the Company's direct written premiums were derived from
policies written in the states of New York and New Jersey. While the Mutual
Company maintains reinsurance coverage to mitigate the effect of losses from
catastrophes, there can be no assurance that such losses will not materially
affect its operating results and financial condition. However, the Mutual
Company is required by law to participate in a number of involuntary
reinsurance pools and such pools may from time to time experience deficits
which could result in losses to the Mutual Company.

F-20
<PAGE>

FARM FAMILY MUTUAL INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Pursuant to an agreement between the Mutual Company and its agents and
agency managers, subject to certain conditions including length of service and
profitability, certain agents and agency managers are eligible to receive
monthly extended earnings payments for a period of up to eight years
subsequent to the termination of their association with the Mutual Company.
Historically, such payments have been funded from commissions earned on the
agent's or agency manager's book of business subsequent to the termination of
the agent's association with the Mutual Company in accordance with the Mutual
Company's agreement with the successor agents and agency managers. In the
event that such commissions are insufficient to fund the extended earnings
payments, the Mutual Company would be responsible for such payments. The
aggregate outstanding amount of the extended earnings payments which former
agents and agency managers are entitled to receive for a period of up to eight
years subsequent to December 31, 1995 was $2,284,000.

13. UNAUDITED INTERIM FINANCIAL INFORMATION

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ------------- -------- ------- ------------ -----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
1994
Revenues.............................. $28,295 $28,594 $30,278 $29,525
======= ======= ======= =======
Net income (loss)..................... $ (255) $ 1,593 $ 1,584 $ 604
======= ======= ======= =======
1995
Revenues.............................. $31,585 $32,770 $34,145 $34,514
======= ======= ======= =======
Net income............................ $ 2,922 $ 2,106 $ 3,173 $ 1,405
======= ======= ======= =======
</TABLE>

F-21
<PAGE>

[LETTERHEAD OF COOPERS & LYBRAND L.L.P. APPEARS HERE]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Farm Family Holdings, Inc.

We have audited the accompanying balance sheet of Farm Family Holdings, Inc. as
of February 29, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Farm Family Holdings, Inc. as
of February 29, 1996, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Albany, New York
April 19, 1996

F-22
<PAGE>

FARM FAMILY HOLDINGS, INC.
BALANCE SHEET

<TABLE>
<CAPTION>
AT FEBRUARY 29,
1996
---------------
<S> <C>
ASSETS
Cash......................................................... $1,000
------
Total Assets............................................... $1,000
======
EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized
and no shares issued
and outstanding............................................. $ --
Common stock, $.01 par value, 10,000,000 shares authorized
and 1,000 shares issued
and outstanding............................................. 10
Additional paid-in capital................................... 990
------
Total Equity............................................... $1,000
======
</TABLE>

See accompanying notes to Balance Sheet.

F-23
<PAGE>

FARM FAMILY HOLDINGS, INC.

NOTES TO BALANCE SHEET

1) BUSINESS

Farm Family Holdings, Inc. (the "Holding Company") was incorporated under
Delaware Law on February 12, 1996 as a wholly owned subsidiary of Farm Family
Mutual Insurance Company ("Farm Family Mutual") for the purpose of becoming
the parent holding company of Farm Family Mutual under a plan of
reorganization and conversion, as amended (the "Plan"), whereby Farm Family
Mutual will convert from a New York mutual property and casualty insurance
company to a New York stock property and casualty insurance company.

The Holding Company has had no operations and the only cash transaction has
been the receipt of $1,000 for the issuance of 1,000 shares of common stock to
Farm Family Mutual.

2) PLAN OF REORGANIZATION AND CONVERSION

Pursuant to the Plan, eligible policyholders of Farm Family Mutual will
receive shares of common stock of the Holding Company or cash in exchange for
their interest in Farm Family Mutual. Farm Family Mutual will thereby become a
wholly owned subsidiary of the Holding Company.

The Plan was approved by the New York Superintendent of Insurance on April
19, 1996 after the public hearing was held and Farm Family Mutual's voting
policyholders on June 5, 1996. The Plan will become effective on a date
determined by Farm Family Mutual's Board of Directors.

3) OPTION TO ACQUIRE LIFE COMPANY

F-24
<PAGE>

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE HOLDING COMPANY. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE HOLDING
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
The Company............................................................... 16
The Reorganization........................................................ 17
Option to Acquire Life Company............................................ 22
Use of Proceeds........................................................... 26
Dividend Policy........................................................... 26
Capitalization............................................................ 27
Selected Consolidated Financial Data...................................... 28
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 30
Business.................................................................. 36
Management................................................................ 56
Certain Relationships and Related Transactions............................ 63
Stock Ownership of Management............................................. 69
Description of Capital Stock.............................................. 72
Shares Eligible for Future Sale........................................... 75
Underwriting.............................................................. 75
Legal Matters............................................................. 76
Experts................................................................... 76
Glossary of Selected Insurance Terms...................................... 77
Index to Financial Statements............................................. F-1
</TABLE>

----------------

UNTIL , 1996 ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

FARM FAMILY
HOLDINGS, INC.

COMMON STOCK
($.01 PAR VALUE)

- -------------------------------------

SALOMON BROTHERS INC
- ----------------------------------------

PROSPECTUS

DATED , 1996

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses of the issuance and distribution, all of which are
payable by the Registrant, are as follows:

<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 21,725
NASD Fee........................................................ 6,800
Stock Exchange Listing.......................................... 89,870
Printing and Engraving.......................................... 316,000
Accounting Fees and Expenses.................................... 100,000
Legal Fees and Expenses......................................... 525,000
Blue Sky Fees and Expenses...................................... 15,000
Transfer Agent and Escrow Agent's Fees and Expenses............. 135,000
Miscellaneous Expenses.......................................... 25,000
----------
Total......................................................... $1,234,395
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Fourteenth of the Registrant's Certificate of Incorporation (the
"Certificate") requires indemnification to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law (the "DGCL"). Section 145
of the DGCL provides that a corporation may indemnify directors and officers
as well as other employees and individuals against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative, or investigative (other
than action by or in the right of the corporation--a "derivative action"), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. A similar standard is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such actions, and the statute requires court approval before
there can be any indemnification where the person seeking indemnification has
been found liable to the corporation. Indemnification provided by or granted
pursuant to Section 145 is not exclusive of other indemnification that may be
granted by a corporation's bylaws, any agreement, any vote of stockholders or
disinterested directors or otherwise. Article VIII of the Registrant's bylaws
provides for indemnification consistent with the requirements of Section 145
of the DGCL. Reference is made to Exhibits 3.1 and 3.2 to this Registration
Statement for the complete text of, respectively, Article Fourteenth of the
Registrant's Certificate and Article VIII of the Registrant's bylaws.

Section 145 of the DGCL also permits a corporation to purchase and maintain
insurance on behalf of directors and officers. Article VIII of the
Registrant's bylaws permits it to purchase such insurance on behalf of its
directors and officers. The Registrant intends to obtain, prior to the
consummation of the public offering of its common stock pursuant to this
Registration Statement, directors' and officers' liability insurance providing
aggregate coverage in the amount of $ million.

Article Thirteenth of the Registrant's Certificate provides for, to the
fullest extent permitted by the DGCL, elimination or limitation of liability
of directors to Farm Family Holdings, Inc. or its stockholders for breach of
fiduciary duty as a director. Section 102(b)(7) of the DGCL permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders

II-1
<PAGE>

for monetary damages for breach of fiduciary duties as a director, except for
liability (i) for any breach of a director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for improper payment of dividends or redemptions of shares, or (iv) for any
transaction from which the director derives an improper personal benefit.
Reference is made to Exhibit 3.1 to this Registration Statement for the
complete text of Article Thirteenth of the Registrant's Certificate.

Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1
to this Registration Statement which provides for the indemnification of the
directors and officers of the Registrant signing this Registration Statement
and certain controlling persons of the Registrant against certain liabilities,
including those arising under the Securities Act of 1933, as amended (The
"Securities Act"), in certain instances by the Underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On February 14, 1996, the Registrant issued 1,000 shares of Common Stock to
Farm Family Mutual Insurance Company for $1,000 in cash. This sale is exempt
from registration under Section 4(2) of the Securities Act. It is contemplated
that such shares will be cancelled pursuant to the plan of reorganization and
conversion described in this Registration Statement and which is included as
Exhibit 2.1 to this Registration Statement.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

(a) Exhibits

<TABLE>
<C> <C> <S>
**1.1 -- Form of Underwriting Agreement
*2.1 -- Plan of Reorganization and Conversion, dated February 14,
1996, as amended by Amendment No. 1, dated April 23, 1996
(Exhibits A, B and C to Exhibit 2.1 are included as Exhibits
10.1, 3.1 and 3.2, respectively, to this Registration
Statement)
*3.1 -- Certificate of Incorporation of Farm Family Holdings, Inc.
*3.2 -- Bylaws of Farm Family Holdings, Inc.
*4.1 -- Form of Certificate for shares of Common Stock
*5.1 -- Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
**5.2 -- Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. for the
Public Offering
*8.1 -- Tax Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
*10.1 -- Option Purchase Agreement, dated February 14, 1996, among Farm
Family Holdings, Inc. and The Shareholders of Farm Family Life
Insurance Company Listed Therein
*10.2 -- Expense Sharing Agreement, made effective as of January 1,
1996, by and between Farm Family Mutual Insurance Company and
Farm Family Life Insurance Company
*10.3 -- Indenture of Lease, made the 1st day of January 1988, between
Farm Family Life Insurance Company and Farm Family Mutual
Insurance Company as amended by the Amendment to Lease,
effective January 1, 1994
*10.4 -- Underlying Multi-Line Per Risk Reinsurance Contract, effective
January 1, 1995, issued to Farm Family Mutual Insurance
Company by The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s) Attached Thereto, as
amended by Addendum No. 1, effective January 1, 1996
*10.5 -- Umbrella Quota Share Reinsurance Contract, effective January
1, 1995, issued to Farm Family Mutual Insurance Company and
United Farm Family Insurance Company, as amended by Addendum
No. 1, effective January 1, 1995
*10.6 -- Excess Catastrophe Reinsurance Contract effective January 1,
1996, issued to Farm Family Mutual Insurance Company
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <C> <S>
*10.7 -- Assumption Agreement, commencing January 1, 1995, between
Farm Family Mutual Insurance Company and United Farm Family
Insurance Company
*10.8 -- Service Agreement, made effective as of July 25, 1988, by and
between Farm Family Mutual Insurance Company and United Farm
Family Insurance Company
*10.9 -- Form of Membership List Purchase Agreement between Farm
Family Mutual Insurance Company and each of the Farm Bureaus
*10.10 -- Farm Family Mutual Insurance Company 8% Subordinated Surplus
Certificate, as amended by Certificate of Amendment No. 1 and
Trust Indenture, dated as of December 29, 1976 relating to
the 8% Subordinated Surplus Certificates
*10.11 -- Farm Family Mutual Insurance Company 5% Debenture, as amended
by Certificate of Amendment, effective January 1, 1969,
Certificate of Amendment No. 2, effective January 1, 1979,
Certificate of Amendment No. 3 and Supplemental Trust
Indenture, dated as of August 25, 1955, Amending Trust
Indenture Dated as of May 16, 1955 Relating to The 5%
Debentures, as amended by Certificate of Amendment, dated as
of August 25, 1955, Certificate of Amendment No. 2, dated as
of August 25, 1955, Certificate of Amendment No. 3, dated as
of August 25, 1955
*10.12 -- Farm Family Mutual Insurance Company Officer Severance Pay
Plan, adopted effective August 1, 1994
*10.13 -- Farm Family Mutual Insurance Company Supplemental Employee
Retirement Plan, adopted as of January 1, 1994
*10.14 -- Escrow Agreement between Farm Family Holdings, Inc. and The
Bank of New York, dated as of April 26, 1996
*21.1 -- List of Subsidiaries
23.1 -- Consent of Coopers & Lybrand L.L.P.
**23.2 -- Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (contained
in their Opinion filed as Exhibit 5.2)
*24.1 -- Power of Attorney (included with the signatures in Part II of
this Registration Statement)
*28.1 -- Information from reports furnished to State insurance
regulatory authorities
*99.1 -- Form of Subscription Order Form for Subscription
Policyholders
*99.2 -- Form of Subscription Order Form for Participating Surplus
Note Holders
</TABLE>
- --------
* Previously filed.

**To be filed by amendment.

(b) Financial Statement Schedule

Schedule VI--Reinsurance

Schedule X--Supplemental Information Concerning Property/Casualty Insurance
Operations

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling

II-3
<PAGE>

precedent, submit to a court of appropriate jurisdiction on the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rules 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement.

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(d) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Post-Effective Amendment No. 1 to the
Registration Statement to be signed on its behalf by the Undersigned,
thereunto duly authorized, in the Town of Bethlehem, State of New York on May
23, 1996.

FARM FAMILY HOLDINGS, INC.

/s/ Philip P. Weber
By:----------------------------------
Philip P. Weber
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 1 to the Registration Statement has been signed
below on May 23, 1996 by the following persons in the capacities indicated.

<S>
<C>

SIGNATURE TITLE
--------- -----

*
____________________________________ Chairman of the Board of Directors
WILLIAM M. STAMP, JR.

*
____________________________________ Vice Chairman of the Board of
JOHN W. LINCOLN Directors

/s/ Philip P. Weber
____________________________________ President and Chief Executive
PHILIP P. WEBER Officer
(Principal Executive Officer)

*
____________________________________ Executive Vice President and
CHARLES E. SIMON Treasurer
(Principal Financial and Accounting
Officer)
*
____________________________________ Director
ROBERT L. BAKER

*
____________________________________ Director
FRED G. BUTLER, SR.

*
____________________________________ Director
RANDOLPH C. BLACKMER, JR.

*
____________________________________ Director
JOSEPH E. CALHOUN

*
____________________________________ Director
JAMES V. CRANE

*
___________________________________ Director
STEPHEN J. GEORGE

*
____________________________________ Director
GORDON H. GOWEN

</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
___________________________________* Director
JON R. GREENWOOD
____________________________________* Director
CLARK W. HINSDALE III
____________________________________* Director
RICHARD A. JEROME
____________________________________* Director
ARTHUR D. KEOWN, JR.
____________________________________* Director
DANIEL R. LAPOINTE
____________________________________* Director
WAYNE A. MANN
____________________________________* Director
JOHN P. MOSKOS
____________________________________* Director
NORMA R. O'LEARY
____________________________________* Director
JOHN I. RIGOLIZZO, JR.
____________________________________* Director
HARVEY T. SMITH
____________________________________* Director
HOWARD T. SPROW
____________________________________* Director
RICHARD D. TRYON
____________________________________* Director
CHARLES A. WILFONG
____________________________________* Director
TYLER P. YOUNG
</TABLE>
/s/ Philip P. Weber
*By:
----------------------------
Philip P. Weber as
attorney-in-fact for each of the
persons indicated

II-6

<PAGE>

EXHIBIT 23.1

COOPERS COOPERS & LYBRAND L.L.P.
&LYBRAND a professional services firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1 (File No.
333-4446) of our reports dated February 13, 1996, on our audits of the financial
statements of Farm Family Mutual Insurance Company and Subsidiary and our report
dated April 19, 1996 on our audit of the balance sheet of Farm Family Holdings,
Inc.. We also consent to the reference to our firm under the caption "Experts"
and in the tables "Summary Consolidated Financial Data" and "Selected
Consolidated Financial Data."

COOPERS & LYBRAND L.L.P.

Albany, New York
May 23, 1996